Korean Air (003490.KS) posted quarterly revenue above 5 trillion won in the third quarter, a record high for any quarter, even as the war in the Middle East drove up fuel costs. Revenue topped 5 trillion won for a second straight quarter on balanced growth in its passenger and cargo businesses, raising expectations for synergies after its merger with Asiana Airlines in December. Analysts expect the combined carrier to become a "mega carrier" with revenue of 20 trillion won and operating profit of 2 trillion won next year, lifting profitability through more efficient flight operations and cost cuts.
Korean Air said on the 15th that preliminary third-quarter results showed revenue of 5.0448 trillion won ($3.53 billion) and operating profit of 421.2 billion won ($295 million) on a separate basis. Revenue rose 26% from 4.0085 trillion won a year earlier, an increase of more than 1 trillion won. It was the second consecutive quarter above 5 trillion won, following 5.0119 trillion won in the second quarter. Operating profit rose 12% from a year earlier.
The record revenue came from balanced growth in the passenger and cargo divisions. Passenger revenue was 2.9174 trillion won, up 496.3 billion won from a year earlier. Fuel surcharges weighed on outbound demand from South Korea, but revenue grew as inbound demand to the country and transfer traffic at Incheon International Airport increased sharply.
A strategy of expanding capacity on major routes during the summer peak season, including Japan (Tokyo and Osaka) and the Americas (Atlanta, Vancouver and Hawaii), proved particularly effective. A total of 5,300,478 travelers flew between Incheon International Airport and Japan in the third quarter, up 20.4% from a year earlier. Passengers on routes to the Americas rose 8.1% to 1,987,477.
The cargo business also contributed to the improvement. Cargo revenue was 1.4323 trillion won, up 365.6 billion won from a year earlier, driven by a sharp increase in demand for shipping high-value products such as semiconductors. Air cargo rates of 629 won per kilometer in the third quarter, up 27.6% from 493 won a year earlier, also supported revenue growth.
Korean Air expects fuel cost pressure to persist in the fourth quarter as the war in the Middle East drags on, but it anticipates continued growth in the passenger and cargo divisions. The won-dollar exchange rate, a major factor in airline earnings, has stayed in the 1,300-won range, which is also seen as easing cost pressure.
In cargo, the carrier plans flexible capacity management ahead of the year-end peak season, on top of demand tied to artificial intelligence and semiconductors. It will deploy charter flights on routes where cargo demand is expected to rise with year-end consumption around Black Friday and Christmas. The company also plans to actively win logistics demand generated by South Korean firms expanding overseas plants to secure additional revenue.
Expectations for synergies from the combined airline are rising ahead of the merger with Asiana Airlines in December. The aviation industry expects Korean Air to reach revenue of 20 trillion won and operating profit of 2 trillion won next year, the first year after integration. Analysts say the carrier can achieve economies of scale and raise profitability by adjusting flight schedules, making aircraft maintenance more efficient and cutting duplicate costs.
