Korean Air has posted its results for 2020 today, and it seems the airline has come through the crisis in a largely healthy position. Despite ending with a net loss, the losses were lower than in 2019, and the operating profit just 17% less than the previous year. The airline plans to continue its efforts on cargo to maintain financial health, but will not add passenger seat capacity before the end of 2021.

An operating profit and reduced losses

Coming through 2020 in a profitable position has been out of the question for the majority of airlines, but for a handful, it did happen. On the back of VietJet finishing the year with a modest profit, today Korean Air has also reported a positive income at the end of aviation’s most difficult year.

The Korean airline recorded an operating profit of KRW 238.3 billion ($219 million) at the end of the year, derived from sales of almost $7 billion. It’s not a huge amount, but is not a million miles away from the profit turned in 2019, which stood at $263.2 million.

However, the net income for the airline remains in the negative, but not wholly due to COVID. 2019 saw the airline post a net loss of $522.7 million, and this year that was significantly reduced to $209.7 million. Its financial statement lays the blame for this outcome on its net interest expense.

Keehong Woo, Korean Air’s president, sang the praises of the airline’s employees, saying,

“Korean Air’s staff is committed to overcoming the crisis with one heart. It was not a miracle that 2020 was a profitable year. It was only possible thanks to our employees’ hard work and sacrifices.”

Sacrifice is right, because, with most passenger flights suspended since April 2020, Korean Air staff have been taking voluntary rotational leave. It’s been a time of hardship for the airline’s employees. Still, Korean says that it has had plenty of support from the labor unions who have been willing to work with the company to overcome these unprecedented challenges.

Cargo tipped the balance

While the overall result was still in the negative, the loss reduction is a sign that 2020 was a formative year for Korean Air. The airline has been strongly focused on reducing operational costs, achieving a 40% reduction while raising almost a billion dollars in additional liquidity through the issuance of new shares. It also sold off its inflight catering and duty-free business for a sum of $878 million.

Passenger sales were down 74% year on year, so the airline had to turn to cargo to support its operations. It says that it fully utilized its fleet of 23 freighter aircraft, increasing its operation rate by some 25% compared to 2019. It also put idle passenger planes to use transporting cargo, operating more than 4,500 cargo flights with non-freighter aircraft.

Thanks to strong demand for cargo, and the associated bump in shipping rates, the airline secured most of its income from these operations. President Woo further noted,

“Almost 24% of the global air cargo capacity disappeared last year when airlines suspended most international flights because of COVID-19. However, Korean Air boosted our cargo operations by operating extra/charter freighters to meet the demands of medical supplies such as COVID-19 test kits and masks. We also increased cargo capacity by converting passenger jets into freighters. We’ve done well to keep our cargo network strong and active.”

The airline is still focused on its acquisition of Asiana Airlines, which it says will “stabilize the Korean aviation industry that’s suffering from the pandemic and to ensure sustainable growth of the domestic aviation market.” However, it predicts continued stresses going forward, and remains focused on its self-rescue efforts to ensure financial stability.

The airline noted that, although the cargo market remains strong, it doesn’t expect passenger demand to recover fast. As such, it plans to keep its passenger seat capacity as it is until the end of 2021, when it expects the market to show a meaningful recovery.

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