Korean Air sees pressure on cargo business in 2021, seeks cost cuts after Asiana buy

SEOUL, Dec 2 (Reuters) - Korean Air Lines Co Ltd said on Wednesday it expects its cargo business to face tougher competition next year as rivals expand in this area to offset a slump in passenger travel globally because of the pandemic.

The company also said it is hoping to complete its acquisition of Asiana Airlines Inc in 2021, after a Seoul court on Tuesday allowed Korean Air’s parent, Hanjin Kal , to issue new shares to Korea Development Bank, paving the way for the deal.

As Korean Air prepares for the acquisition, it plans to review Asiana’s aircraft lease contract to minimise cost, potentially by purchasing aircraft than renting ones, Woo Kee-hong, president of Korean Air, said during a briefing.

Woo said the coronavirus pandemic’s toll on Korean Air will be likely to continue into the next year, adding that the airline expects a 65% drop in annual passenger demand for 2021 compared to 2019.

“While we have been able to make up for passenger losses with our cargo demand this year so far, other carriers will likely expand cargo supplies next year, which may lead to less profitable cargo business for us,” Woo said.

Combining South Korea’s two biggest carriers would create the world’s 15th largest airline using the industry measure of kilometres flown by paying passengers, based on 2019 data from the International Air Transport Association. That represents a jump from 28th for Korean Air and 42nd for Asiana.

Asiana operated 29 passenger routes and had 72 passenger aircraft as of June, according to a regulatory filing. Prior to the pandemic, it was operating 85 passenger routes.

“We plan to submit our application to antitrust regulators by January 14 to seek approvals from each country,” Woo said. “Since our routes abroad do not have such high market shares, we do not expect this would be a big issue.”

Korean Air reported operating profit of 7.6 billion won ($6.91 million) in the third quarter, marking more than 93% decline from the same period a year earlier.

$1 = 1,100.6200 won Reporting by Heekyong Yang. Editing by Jane Merriman