Although the management environment for airlines has worsened as international oil prices remain high due to the war between the United States and Iran, only the air cargo business is showing a good trend. Because of the essential nature of the business and a boom in semiconductor exports, airlines are able to pass higher fuel prices on to shippers by reflecting them in rates.
Korean Air Lines(003490) also posted a profit in the second quarter despite high oil prices caused by the war, and AIRZETA Co., which acquired the cargo division from Asiana Airlines, is also said to be delivering strong results. Low-cost carriers (LCCs), which are struggling as high oil prices coincide with falling passenger demand, are moving to strengthen their cargo businesses one after another.
According to the airline industry on the 21st, the Baltic Air Freight Index (BAI) was 2,486 as of the 13th, up 21.9% from late February, just before the outbreak of war between the United States and Iran. After surging to 2,772 at the end of April due to the war's impact, it has stabilized, but it is still 23.3% higher than the same period last year.
Korean Air Lines' air cargo rate also came in at 703 won per kilometer, up 42% from the same period last year. This is close to the level in 2022, when rates soared to around 800 won per kilometer due to the logistics crisis triggered by the spread of COVID-19. Over the same period, passenger fares rose 16.4% to 227 won per kilometer.
On this basis, Korean Air Lines posted solid results in the second quarter this year. In the second quarter, Korean Air Lines' separate revenue was 5.0199 trillion won and operating profit was 261.8 billion won, up 26% and down 34%, respectively, from a year earlier, beating market consensus. Ahn Do-hyun, an analyst at Hana Securities, said, "The air cargo business drove second-quarter results."
AIRZETA Co., a low-cost cargo-focused airline that acquired Asiana Airlines' cargo division during the merger of Korean Air Lines and Asiana Airlines, is also said to be generating operating profit. This contrasts with typical low-cost carriers (LCCs) such as Jin Air and Jeju Air, which are expected to post losses.
An AIRZETA Co. official said, "It's nothing to boast about, but we are not recording an operating loss," adding, "The company was launched not long ago, so we are focused on stabilization."
While oil prices remain elevated due to the war, the increased demand for air cargo, centered on semiconductors amid worldwide investment related to artificial intelligence (AI), had a big impact. In the first half of this year, Korean-flag carriers transported a total of 1,548,935 tons of air cargo, up 4.6% from the same period last year. Exports of semiconductors, a key air export item, rose 10.4% over the same period to 20,078 tons.
For airlines, it is an environment conducive to reflecting high oil prices in rates. According to Korea National Oil Corporation (KNOC), international oil prices, which were around $70 per barrel before the outbreak of war between the United States and Iran, exceeded $100 after the start of hostilities before entering a period of stability, but have shown volatility, standing at about $82 as of the 17th.
Riding this trend, LCCs are also moving aggressively into the air cargo business. Aero K began cargo transport on the Incheon–Osaka route this month. Aero K plans to expand from that route to cargo transport at its main hub, Cheongju Airport.
Parata Airlines (formerly Fly Gangwon) also started a cargo transport business late last year and plans to increase related revenue by expanding its operating routes.
An airline industry official said, "Competition in the air cargo market is as intense as in passenger service, but right now, demand is strong as the war has destabilized ocean shipping and the semiconductor boom overlaps," adding, "The air cargo business could deliver decent profitability for a while."