Korean Air post worst loss in 14 years on weak won
Korean Air Lines Co posted its worst quarterly loss in 14 years because of high fuel costs and weakness in the South Korean won.india Updated: Nov 14, 2008 14:42 IST
Korean Air Lines Co. posted its worst quarterly loss in 14 years because of high fuel costs and weakness in the South Korean won.
South Korea's biggest airline and the world's largest international cargo carrier said on Friday it lost 684.1 billion won ($497.6 million) in the July-September quarter. Korean Air recorded net profit of 129.6 billion won a year earlier.
The last time a net loss was bigger was in 1994, according to spokeswoman Lee Ji-hye, though she could not provide a figure. It was the airline's fourth straight quarter of red ink. However, quarterly sales rose 16.4 per cent to 2.76 trillion won ($2.01 billion), showing that the pain came mostly from the won's weakness, which increased the cost of purchasing fuel and servicing overseas debt.
Fuel prices are denominated in dollars, so that means the airline requires more won to buy the same amount of fuel when the local currency is weak. Compared to a year ago, fuel expenses jumped 82.5 per cent, the airline said.
International passenger revenue rose 13 per cent during the quarter. Cargo revenue jumped 29 per cent.
During the quarter, the won fell about 13 per cent against the U.S. dollar during the period, according to a Bank of Korea database. Since the start of the year, it has dropped 33 per cent. A weaker won also increases the burden of servicing Korean Air's foreign debt. The airline's borrowings denominated in the U.S. currency totaled $5.3 billion at the end of the third quarter. In the cargo business, shipments of telecommunications equipment grew strongly, but liquid crystal displays, semiconductors, auto parts and machinery declined compared with the same period last year, the airline said.
Korean Air launched two new destinations during the quarter, a passenger route to Tashkent, Uzbekistan, and a cargo route to Navoi, also located in the Central Asian country.
The airline offered a bleak picture for the rest of this year. "Given current economic conditions, air travel demand will continue to slow down" during the fourth quarter, Korean Air said, in particular for outbound traffic from South Korea. Shares in Korean Air, which released earnings results before the stock market opened, fell 0.2 per cent to close at 32,850 won ($23).