Korean Air is expecting air cargo rates to drop in the third quarter on the back of weak demand and increased capacity as airlines continue to rebuild their global networks.
"In Q3 2023, the cargo business foresees intensified competition and a drop in freight rates due to weaker air cargo demand following the global economic slowdown and growing aircraft belly cargo capacity," the South Korean airline said.
"The airline will proactively work to procure new freight demand and efficiently manage operations for increased revenue," it added.
Korean Air issued the forecast as it reported its financial results for the second quarter — which was characterised by a strong passenger business recovery and, on the other hand, a decline in its air freight performance metrics.
For the second quarter, Korean Air said its cargo business revenue decreased by 56% year-on-year in the second quarter to KRW 963.8 billion (US$736.6 million).
"The business has been affected by a decline in air freight demand due to increased passenger belly cargo capacity following the strong rebound of passenger operations as well as a drop in cargo rates," it said of the decline.
Meanwhile, the airline's Q2 passenger business revenue rose by 154% year-on-year to KRW 2.221 trillion (US$1.7 billion) — which it said was a result of the airline increasing its passenger capacity by 20% from the previous quarter to meet strong travel demand.
"Korean Air expects stronger results from its passenger business in Q3 2023, fueled by robust travel demand during summer and autumn Chuseok (Korean Thanksgiving) holiday peak seasons," it said.
"The airline plans to maximise revenue by expanding operations to popular vacation destinations and flexibly increasing capacity on routes where high demand is expected," it added.
As a whole, in Q2 2023, Korean Air achieved revenue of KRW 3.5354 trillion (US$2.693 billion) — marking a 6% year-on-year increase following the strong recovery of travel demand.
For the period, the carrier said it posted a "moderate operating profit" of KRW 468 billion (US$356.5 million) compared to the same period in 2022 due to rising operation costs and airport fees.
