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Korean Air: Another earnings surprise in Q4 2020

By Feb 05, 2021 (Gmt+09:00)

Korean Air: Another earnings surprise in Q4 2020

Korean Air Lines Co. posted a positive earnings surprise in 2020, reporting an operating profit of 238.3 billion won ($212 million) amid a drastic drop in passenger flights, based on the company's provisional earnings released on Feb. 4.

The company has posted an operating profit for three consecutive quarters, especially impressive considering that most major airlines swung to operating losses amid the COVID-19 crisis.

According to Korean Air's provisional earnings, the South Korean flag carrier reported around 7.4 trillion won in revenue last year, accounting for 60.2% of the revenue from the year-earlier period on a 74% drop in passenger flights.

But the company's operating profit fared relatively well during the same period as it dwindled by just 16.8% versus the previous year. In particular, the company's fourth-quarter 2020 operating profit stood at 146.5 billion won, far above the market forecast of between 100 billion won and 130 billion won.

The airline industry's vulnerable business conditions had raised concern that Korean Air may not weather the crisis if the pandemic carried on until year-end. Fortunately, Korean Air has managed to post profit thanks to robust cargo operations keeping the airline afloat in the global pandemic era.

While many global airlines reduced cargo flights to save costs, the Korean flag carrier focused on expanding cargo operations. Last year, Korean Air reported around around 4.3 trillion won in cargo sales, up by 66.2% from the previous year. 


Air freight rates have been on a steady uptrend since November 2020. Last December, the air freight rate from Hong Kong to North America reached $7.50 per kilogram, more than double the $3.14 of last year's first quarter, according to air cargo rates provider TAC Index.

The surging air freight rate is owing to the sharp drop in international passenger flights, which led to a lack of air cargo services. 

Korean Air converted some of its passenger planes into cargo planes.
Korean Air converted some of its passenger planes into cargo planes.

Korean Air did not hesitate to shift its focus to the cargo business. Last year, the company operated 23 major cargo planes and even converted two of its passenger planes to ship cargo goods

“Sales increased as the shipping cargo volume flocked to air cargo, alongside the rising demand for COVID-19 diagnostic kits,” said a Korean Air official.

Industry watchers expect air freight rates to rise further once COVID-19 vaccine transport begins. Korean Air plans to begin transporting the vaccines in the second quarter of this year.


Korean Air's executives, employees, and the labor union made sacrifices as nearly 10,000 employees, accounting for 70% of the total staff, took turns taking a month off from work. The executives also turned in up to 50% of their pay.

Due to these efforts, Korean Air’s payroll expenses and operating costs shrank by 40% in 2020 compared to the previous year.

Among major global airlines, Korean Air is expected to be the only airline reporting an operating profit for last year. Other airlines, including Delta Air Lines, American Airlines and Air France-KLM Group, received tens of billions of dollars in government funds. Still, they are estimated to have each posted over $8 billion in operating losses, at least.

Korean Air has decided to continue rotational leave until the first half of this year due to pending uncertainties over the COVID-19 crisis. The company also plans to secure liquidity by selling the Wilshire Grand Center in Los Angeles and the undeveloped Songhyun-dong land in central Seoul.

Meanwhile, the company is speeding up its acquisition of Asiana Airlines Inc. Next month, Korean Air will raise funds to acquire Asiana Airlines via a 3.3 trillion won ($3 billion) rights offering.

Asiana Airlines has also shared the burden, as its executives voluntarily have returned up to 60% of their pay since April of last year. The company's employees are also taking turns to take an unpaid leave each month.

Write to Kyung-min Kang at

Danbee Lee edited this article.

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