Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Korea Stock Exchange  >  Korean Air Lines Co.,Ltd.    A003490   KR7003490000

KOREAN AIR LINES CO.,LTD.

(A003490)
  Report
SummaryChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsPress ReleasesOfficial PublicationsSector newsMarketScreener Strategies

How a Fortunate Few Airlines Profit in a Pandemic: Lots of Cargo

share with twitter share with LinkedIn share with facebook
09/22/2020 | 10:46am EDT

By Eun-Young Jeong

SEOUL--The only major airlines making money these days are busy flying cargo, not passengers.

Of the world's 30 largest airlines by revenue, just four reported profits for the April-June quarter, according to a Wall Street Journal analysis. They are all based in export-heavy South Korea or Taiwan, benefiting from the surge in demand for tech components and electronic gadgets as more people work from home, and for personal protective equipment, much of it produced in Asia. Continuing demand for automobile parts and other Asia-made goods has also helped.

The analysis excluded some major carriers that didn't report recent quarterly earnings.

Industrywide cargo revenue is expected to reach about $111 billion this year, according to the trade group International Air Transport Association. That is only a slight uptick from its pre-pandemic forecast, but the plunge in passenger revenue--IATA has slashed its 2020 forecast to $241 billion from an initial $581 billion--means cargo's contribution would represent more than a quarter of total industry revenue, compared with the typical eighth.

For the four airlines that showed a profit in the latest quarter-- Korean Air Lines Co., Asiana Airlines Inc., China Airlines Ltd. and EVA Airways Corp.--cargo's share of revenue ranged from 72% at Korean Air to 93% at China Airlines, compared with no more than a third last year.

When the pandemic hit, it wiped out some 40% of the world's capacity for air cargo carried in the bellies of passenger planes, according to the trade group IATA. Plenty of airlines looked to fill the gap and boost cargo capacity as the pandemic triggered mass layoffs and widespread flight cancellations and led governments to provide more than $120 billion in aid. They are using passenger planes for cargo operations temporarily, stashing freight in overhead bins and buckling it into seats or removing seats altogether. Travelers aren't allowed aboard with cargo in the cabin.

The four carriers that showed profits enjoyed gains because they already had sizable cargo fleets. The profit boost came from the low supply of global airfreight capacity that sent the cost of shipping goods on common routes from Asia to the U.S. or Europe soaring; they have increased less going the other way. IATA's latest figures show capacity still about a third below last year's levels.

Rates have fallen from recent highs, according to TAC Index, a market researcher, and industry analysts say they should decline further later this year--though demand for shipping Covid-19 vaccines could disrupt that.

Seoul-based Korean Air recently removed passenger seats on two planes and has plans to soon modify two more, said Eum Jae-dong, the head of the airline's cargo business division. One unexpected benefit: Regulators still treat them as passenger flights, meaning goods can now fly to certain cities, like Yangon, Myanmar, previously difficult to reach for cargo fleets.

"They can fly into airports and other destinations where cargo aircraft couldn't go because of airport conditions or the lack of operational equipment," Mr. Eum said.

But their advantage is also their limitation. Under aviation rules, a modified passenger plane cannot make multiple stops as an airfreight plane, according to Kim Yu-hyuk, an analyst at Hanwha Investment & Securities Co. in Seoul. They can make only round trips, as they typically would while carrying passengers.

Routes for airfreight carriers from South Korea and Taiwan typically begin with transporting locally made high-value electronic components to China or Southeast Asia. There, the components are dropped off and the plane picks up finished products to fly to Europe or North America. On the way back home, the planes often carry fresh foods and pharmaceuticals.

U.S. airlines, despite having the federal authority to do so, largely haven't removed seats to fly more cargo, partly because most flights are domestic, using narrower-body planes that lack significant cargo capacity, industry experts say.

Still, U.S. carriers started cargo-only flights using just the bellies of their planes at the start of the pandemic and have now flown thousands of them--1,200 since February for Delta Air Lines Inc. alone, which now averages about 50 a week, a spokesman said. The airline did remove seats from one Boeing 777-200ER, boosting its cargo capacity by 35%. The plane was first used on Sept. 11 for a cargo charter flight between Mumbai and New York. Delta, which is retiring its 777 fleet, has no current plans to reconfigure more planes, the spokesman said.

Seats have also come out at Air Canada--on three 777-300ERs--and European carriers such as International Consolidated Airlines Group SA's British Airways and Deutsche Lufthansa AG. China Southern Airlines Co. reconfigured two Airbus A330 passenger planes. Dubai-based Emirates, which has one of the world's largest air-cargo fleets, has ripped out economy seats on 10 passenger jets since June.

"The airline industry is still bleeding cash by the billions each month, " said Tim Clark, president of privately held Emirates, in a written statement. "We're taking baby steps on the path to recovery."

The shift to cargo is a stopgap measure, say aviation experts. "The core competency for passenger airlines is to serve passengers," said Bijan Vasigh, of Embry-Riddle Aeronautical University in Daytona, Fla., who specializes in airline economics. But about 3 billion fewer passengers are expected to fly this year than last, with airlines reducing available seats by about half--by about two-thirds on international routes--according to the U.N.-affiliated International Civil Aviation Organization.

