After swinging to a consolidated net loss of 67.2 billion won (US$59 million) in the first quarter, and with high oil prices looking likely to persist into the second quarter, Korean Air Lines said it is rethinking schedules and aircraft deployment.
Attributing the loss to smaller foreign-exchange translation gains and fuel costs, exacerbated by the weak won, South Korea’s flag carrier said in a statement Thursday it will “readjust the number of flights and kinds of planes on routes depending on demand and will focus on profitability.” In last year’s first quarter it reported a net profit of 270.9 billion won.
Analysts had some good news for the airline, saying that seasonal factors will increase outbound travel from the second quarter – but they added that freight volumes aren’t likely to rise sharply owing to worldwide economic uncertainty.
Korean Air said in the statement cargo demand will get a boost, if not a big one, from the free-trade pact with the US and this summer’s London Olympic Games.
“The company will be able to pass on some higher fuel costs to customers by raising surcharges in the second quarter,” Jee Heon-seok, an analyst at NH Securities, said.
Outbound cargo volumes – mainly to Europe and the US – were down 12 percent in the three months ended March 31 compared with a year earlier, the airline said, pointing to stiffer competition. The number of midsize and large cargo aircraft in China, it added, stood at 109 in April, up from 93 in early 2010.
First-quarter jet-fuel expenses were up 22 percent from a year earlier, to 1.210 trillion won from 995 billion won. The unit price was 15 percent higher, at $133 a barrel versus $116.
Foreign-exchange translation gains were off 28 percent, to 146.7 billion won from 204.6 billion won, the airline said, citing the won’s weakness against the dollar. Dollar-denominated debt at the end of March was $12.4 billion, up 3.3 percent from the end of December.
The dollar ended the quarter at 1,137.80 won, up from 1,107.20 a year earlier.
Korean Air posted a first-quarter operating loss of 98.9 billion won, reversing an operating profit of 162.9 billion won. Sales were up 6.3 percent, to 2.998 trillion won from 2.821 trillion won. -By KYONG-AE CHOI