Korean Air will prioritise “route profitability” in light of intensifying global competition, as it saw first-quarter profits improve on the back of strong passenger and cargo demand.
During the period, the South Korean flag carrier saw system-wide capacity recover close to pre-pandemic levels, though it flags weaker demand from the Mainland Chinese market.
For the three months ended 31 March, Korean Air saw operating profits grow 5% year on year to W415 billion ($305 million). Still, it remains below the record W788 billion figure the airline posted in the first quarter of 2022 when it was helped by strong cargo demand in the early days of pandemic recovery.
The SkyTeam carrier saw a 20% jump in revenues to W3.8 trillion, led by a 32% increase in passenger revenues. International travel revenue grew 34% on the back of a 37% increase in traffic, offsetting a 5.5% dip in domestic travel revenue.
Korean Air’s aerospace business also saw its performance improve during the quarter, with revenue up 10.3% year on year.
Operating expenses grew 22%, to W3.38 trillion, led by an uptick in non-fuel costs such as labour, as well as airport and cargo handling charges.
While it notes the “steady leisure demand” on its short- to medium-haul routes within Asia, Korean Air has flagged increasing competition. Operations to Japan and Southeast Asia held up well during the quarter, with the airline seeing strong demand from tour providers.
As for Mainland China operations, Korean Air says direct demand between the two countries remain sluggish, even as transit operations – such as onwards to North America – improves.
It hopes to “strengthen profitability through cost control” and the carrier is also on the cusp of entering the peak travel season for its European network, which it hopes will spur leisure demand.
As for cargo operations, Korean Air saw a dip in cargo revenues during the quarter, down about 5% year on year, amid global supply chain “volatilities”.
The airline intends to tap on opportunities in the e-commerce sector by extending contracts with global shippers, as well as “maximising” belly capacity for flexible supply operations.
