(SEOUL-News2day) In 2023, as the clouds of the COVID-19 pandemic lifted, and the skies reopened, the aviation industry embarked on a robust recovery, fueled by the surging desire for travel that had been suppressed during the pandemic.

 

The pent-up travel demand, exacerbated by the COVID-19 endemic, exploded alongside a rapid recovery in passenger demand, with Low-Cost Carriers (LCCs) notably achieving record-breaking quarterly performances.

 

While Full-Service Carriers (FSCs), represented by major airlines like Korean Air, saw a decline in cargo business due to the unique circumstances of the pandemic, improvements in passenger operations helped offset these losses and stabilize their overall performance.

 

As a result, Incheon International Airport recorded its highest monthly passenger transport performance in December, reaching 5.6 million passengers, representing a recovery to 92% of the pre-pandemic levels of December 2019.

 

The primary challenge for the aviation industry this year is the complete normalization of passenger operations.

 

 

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• Korean Air: Navigating Challenges with Cargo Success

 

Korean Air, a representative FSC, faced a downturn in international passenger operations during the COVID-19 period. However, a surge in air cargo rates and supply shortages propelled its cargo business into an unprecedented boom, compensating for the passenger-related setbacks.

 

Despite achieving operational profitability through this cargo success, Korean Air is now confronted with the task of restoring its passenger business to pre-COVID-19 levels, considering the uncertain global situation, high fuel prices, and declining cargo rates.

 

This trend became evident from the first quarter of 2023 when Korean Air reported KRW 3.2 trillion ($2.7 billion) in revenue, a 14% increase year-on-year, but a 47% decrease in operating profit. Subsequent quarters showed similar patterns, with revenue increasing but operating profit declining.

 

While the decline in quarterly operating profit may raise concerns, the increase in ancillary costs such as fuel, operational expenses, and labor costs due to expanded flight operations should be considered. Additionally, the crucial passenger business has consistently shown signs of improvement.

 

 

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• Low-Cost Carriers (LCCs): Soaring to Unprecedented Heights

 

Even LCCs that do not engage in cargo operations experienced a resurgence in passenger demand due to the endemic. Jeju Air, the leading LCC, achieved its highest-ever quarterly performance in the first quarter, surpassing the record set in the first quarter of 2019. This success was notable despite operating fewer aircraft compared to 2019.

 

In the traditionally slow second quarter for the aviation industry, Jeju Air once again achieved record-breaking results. Notably, in the third quarter, the airline set another quarterly performance record, demonstrating a 125.5% increase in revenue compared to the same period last year.

 

Similarly, T'way Air, the second-largest LCC, reported its best-ever quarterly performance in the first quarter, marked by a substantial increase in both revenue and a transition from an operating loss to profit. The airline continued this positive trend in the second and third quarters, further solidifying its position in the market.

 

 

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• Outlook for 2024: Anticipating Full Recovery Amid Challenges

 

While the fourth-quarter results for 2023 are pending, the year is widely considered as a turning point for the aviation industry, marking a substantial recovery in passenger demand. Industry players are now gearing up for a complete return to pre-COVID-19 levels in 2024.

 

In anticipation of this trajectory, airlines are focusing on strategies such as route diversification and enhanced customer services to expand demand. Korean Air, for instance, is concentrating on initiatives like expanding in-flight Wi-Fi services and introducing a one-stop insurance service to streamline the insurance purchasing process for travelers.

 

The impending merger between Korean Air and Asiana Airlines, aiming to transform into a "Mega Carrier," remains a significant focus. While awaiting approvals from regulatory bodies, including the EU, the U.S., and Japan, Korean Air is actively working towards a successful conclusion of the merger.

 

LCCs are also diversifying their routes. Jeju Air expanded its network to include lesser-known Japanese cities and initiated new routes to Oita and Hiroshima, along with the Incheon to Dalat route, the first for a domestic airline. T'way Air, differentiating itself from other LCCs, has been expanding into long-haul routes since 2022 and is planning to secure European routes through new Croatia services this year.

 

However, despite optimism for 2024, the industry remains cautious. Economic uncertainties and intense supply competition pose challenges, and while the effects of the pandemic are expected to linger, the extent of market prosperity remains uncertain.

 

An industry insider shared with News2day, "Expecting the recovery trend to continue for three years, given the prolonged impact of the pandemic and the significant drop in international oil prices. However, with the market being highly competitive, especially with the increased supply from LCCs, caution is warranted."

 

In conclusion, while the aviation industry looks towards 2024 with hope for a complete recovery, the prevailing economic uncertainties and fierce competition suggest that caution is essential in predicting sustained prosperity. make a title and subtitle

 

 

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By Soyeon Jeon, a reporter of News2day / jsy@news2day.co.kr

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