News / Air cargo market has 'normalised', but earnings will fall, says KAL chief

In his new year message yesterday, Korean Air Lines chairman and CEO Walter Cho Won-tae said he believed the air cargo market had normalised after Covid, but predicted reduced earnings in 2024.

He said 2024 would be “a profound turning point” and that “innovation will sprout in the aviation industry”.

But he added: “Although the great crisis has passed, the road ahead of us is not smooth.”

He said: “Geopolitical risks, due to conflicts around the world, global supply chain instability, economic recession and inflation, are expected to continue. In addition, there’ll be fiercer competition for market share and the cargo business, which was a cash cow during the Covid-19 days, will return to pre-pandemic levels.”

In light of these uncertainties, Mr Cho urged KAL staff to return to fundamentals.

He said: “‘Safety is the most basic condition customers consider when choosing an airline. The customer’s time is more precious than anything else. That’s why we put ourselves in the customer’s shoes to ensure that the customer’s time is not wasted, and check whether there are any areas that can be improved.”

On KAL’s bid to acquire compatriot peer Asiana Airlines, Mr Cho pledged to complete the takeover this year.

Reviews by antitrust authorities in various jurisdictions, particularly the EC, US and Japan, have delayed the process since 2020 and Mr Cho said: “Although it has taken much longer than expected, the launch of an integrated airline will be a huge growth engine for us in the long term.

“If we achieve economies of scale through the acquisition of Asiana, schedules can be rearranged reasonably and surplus aircraft can be deployed to new destinations.”

Asiana fell into financial difficulties after Covid shuttered air travel in 2020, prompting the South Korean government to push for a merger with KAL. To convince the EC to give a green light, Asiana’s directors voted in November to divest its cargo business. However, observers think it will not be easy to find a South Korean buyer.

According to data from CH-Aviation, the proposed KRW1.8 trillion ($1.37bn) merger will see KAL take a 63.9% stake in Asiana, its aircraft and infrastructure.

Data from AviationValues shows KAL has a fleet of 162 aircraft (144 active), including four B747-400Fs, seven B747-8Fs and 12 B777-200LRFs, while Asiana has 79 aircraft (77 active), including 10 B747-400Fs and one B767-300F.