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Korean Air

Record first-quarter profit posted by Korean Air

KYONG-AE CHOI  Apr 15, 2010

SEOUL—South Korea's flag carrier Korean Air Co. Wednesday posted a record first-quarter operating profit as a strong won and economic recovery boosted outbound travel and cargo shipments.

The airline also forecast a more than sixfold increase in its operating profit for the year as the economic recovery and the strengthening local currency are tipped to further increase demand for international travel.

Operating profit for the three months ended March 31 skyrocketed to 220.2 billion won ($197 million) from 6.6 billion won, while sales rose 15% to 2.599 trillion won from 2.264 trillion won a year earlier, Korean Air said.

"Increased outbound travel to China and Southeast Asia and exports by IT [information technology] companies pushed up the quarterly results," the airline said in a statement.

The company didn't provide a net profit figure for the January-March period though its pretax profit was 226.9 billion won. Korean Air said it hadn't yet calculated its corporate tax, and thus couldn't provide a net result. The carrier said the net profit figure would be available in mid-May. The company posted a net loss of 526.3 billion won in the same period a year earlier, when it was reeling from the economic downturn, a weak won and the consequent fall in travel.

For 2010, the company set an operating profit target of 800 billion won on sales of 10.6 trillion won, up from the 130 billion won and 9.394 trillion won, respectively, it posted in 2009.

"We may even achieve an operating profit of one trillion won for this year as the economy has entered a rapid recovery path," Marketing Vice President M.S. Hwang said after an investor relations session. "A strong won is offsetting high oil prices."

The Korean currency strengthened to an average of 1,144.08 won against the U.S. dollar in the first quarter from 1,415.22 won a year earlier, according to the Bank of Korea.

"The annual targets are based on oil prices at $80 per barrel and the U.S. dollar at 1,200 won," the company said in the statement. The dollar traded at 1116.50 won.

Fuel costs accounted for 32% of its operating costs worth 2.379 trillion won in the first quarter, little changed from 32% of 2.258 trillion won a year earlier, it said.

This year, the company said it expects airline markets to show an average of 3.7% growth globally and 9.7% domestic growth on international routes.

Shin Min-seok at Daewoo Securities said the number of outbound travellers will likely rise 27% from more than an estimated 12 million in 2010.

Korean Air plans to add 56 large new airplanes from 2010 to 2016 to strengthen its fleet to 180—composed of 140 passenger jets and 40 cargo planes—by 2019 from 132 in 2010.

The company didn't offer the investment size for the 56 passenger and cargo jets.

Record first-quarter profit posted by Korean Air
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