Yesterday, Korean Air took delivery of its twelfth 777F (62697), as part of a plan to renew a fleet once heavily-reliant on 747-400BCFs and 400ERFs. This unit is on lease from GECAS, and was the fifth aircraft included as part of a sale-and-leaseback deal for five 777Fs between Korean Air and GECAS that was reached in September 2016. Since February 2015, Korean has retired nine -400BCFs and replaced them with two 747-8Fs and now eight 777Fs. The deliveries come at a time when global demand for air cargo is surging, and providing a much-needed boost to yields which have been sluggish for past few years.
With all of Korean’s -400BCFs now retired, the carrier is gradually phasing out its -400ERFs. Last week, the Seoul-headquartered carrier sold one-of-five remaining 747-400ERFs to lessor Altavair, who immediately leased it to Atlas Air Worldwide Holdings (AAWW). The aircraft (33517), was part of a two-unit deal brokered some time ago, which also included a sister ship (33515) leased to AAWW in September.
Korean’s freighter fleet now includes twelve 777Fs, seven 747-8Fs, five 747-400Fs and four 747-400ERFs. No additional freighter orders or retirements are scheduled at this time.
With a substantial fleet of modern freighters, we now shift the focus to the performance of Korean’s cargo operations. Though 3Q17 is already weeks into the past, Korean Air only recently released its 2Q17 earnings, reporting USD cargo yields up 15.3% y-o-y, over 2Q16, on traffic that was 2.6% higher. Tonnage meanwhile, was up 6%, and since cargo capacity was relatively stable (up 0.9%), load factors rose 1.3pts. Cargo revenues were significantly higher for imports and exports on routes linking the Americas to South Korea, with revenues up 16% y-o-y. Growth markets, such as Southeast Asia, and Japan also saw revenues jump by 26% and 37% respectively. With significantly higher revenues, Korean Air now derived 23.6% of its revenues from cargo in 2Q17, up 2.1pts from the same period in 2016.
Korean’s Q317 outlook was, no surprise, quite bullish, with the company predicting a “positive impact from recovering global economy and Korean exports.” And while it will be a few more weeks until the carrier reports Q3 traffic and earnings, September data from South Korea’s Incheon Airport suggests that Q3 will be just as robust. Incheon reported its September cargo handle up 10.7%, to 256,000 tonnes. For the first three quarters of 2017, ICN’s handle was up 9.6% to 3.1 million tonnes.