ATW Daily News

Korean's bottom line collapses with won

Monday November 17, 2008

The dramatic collapse in the value of the won was blamed for Korean Air's largest single-quarter loss in 14 years, a KRW684.1 billion ($492.8 million) third-quarter deficit representing a reversal from a KRW129.6 billion profit in the year-ago period.

The result came on the heels of a KRW288.9 billion loss in the second quarter, when fuel prices savaged the carrier. The third-quarter loss came despite a 16.4% year-over-year rise in KE's revenue to KRW2.76 trillion.

The won's decline has made travel for Koreans more expensive, raised the value of any US dollar-denominated debt and adversely affected the price of jet fuel despite the recent decline in fuel prices. KE booked a KRW905.6 billion loss after converting US dollar and Japanese yen debt into won, according to a company statement cited by press reports from Seoul. The Korean currency has fallen 33% this year.

Fuel costs remained high. The carrier spent KRW1.26 trillion during the quarter, up 83% year-over-year. Its operating result swung to a KRW2.51 billion loss from a KRW281.4 billion profit in the third quarter of 2007.

Domestic traffic declined 3.1% to 845 million RPKs against a 2.4% fall in capacity, dropping load factor 0.5 point to 68.6%. Yield decreased 8.5% to KRW192. International RPKs were level at 13.91 billion, with loads dipping 0.8 point to 74.2% and yield down 14.1% to KRW99.5

Nine-month loss of KRW1.3 trillion compared to a KRW46 billion profit in the first nine months of 2007. Operating result swung to a KRW121.9 billion loss from a KRW508.2 billion profit.

KE said that "given current economic conditions, air travel demand will continue to slow down" in the current quarter, the Associated Press reported. On the bright side, it said it will "realize significant benefits" when Koreans become eligible for the US visa waiver program this week. Director-Marketing-Americas John Jackson said the number of Korean visitors to the US is expected to rise 10% in the first year of the program, with KE's transpacific capacity increasing 5%-7%.

by Geoffrey Thomas

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