Airlines fast recovering as flight demand continues to increase

The main parking lot outside Gimpo International Airport is full of cars on Aug. 19, 2022. [YONHAP]

Airlines are starting to bounce back from the Covid-19 crisis.

Sales are increasing with international routes resuming and demand rising, but headwinds still remain as the won plummets and the pandemic continues.

Major airlines reported stronger revenue in the second quarter compared to the previous year when the pandemic was at its peak.

Korean Air Lines reported 3.33 trillion won ($2.48 billion) in revenue during the second quarter, up by 71 percent year on year. Net profit was 450.4 billion won, 246 percent higher than the year-earlier period.

Second-quarter revenue at Asiana Airlines jumped 51 percent on year to 1.41 trillion won, although it lost 91.5 billion won on a net basis in the same period.

Strong sales were led by the cargo business.

"In the second quarter of this year, cargo business sales increased by 16 percent compared to the same period last year, to 818.3 billion won," said a spokesperson for Asiana Airlines.

Korean Air Lines said cargo sales were 65.2 percent of revenue in the second quarter, at 2.17 trillion won.

International passenger traffic is improving as well.

In the second quarter, Korean Air Lines passenger sales were 874.2 billion won, a 307 percent increase compared to the same period last year. Sales for routes to the United States, which had the highest number of passengers, increased 3.8 times on year. Sales for routes to Europe increased 7.6 times, while those for Southeast Asia increased 5.5 times.

Asiana Airlines reported a 4.5-times increase in sales of its international passenger flights in the second quarter compared to the same period last year.

Low-cost carriers (LCCs) narrowed their losses with good passenger numbers.

Jin Air posted revenue of 126.4 billion won in the second quarter this year, up 99.4 percent compared to the same period last year. Its net loss went from 50.4 billion won in the second quarter last year to 28.7 billion for the same period this year.

The recovery of international passenger flights has contributed to these numbers.

"The number of international passengers reached 76,000 in the second quarter," said a spokesperson for Jin Air. "This is a 13-fold increase compared to the same period last year."

"The volume of traffic for passenger flights of LCCs is increasing mainly surrounding South-east Asia," said Jung Yeon-seung, an analyst at NH Investment & Securities. "Demand recovery from Japan and China is slow, but demand for long-distance routes, such as those to the Americas and Europe, is showing a solid recovery."

Airline industry insiders argue that remaining restrictions on entering and traveling from Korea should be loosened, as international flights are key to revitalizing the beaten-up market. Only 14 of 132 countries tracked by the Ministry of Foreign Affairs have entry restrictions.

"We still have mandatory antigen tests or PCR tests requirement before entry, and additional PCR tests are required again on the day after entry," said an airline industry official. "The full revitalization of the tourism industry can only be achieved when regulations are lifted."

The weak won, the economic downturn and the resurgence of Covid-19 are hindrances to a complete recovery of the airline industry.

Korean Air Lines lost 205.1 billion won due to the currency in the second quarter, while Asiana Airlines lost 274.7 billion won the same period. In last year's second quarter, Korean Air Lines gained 11.1 billion from the currency and Asiana Airlines gained 5.3 billion won.

The high dollar is a challenge for airlines, which have to pay for fuel and aircraft lease fees in dollars.

Korean Air Lines emerged from the deficit caused by the Covid-19 pandemic by actively shipping high-value-added cargo, such as semiconductors, electronic equipment and parts, but the demand for cargo transportation is expected to decrease due to the economic downturn. Demand recovery is slow also due to the resurge of the Covid-19 virus.

The number of airline passengers last month stood at 4,352,172, an increase of 5 percent on month.

BY KANG KI-HEON [lim.jeongwon@joongang.co.kr]