KOREAN AIR (KAL) came close to tripling its profits in 1995, although much of the improvement came as a windfall from the appreciation of the South Korean won against the US dollar, in which the airline holds most of its debt.
KAL's net profit soared over the year, reaching nearly 106 billion won ($136 million) compared with 37 billion won in 1994 and 11.8 billion won in 1993. In contrast, the airline's sales were up by a less dramatic 11%, to 3,380 billion won.
"On closer examination, most of the improvement is linked to currency changes, rather than any underlying factors," says Kay Hian James Capel aerospace analyst Shane Matthews. "There is still room for more improvement."
With around 80% of KAL's 3.6 trillion won of debt and all its aircraft transactions denominated in US dollars, the stronger won has reduced the carrier's costs considerably. As much as 89 billion won of the carrier's improved finances came from exchange rate gains.
At the same time, KAL's revenues are heavily biased towards South Korean and Japanese traffic. A large number of increasingly wealthy South Korean tourists are now travelling overseas. Since the lifting of Government restrictions on foreign travel a few years ago, there has been a double-digit hike, in outward bound passenger traffic. South Korea has also developed a role as an off shore hub for Japanese passengers avoiding their own heavily congested airports.
Financial analysts expect KAL's fortunes to stay linked to fluctuations in the dollar and yen exchange rate over 1996.
Source: Flight International
