Korean Air, the fifth-largest airline for cargo shipping, reported on Wednesday that its cargo income fell 56% to $748.8 million in the second quarter, underscoring the fact that Asian carriers have been particularly hard hit by the sluggish freight market. With 155 aircraft in its fleet, 23 of them are widebody freighters (Boeing 747s and 777s).
Total revenue grew to $2.7 billion because of a robust rebound in travel demand, but the company reported that the cargo business was negatively impacted by a fall in shipping demand and an increase in capacity brought on by passenger aircraft’s post-COVID return to service, which has lowered freight prices. In the quarter, Korean Air’s cargo volume decreased 18.8% year over year but improved 15.6% over the corresponding time in 2019. Load factors dropped by 12.5%, reaching 70%.
In the quarter, Korean Air’s cargo volume decreased 18.8% year over year but improved 15.6% over the corresponding time in 2019.
Since March 2022, the demand for air freight has decreased by 7% to 10% as maritime supply systems have rebuilt and the global economy has slowed due to the pandemic. Although the situation has slightly improved recently, shipping costs are 40% to 50% less affordable than they were a year ago, and airfreight demand is still around 3% lower. Rates in several trade routes are roughly where they were in 2019 when fuel surcharges are excluded.
Because of the increased competition and the decline in freight rates, management stated that it did not expect improved profitability in the third quarter, but that volumes may increase as semiconductor companies exhaust their stockpiles and the need for batteries for electric vehicles increases.
Rates in several trade routes are roughly where they were in 2019 when fuel surcharges are excluded.
With consumer demand for smartphones, handheld electronic devices, and electric vehicles, the transportation of lithium batteries already accounts for more than 10% of Korean Air’s overall air cargo volume. To draw in more customers, the airline intends to use its new certification from the International Air Transport Association for superior management of lithium-ion batteries.
The cargo division is also attempting to increase profitability by boosting e-commerce contracts, adding a freighter destination in Zhengzhou, China, and optimising connecting routes in response to shifting demand patterns.
With consumer demand for smartphones, handheld electronic devices, and electric vehicles, the transportation of lithium batteries already accounts for more than 10% of Korean Air’s overall air cargo volume.
Last Monday, All Nippon Airways said that second-quarter freight revenue fell by 60%. Lower shipping demand for semiconductors, electronics, and automotive products was partly blamed for the disappointing results.
On the back of strong passenger demand, Singapore Airlines set a record for quarterly net profit, but reported that cargo revenue decreased by 50.6% to $416 million. As additional passenger flights resumed service, capacity rose 12% while cargo traffic dropped 11.3% year over year. Only 51.8% of cargo capacity was occupied, a decrease of 13.7 points. Though down 44.3%, cargo yields were still 50% higher than they were before COVID. In addition to a sizable fleet of passenger aircraft, Singapore Airlines also runs seven Boeing 747-400 freighters.
Singapore Airlines set a record for quarterly net profit, but reported that cargo revenue decreased by 50.6% to $416 million.
The airline stated that It anticipates the market for cargo to remain subdued in the foreseeable future as a result of supply chain restrictions easing, inflation, bad economic conditions, and a modal shift back to ocean freight. Additionally, it mentioned how increased competition put additional downward pressure on freight yields. Prior to this, experts in air cargo have noticed that many airlines and logistical companies are undercutting market costs in an effort to fill empty seats. Many regions of the world’s manufacturing industries are still experiencing contractions, and experts now expect less growth in international commerce in 2023.
In the quarter, Korean Air’s cargo volume decreased 18.8% year over year but improved 15.6% over the corresponding time in 2019. Load factors dropped by 12.5%, reaching 70%. Both Korean Air and ANA said that their main market, North America, had a considerable decline in their cargo activities.
Cargo revenue for European airlines Air France-KLM and International Airlines Group fell by a third in the second quarter, while cargo revenue for American Airlines, Delta Air Lines, and United Airlines declined by 37% to 40%. Overall, Korean Air made a modest operating profit of $356.5 million, which is reflective of the Asia-based airlines’ delayed recovery as a result of governments there maintaining COVID travel restrictions for a longer period of time than in other areas of the world.
