Korean Air surprises market with highest quarterly profit in 5 years

Korean Air Lines Co. (KAL) surprised the market on Friday by posting its highest third-quarter operating profit in five years, boosted by strong demand for cargo traffic amid a gradual global economic recovery from the pandemic.

The South Korean flag carrier is forecast to report solid earnings again in the fourth quarter, a seasonally high period, when cargo demand rises further due to Thanksgiving Day, Black Friday and Christmas shopping, analysts said.

Korean Air’s operating profit in the three months to September reached 438.6 billion won ($372 million) on a non-consolidated basis, which excludes earnings from affiliates, according to a regulatory filing.

The third-quarter profit marks the highest since 2016, and comes above the market consensus of a profit of 280.9 billion won. In the third quarter of last year, the company posted an operating profit of 7.6 billion won on a standalone basis.

Revenue stood at 2.23 trillion won in the third quarter, up from 1.55 trillion won.

RISE IN CARGO TRAFFIC

The company attributed its strong performance to robust cargo operations, which kept the airline afloat even passenger traffic remained subdued in the global pandemic era.

Its cargo traffic business posted 1.65 trillion won in revenue in the third quarter, it said.

According to industry data, Korean Air handled 144,146 tons of cargo in October.

A Korean Air official said air cargo traffic was also boosted by the seaborne cargo crisis caused by a shortage of container ships.

Airfreight rates have been on a steady rise since late last year. Last month, the airfreight rate from Hong Kong to North America reached $9.94 per kilogram, more than triple the rate of $3.14 in January 2020, according to air cargo rates provider TAC Index.

PASSENGER TRAFFIC SET TO RISE

Hit hard by an industry downturn caused by the pandemic, Korean Air has converted many of its passenger planes into cargo planes as demand for the transport of medical and other emergency goods increased rapidly.

The company has converted a total of 16 aircraft – ten B777 airplanes and six A330 planes – and flown large cargo planes such as the B747 more frequently.

The company expects its passenger traffic to rise in the coming quarters in line with growing vaccination rates and the introduction of air travel bubbles, temporary arrangements involving two or more countries aimed at restarting commercial passenger services following the COVID-19 pandemic.

“We plan to expand flight services to Hawaii, Guam, Spain and other destinations where the mandatory quarantine has been exempted,” said a Korean Air official.

Write to Jeong-Min Nam at peux@hankyung.com
In-Soo Nam edited this article.