SEOUL: Korean Air posted a first-half consolidated net loss of KRW302 billion ($267 million), reversed from a KRW206 billion profit in the year-ago period. Foreign exchange losses totaled KRW174 billion in the first half, a negative shift of KRW494 billion year-over-year. Korean currency weakness hit the carrier particularly hard since 63% of its debt is in US dollars.
Excluding foreign exchange losses and other special items, the carrier achieved a first-half operating profit of KRW187 billion, compared to a KRW1 billion profit in the first half of 2014.
First-half passenger revenue was affected by the Middle East Respiratory Syndrome (MERS) outbreak in Korea, which caused some travelers to stay away from Korea, prompting the South Korean carrier to temporarily suspend some routes.
Second-quarter international traffic rose 7.6% on a 3.3% capacity gain, with domestic traffic up 9.8% on a 1.8% capacity increase. In both sectors, traffic declined in June as MERS began to have an effect. For the quarter, yield was down 17.5% for international and 20.9% for domestic routes.
Second-quarter revenue was down in every region except Europe, where it was flat. The highest second-quarter revenue declines were 9% for North American routes and 8% on Chinese services. In addition to MERS, lower fuel surcharges also affected revenue, the airline said. Korean expects demand to recover in the third quarter since the MERS threat has receded.
As with other Asian carriers, Korean Air’s cargo business was weaker in the second quarter. Cargo traffic was essentially flat despite a 2.9% capacity increase, causing load factor to drop 2.1 points to 77.6%. Yield fell 16.4% in the quarter.
As of June 30, the carrier had 125 passenger aircraft and 28 freighters in its fleet. It expects to add another 13 passenger aircraft in the second half.
