Korean Air and Asiana Airlines, which are in financial trouble due to the COVID-19 outbreak, are expected to post operating profits in the second quarter. Although passenger demand remains at rock bottom, analysts say that the explosive increase in cargo demand has offset sluggishness.
According to financial information provider FnGuide on June 9, Korean Air's second-quarter earnings consensus (average estimate) is 1.91 trillion won ($1.56 billion) in sales and 110.9 billion won ($90.9 million) in operating losses.
In simple terms, it is in the red following the first quarter. Until April-May, securities firms estimated that Korean Air would post an operating loss of at least 100 billion won and up to 500 billion won.
However, the atmosphere has changed since June. Securities firms are rushing to pour out their surplus forecasts. Samsung Securities estimated that Korean Air will record 2.0 trillion won in sales and 235 billion won in operating profit in the second quarter.
Hi Investment & Securities and Hana Financial Investment expected Korean Air to post operating surpluses of 88 billion won and 51.2 billion won, respectively.
The prevailing view is that Asiana Airlines will also post a surplus. Consensus for the second quarter is 1.068 trillion won in sales and 54.7 billion won in operating profit. It is expected to turn into a surplus compared to the second quarter of last year when it recorded a loss of 124.1 billion won.
Samsung Securities expects Asiana Airlines to achieve 1.216 trillion won in sales and 172.1 billion won in operating profit. The figure is similar to the previous second-quarter record of 177.5 billion won in 2010.
Korean Air and Asiana Airlines saw their passenger demand plunge as sky roads were blocked by the spread of COVID-19. In the aftermath, they posted losses of 56.6 billion won and 208.2 billion won, respectively, in the first quarter.
Initially, the market was concerned that the deficit could grow even bigger in the second quarter. However, the company's profitability has improved significantly as cargo filled the empty seats of passengers.
Korean Air's international cargo traffic rose 14 percent on-year in May, while Asiana Airlines also grew around 4 percent, according to Incheon International Airport Corp. On top of that, it is analyzed that cost-cutting effects such as employees' leave of absence have led to improved profitability.
In the early days of COVID-19, there were mostly supplies related to untact consumption such as quarantine, medical equipment, semiconductors and PCs. Recently, the portion of general cargo has been on the rise due to the resumption of transportation.
Starting this month, Korean Air will also use passenger seats to load cargo. Asiana Airlines also plans to operate additional Belly Cargo to focus on cargo transportation. It is also planning to continue expanding cargo export routes to China, Southeast Asia, the Americas and Europe.
