Hyundai Motor Co.’s race to meet U.S. demand for Elantra and Sonata cars is helping South Korean air-cargo carriers withstand a global freight slump.

Korean Air Lines Co., the nation’s biggest carrier, boosted U.S. auto-part shipments 16 percent in the first 10 months as Seoul-based Hyundai and affiliate Kia Motors Corp. ramped up U.S. production because of surging sales. Second-ranked Asiana Airlines Inc. has also seen a pick-up in component shipments that has slowed an overall decline in volume, Senior Vice President Kim E-bae said without elaboration.

Korean Air, the world’s second-biggest international cargo carrier, filled 74 percent of capacity in the third quarter, compared with about 65 percent at Cathay Pacific Airways Ltd., as rising volumes of car sensors and display panels, as well as capacity cuts, offset slower shipments of liquid-crystal display TVs. Asia-Pacific airlines’s cargo traffic fell 4.1 percent this year through September as the slower economy sapped trade, according to the International Air Transport Association.

“Korean airlines are benefiting, to a certain extent, from the strong demand for South Korean cars,” said Jee Heon-seok, an analyst at NH Investment & Securities Co. in Seoul. “While the downturn in the technology industry has left many freighters with more empty space, Korean carriers are less affected because they are filling it up with auto parts.”

Hyundai and parts-making affiliate Hyundai Mobis Co. declined to comment on their use of air cargo.

Hyundai is running its only U.S. plant, in Alabama, at 115 percent of capacity to meet demand as Japanese carmakers struggle with a stronger yen and supply disruptions following Japan’s March earthquake. The Korean automaker’s U.S. market share declined in the third quarter because of a lack of cars, Chief Financial Officer Lee Won Hee said on Oct. 27.

“More auto parts are expected to be shipped by plane in the second half, continuing the trend seen in the first half? Korean Air said in an e-mailed response to questions.

“We expect demand to grow further should the free-trade deal with the U.S. take effect.”

The free trade agreement, which will eventually remove tariffs on most products exported between two countries, was signed into law by President Barack Obama last month. South Korea’s legislature has yet to vote on the accord. That approval will determine when the agreement comes into effect.

Hyundai boosted U.S. sales 20 percent in the first 10 months to 545,316 vehicles, outpacing a 10 percent increase in the overall market. Kia, which has a plant in Georgia, boosted sales 35 percent to 405,095. The carmakers had a combined 9.1 percent market share.

Sales growth is likely to continue into next year as Toyota Motor Corp. and Honda Motor Co. face a shortage of parts following flooding in Thailand, which is compounding the difficulties they faced after the Japan earthquake and tsunami, said Song Sang-hoon, an auto analyst at Kyobo Securities Co. in Seoul.

“There have been series of unfortunate events for the Japanese automakers recently, which has helped increase sales for Hyundai,” he said. “Their luck keeps holding up.”

Korean Air, which generated 33 percent of sales from freight last year, carried 22,559 tons of auto parts in the first 10 months. Total volumes were 1.28 million tons. Its third-quarter load factor fell 1.1 percentage points from a year earlier after a 4.6 percent reduction in capacity.

Korean carriers have benefited from rising shipments of Samsung Electronics Co. and LG Electronics Inc. smartphones. The two electronics companies both make the majority of their devices in South Korea.

Samsung sold the 10 millionth Galaxy S II phone in September, less than five months after the model’s debut. The Suwon, South Korea-based company also surpassed Apple Inc. in smartphone sales in the third quarter, with 27.8 million shipments or 23.8 percent of the global market, according to Strategy Analytics.

LG Electronics will probably ship about 23.8 million smartphones this year, compared with 6.2 million in 2010, according to the Milton Keynes, England-based industry researcher.

“Smartphones and auto parts are helping fill space on Korean Air planes,” said Um Kyung-a, an analyst at Shinyoung Securities Co. in Seoul. “That’s letting the carrier fare better than rivals during the slowdown.”

The increase in smartphone and tablet PC shipments contributed to the value of cargo handled at Incheon Airport, South Korea’s main hub, rising 8 percent in the first 10 months to $167.3 billion, according the airport operator. Volumes fell 5.1 percent to 2.12 million tons. Neither the airport nor Korean Air were able to provide figures on electronics shipments.

The decline in freight tonnage and higher fuel costs has damped earnings at Korean Air. Operating profit fell 46 percent in the third quarter to 239.3 billion won ($214 million). The carrier also last month announced a voluntary early retirement program.

Global air-cargo traffic, or distance multiplied by volumes, fell 3 percent in September, the fifth straight decline, according to IATA. The slowdown prompted the airline group to pare its forecast for full-year freight growth to 1.4 percent from 5.5 percent. (Bloomberg)

“Auto parts shipments have definitely helped fill space on Korean planes, but it is still a small portion of total air-cargo volumes,” said Jee at NH Investment. 

(Bloomberg)