Korean Air Cargo makes sharp cut as freight volumes fall

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The global air cargo market continues to cause anguish for the non-express carriers – especially the so called ‘legacy’ passenger airlines who continue to operate large air cargo fleets.

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Last week Delta, while not operating its own cargo fleet, reported a 17% drop in Q2 revenue for freight, and a 12.2% fall in cargo ton miles flown, which is huge.

Lufthansa has already seen the writing on the wall and is looking at ending all of its MD-11F operations by the end of 2020, effectively cutting its fleet in half.

Last week ElAl Israeli Airlines Cargo ended operations of its only 744F and sub contracted the business out to a third party.

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How long can they stay in service?

Over the last six years, British Airways, Air France and KLM have either walked away from or slowly reduced their cargo operations to minimal.

The news from Korea is gloomy. A cut edging towards 10% in last quarter results for cargo, and a revenue fall of 7.6% year on year coupled to a dismal second half of year forecast for 2019, has forced it to cut three of its main operating hubs completely:   Gwangju, Cheongju and Daegu. The company said its cargo arm had lost US$9.2 million in Q2 alone.

It hasn’t yet gone as far as cutting aircraft but some analysts feel it may have little choice, especially the less efficient 744F’s of which it has four. It also operates 7 748F and 12 777F’s.

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The country is heavily dependent on exports, there is trade spat with Japan that’s causing bureaucratic delays (caused by an issue dating back to 1910-1945 and Japan refusing to further apologise, or compensate, slave labour and ‘comfort girls’, when it occupied the peninsula for 40 years, it says it was closed in a 1965 peace treaty finally ending the matter).   That looks like its years away from ever being solved.

On top of that China is suffering a decline in growth and exports, the overly strong US dollar is driving up costs and the US-Chinese trade and tariff war is causing further incremental disruption.

 

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