Even as international oil prices remain high due to the war between the United States and Iran and the business environment for airlines has worsened, the air cargo business alone is showing a good trend. Because of the essential nature of the business and a boom in semiconductor exports, airlines are able to pass through higher fuel costs to shippers by reflecting them in rates.
Korean Air Lines(003490) 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 posting solid results. Low-cost carriers (LCCs), which are struggling as high oil prices are compounded by a decline in 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) stood at 2,486 as of the 13th, up 21.9% from late February, just before the war between the United States and Iran broke out. Although it has stabilized after surging to 2,772 at the end of April due to the war's impact, it is still 23.3% higher than the same period last year.
Korean Air Lines' air cargo rate also came to 703 won per kilometer, up 42% from the same period last year. This is close to the 2022 level, when rates soared to around 800 won per kilometer due to a logistics crunch following the spread of COVID-19. Over the same period, the passenger fare 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 recorded separate revenue of 5.0199 trillion won and operating profit of 261.8 billion won, up 26% and down 34% year over year, respectively, beating market consensus. Ahn Do-hyun, an analyst at Hana Securities, said, "The air cargo business drove second-quarter results."
AIRZETA Co., a cargo specialist airline that acquired Asiana Airlines' cargo division during the merger process with Korean Air Lines, is also said to be generating operating profit. This contrasts with the outlook for losses at typical low-cost carriers (LCCs) such as Jin Air and Jeju Air.
An AIRZETA Co. official said, "It's not something to brag about, but we are not posting an operating loss," adding, "The company was launched not long ago, and we are in a phase of focusing on stabilization."
While oil prices remain high due to the war, the impact of increased air cargo demand, centered on semiconductors amid global investment related to artificial intelligence (AI), has been significant. In the first half of this year, Korean-flag carriers transported a total of 1,548,935 tons (t) of air cargo, up 4.6% from the same period last year. Exports of semiconductors, a major air export item, rose 10.4% over the same period to 20,078 t.
For airlines, it is a situation in which it is easy to reflect high oil prices in rates. According to the Korea National Oil Corporation (KNOC), international oil prices, which were around $70 per barrel before the war between the United States and Iran broke out, exceeded $100 after the start of hostilities before entering a period of stability, but have shown volatility, standing at $82 as of the 17th.
Buoyed by this trend, LCCs are also actively entering the air cargo business. Aero K began cargo transport service 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 Air (formerly Fly Gangwon) also started a cargo transport business late last year and plans to increase related revenue by expanding its serviced routes.
An airline industry official said, "Competition in the air cargo market is as fierce as in passenger service, but now demand is strong as maritime transport has become unstable due to the war and a semiconductor boom overlaps," adding, "The air cargo business could show decent profitability for a while."