Korean Air's Profit Doubles
Increased Demand And a Stronger Won Help Offset Fuel Costs
By SEON JIN CHA
May 5, 2006
SEOUL -- Korean Air's first-quarter net profit more than doubled as a strong local currency and solid passenger and cargo demand helped offset high fuel costs, the South Korean carrier said.
Korean Air, the nation's largest passenger carrier and world's biggest cargo airline by volume, posted a net profit of 127.3 billion won ($136.2 million), jumping from 59.3 billion won a year earlier. Revenue rose 7.8% to 1.83 trillion won as the airline carried more domestic and international passengers and shipped more cargo such as mobile handsets and semiconductors.
"Korean Air fared really well in the first quarter, considering the high jet-fuel costs," said Song Jae Hak, an analyst at Woori Investment & Securities Co.
Analysts expect Korean Air's profit to rise further amid high demand and a stronger won. Because Korean Air holds about $4.9 billion of dollar-denominated debt, currency fluctuations change the value of the debt. Korean Air's bottom line inflates by about 49 billion won for every 10 won that South Korea's currency gains against the dollar.
The dollar fell to 971.6 won at the end of March, compared with 1,011.6 won at the end of December. Lately is has been hovering around an eight-year high against the dollar. In Seoul late Thursday, the dollar was trading at 939.6 won.
Korean Air posted a net foreign-exchange gain of 181 billion won in the first quarter, compared with 106 billion a year earlier. Revenue from international passenger and cargo businesses grew 9.8% and 6.6%, respectively.
During the quarter, Korean Air filled 69.2% of available seats with paying passengers on its international routes, down 0.1 of a percentage point from a year earlier after increasing its seat capacity by 7.6%. The airline filled 61.8% of seats on domestic flights, up 4.7 percentage points, and 79.2% of available cargo space, up 5.2 percentage points.
Operating profit jumped 49% to 91.1 billion won. A higher fuel surcharge on tickets and reduced costs helped widen its margin.
"Fuel costs remained at a high level, yet we were able to offset these and keep the increase in operating expenses at a reasonable level by lowering maintenance and rental expenses," Korean Air's president, Jong Hee Lee, said in a statement.
The brisk earnings and anticipation of further improvement lifted Korean Air's shares 3.8% Thursday to 36,000 won, outperforming the Korea Composite Stock Price Index's 0.4% rise. |
