Published on
November 3, 2025
South Korea’s airline industry is facing a significant downturn, with profits taking a sharp hit due to a combination of travel barriers to the US and the ongoing trade slowdown with China. These external factors have severely impacted passenger demand and cargo volumes, leaving South Korean carriers grappling with dwindling revenues and uncertain recovery prospects.
South Korea’s airline sector is facing a turbulent period following a disappointing third-quarter performance, which is typically considered its busiest season. The nation’s largest carriers have reported sharp declines in both revenue and profit, largely due to a combination of factors including global economic uncertainties, fierce competition, and changing travel patterns.
In its latest earnings report, Korean Air, South Korea’s flagship airline, posted a revenue of 4 trillion won for the third quarter, marking a 6 percent drop compared to the same period last year. Operating profit saw a drastic decline of 39 percent, reaching 376.3 billion won, while net profit dropped an alarming 67 percent to 91.8 billion won. This downward trend in financial performance has sparked concerns about the airline’s ability to recover and maintain profitability in the coming months.
The root causes of these declines have been attributed to a combination of factors, some of which are beyond the control of the airline industry. One of the key issues is the rapid expansion of global flight capacity. With more airlines increasing their routes and seat availability, the competition has intensified, forcing airlines to lower their prices in order to remain competitive. This increase in capacity, coupled with fierce fare wars, has placed significant downward pressure on revenue, especially in the passenger segment, which traditionally accounts for a large portion of an airline’s earnings.
In addition to the heightened competition, fluctuations in exchange rates have created another layer of instability for South Korea’s airlines. The value of the Korean won has been volatile in recent months, which has added further financial strain. For Korean Air and other carriers with international operations, this has led to higher costs in foreign currency-denominated transactions, affecting the overall profitability of their services.
Another major factor in the weaker-than-expected performance has been a shift in travel patterns, driven by stricter entry requirements in key markets, such as the United States. For instance, recent changes in U.S. visa policies and the introduction of more stringent border controls have discouraged potential travelers. Additionally, the timing of the Chuseok holiday this year—moving from September last year to October this year—has further affected travel demand. While the third quarter is traditionally a peak period for travel, particularly for family overseas trips, the spread of demand due to these regulatory changes meant that airlines couldn’t fully capitalize on the seasonal surge.
In the passenger business, Korean Air’s sales dropped by 7.5 percent year-on-year, totaling 2.42 trillion won. This decrease in revenue comes despite the usual uptick in demand during the third quarter. However, this year saw a flattening of demand, particularly from overseas travel, as travel restrictions and stricter entry protocols, especially to the United States, deterred many potential passengers from booking international flights.
The airline’s cargo sector also faced significant headwinds during the third quarter. Revenue from this division fell by 4.7 percent to 1.07 trillion won. The decline can be attributed to a combination of trade uncertainties and the looming risks of U.S. tariffs. The global slowdown in trade, which has been affecting various industries, has led to reduced demand for air cargo services, contributing to the drop in earnings.
Other South Korean airlines are facing similar struggles. Asiana Airlines and several low-cost carriers (LCCs) are expected to report drops in both revenue and operating profit for the third quarter. High exchange rates and increasing operational costs, particularly rising lease costs for aircraft, are adding additional pressures on these carriers. The competition in the low-cost sector has also intensified, with LCCs facing stiff challenges from larger network carriers that are able to offer more extensive route networks and more competitive pricing.
The outlook for South Korea’s airline industry remains bleak as analysts are continuing to lower their target prices for major carriers, citing weak performance in the short term. Among the low-cost carriers, one is projected to experience a significant decline in operating profit, with estimates suggesting a 95.4 percent drop in year-on-year earnings. This decline reflects the challenges faced by LCCs in coping with rising costs and stiff competition.
Other low-cost carriers, including Air Busan and Jin Air, are also expected to experience significant profit drops, with estimates forecasting a 60 percent and 48 percent decline in operating profit, respectively. These projections reflect the pressure that LCCs are under in an increasingly challenging operating environment.
Looking forward, the fourth-quarter forecast remains uncertain, and many carriers are cautious about the potential for recovery. However, there is a glimmer of hope for a short-term rebound in passenger demand, particularly due to the extended Chuseok holiday in early October. The extended break could encourage more domestic and international travel, providing a temporary boost to airline bookings.
Moreover, South Korea’s government has introduced a new measure that could help the industry recover in the medium to long term. The decision to allow visa-free entry for Chinese group tourists through next year is seen as a potential boost for South Korean carriers. China is a key market for South Korea’s airlines, and this move could help increase flight operations and improve load factors, especially on routes to and from China.
South Korea’s airline industry is struggling with profit slumps, primarily due to travel restrictions to the US and a slowdown in trade with China, which has reduced demand and cargo volumes.
Despite the current challenges, the South Korean airline industry remains hopeful that the recovery of passenger traffic, particularly in the wake of the Chuseok holiday and government-backed tourism initiatives, will offer some relief. However, airlines will need to navigate a turbulent landscape filled with intense competition, rising costs, and global uncertainties before achieving sustainable growth and profitability in the coming quarters.
