May 17, 2020

Coronavirus drives 1Q loss at Korean Air, but cargo sees bump

Korean Air said first-quarter cargo business increased 3.1%, measured in freight ton kilometers, compared to an equivalent period a year ago, but it wasn’t enough to offset a 30% drop in passenger sales associated with the coronavirus outbreak that led to a $67.3 million consolidated operating loss.

The international carrier said it's securing $1.8 billion, about equally split between a replacement stock offering and government loans backed by cargo sale bonds, as a part of a broader effort to shore up its balance sheet. Belt-tightening measures thus far include placing 70% of the workforce inactive , cutting executive pay in half and selling non-core assets like land .

South Korea was one of the first countries after China to fall victim to the novel coronavirus.

Korean joins a number of airlines seeking government bailouts, private financing and equity sales to possess money for ongoing operations until business bounces back.

Korean Air’s first-quarter revenue fell 23%, but the relatively small operating loss was the results of many fewer flights, which reduced expenses like fuel and payroll.

The company said further losses are expected within the second quarter due to ongoing COVID-19 spread round the world. However, revived domestic travel demand and easing of some travel restrictions by the U.S. and some European countries starting in May could help improve the revenue situation.

Cargo sales increased despite a drop by cargo capacity from the reduction in passenger flights. Korean attributed the positive results to increased operations of its 23 pure freighters, improved load factors and therefore the use of passenger jets as cargo planes.

The ongoing capacity shortage within the freight market is predicted to form cargo operations profitable within the second quarter.

“I deeply appreciate the dedication and sacrifice of our executives and employees. We also are grateful to the govt of Korea, the Korea Development Bank and therefore the Export-Import Bank of Korea for his or her support in these dire times,” President Keehong Woo said in a statement. “We will continue our self-rescue efforts both operationally and financially, while prioritizing the health and safety of our employees and customers in the least times,” he added.

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