2021 started weakly for the Korean aviation market, revenue passenger kilometres (RPKs) in January were 72% lower than the same month in 2019 according to IATA and our own InsightIQ Flights analysis. In this detailed report, Finlay Grogan, IBA airlines analyst, uses InsightIQ data to research and evaluate Korean airline performance, including financial reviews, fleet structures, utilisation levels, carbon emissions and future performance and consolidations.
Chinese Lunar New Year domestic traffic plummeted as Covid infections prevented travel during this typically busy period. Pre-pandemic Korean civil aviation enjoyed several years' growth and experienced market overcapacity before Covid's impact forced airlines to seek extensive support from the Ministry of Land, Infrastructure and Transport (MOLIT), the Korea Development Bank (KDB) and Export-Import Bank of Korea (Korea ExImBank).
Since March 2020, KDB has been involved in over KRW 3T (~USD 3B) of financing for Korean carriers. The previously crowded Low-Cost Carrier (LCC) market has been hardest hit by Covid, unable to profit from the positive outlook for cargo; a rebound in manufacturing activity and exports has resulted in Cargo Tonne Kilometres (CTKs) in January being 1.1% higher than pre-Covid levels. With Korean Air parent Hanjin KAL Corp. agreeing to buy Asiana for USD1.6B last November, Korea's two largest airlines will merge to form a combined group with a market monopoly controlling 71% of all Korean commercial aircraft.
What does this mean for competition in Korean aviation and the aircraft that will serve it? What is the future of Korean aviation post Covid and is there the potential of a monopoly mega airline?
If you have any further questions or comments or would like to discuss how IBA can support your business, please contact: Finlay Grogan
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According to data published by IATA, the outbreak of Covid-19 could result in a 22% drop in passenger volume and a USD 4.4B, ~KRW (South Korean won) 5.4T loss, in passenger base revenue for the Korean air transport market this year. Further effects will inevitably be felt through the whole economy, potentially leading to the loss of around 160,000 jobs and a USD 9B (~KRW 11T) hit to GDP. IATA members have urged the Korean government to urgently extend direct financial support, loan guarantees, support for corporate bond issuance and tax relief to airlines.