Meanwhile, for the April-June quarter Korean Air reported an operating profit of $90 million, hometown rival Asiana Airlines $19 million, Taiwan's EVA Airways $6 million and China Airlines, also from Taiwan, $92 million--more than four times what it had earned a year earlier.

This month, Korean Air deployed its first modified Boeing 777-300ER; removing most of its 291 cabin seats added 10.8 tons of capacity to its previous limit of 22 tons, the airline said. The newly cleared cabin and belly were packed with boxes of automobile parts, garments and electronics devices.

"South Korean carriers have a geographical advantage being plugged into a location that produces goods," said Mr. Kim, the Hanwha analyst. "The same applies to Taiwanese carriers."

Alison Sider in Chicago and Lekai Liu in Beijing contributed to this article.

Write to Eun-Young Jeong at Eun-Young.Jeong@wsj.com

 


Stocks mentioned in the article
ChangeLast1st jan.
AIR CANADA -1.94% 15.63 Delayed Quote.-67.10%
AIRBUS SE -2.81% 64 Real-time Quote.-49.53%
ASIANA AIRLINES, INC. -1.31% 3755 End-of-day quote.-30.46%
CHINA AIRLINES, LTD. -1.24% 8.79 End-of-day quote.-2.98%
CHINA SOUTHERN AIRLINES COMPANY LIMITED -5.11% 4.27 End-of-day quote.-18.51%
DELTA AIR LINES, INC. -3.23% 30.885 Delayed Quote.-45.40%
DEUTSCHE LUFTHANSA AG -5.32% 7.622 Delayed Quote.-50.94%
EMBRY HOLDINGS LIMITED -0.96% 1.03 End-of-day quote.-29.93%
EVA AIRWAYS CORP. -0.90% 11.05 End-of-day quote.-19.64%
HANWHA CORPORATION -0.39% 25450 End-of-day quote.1.80%
HANWHA SOLUTIONS CORPORATION 4.87% 44150 End-of-day quote.134.22%
HANWHA SYSTEMS CO., LTD. -0.93% 10700 End-of-day quote.3.38%
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A. -4.31% 96.36 Delayed Quote.-75.70%
KOREAN AIR LINES CO.,LTD. -3.04% 20750 End-of-day quote.-27.19%
THE BOEING COMPANY -2.98% 156.215 Delayed Quote.-48.62%
share with twitter share with LinkedIn share with facebook
All news about KOREAN AIR LINES CO.,LTD.
10/14KOREAN AIR LINES : Air cargo industry not yet ready for COVID-19 vaccine distrib..
RE
10/14KOREAN AIR LINES : Air cargo industry not yet ready for COVID-19 vaccine distrib..
RE
09/22HOW A FORTUNATE FEW AIRLINES PROFIT : Lots of Cargo
DJ
09/22HOW A FORTUNATE FEW AIRLINES PROFIT : Lots of Cargo
DJ
09/11Creditors to inject $2 billion into Asiana Airlines after sale collapses
RE
08/07S.Korean stocks rise ahead of U.S. jobs data; U.S.-China tensions weigh
RE
06/30South Korea's Hankook Tech chairman sells entire stake to younger son; shares..
RE
06/05KOREAN AIR LINES CO.,LTD. : RIGHTS ISSUE: 66.168312 new shares @ 14600 KRW for 1..
FA
05/19New measures being put in place for air travel differ by country
RE
05/18KOREAN AIR LINES : North Korea denied abducting South Koreans on 1969 flight, do..
AQ
More news
Financials
Sales 2020 7 942 B 7,05 B 7,05 B
Net income 2020 -404 B -0,36 B -0,36 B
Net Debt 2020 14 049 B 12,5 B 12,5 B
P/E ratio 2020 -6,83x
Yield 2020 -
Capitalization 3 755 B 3 314 M 3 335 M
EV / Sales 2020 475x
EV / Sales 2021 371x
Nbr of Employees -
Free-Float 67,6%
Chart KOREAN AIR LINES CO.,LTD.
Duration : Period :
Korean Air Lines Co.,Ltd. Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends KOREAN AIR LINES CO.,LTD.
Short TermMid-TermLong Term
TrendsBullishNeutralNeutral
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 14
Average target price 22 115,38 KRW
Last Close Price 21 400,00 KRW
Spread / Highest target 30,8%
Spread / Average Target 3,34%
Spread / Lowest Target -29,9%
EPS Revisions
Managers
NameTitle
Won-Tae Cho President, Co-Chief Executive Officer & Director
Gi-Hong Woo Co-CEO, Director & Head-Strategy Management
Eun-Yong Ha Senior Managing Director & Head-Finance
Soo-Geun Lee Director & Vice President-Technology
Jae-Il Kim Independent Director
Sector and Competitors
1st jan.Capitalization (M$)
KOREAN AIR LINES CO.,LTD.-24.91%3 314
DELTA AIR LINES, INC.-45.40%20 280
RYANAIR HOLDINGS PLC-13.26%16 875
AIR CHINA LIMITED-30.97%13 782
CHINA SOUTHERN AIRLINES COMPANY LIMITED-14.12%11 985
CHINA EASTERN AIRLINES CORPORATION LIMITED-16.01%10 403