Korean Air’s third-quarter operating profit declined by 70%, as revenues were hampered by geopolitical issues.
Korean Air’s third-quarter operating profit declined by 70%, as revenues were hampered by geopolitical issues.
Passenger load factor was in fact up by 1.3 percentage points to 83%, with a 3.2% year-on-year increase in RPKs versus ASKs rising 1.6%. Yield, however, declined by 3.7% and the carrier attributed lower passenger revenues to Japan and Hong Kong routes, due to political issues.
On the upside, it saw strong demand from long-haul routes to the Americas and Southeast Asia, via its joint venture with Delta Air Lines.
Likewise, the carrier says its cargo business was impacted by US-China trade tensions and a slowdown in global trade. FTKs declined by 11.2% versus a 4.2% increase in AFTKs, reducing the cargo load factor by 5.6 percentage points to 71%. It plans to focus on growth markets while securing project shipments in the IT machinery sector.
As a result, operating revenue was down by 3.7% year-on-year to W3.28 trillion ($2.8 billion), and this was compounded by a 4.9% increase in operating expenses, to W3.17 trillion.
Fuel, the major component, cost 4.9% less during the quarter, but two other key factors, labour as well as airport and handling expenses, were up by 8% and 10%, respectively. Maintenance accounts for only 4% of expenses but increased sharply by 162%.
On the whole, operating profit tumbled from W393 billion during the third quarter of 2018 to W118 billion in the current period.
To mitigate the impact of geopolitical issues, Korean Air plans to grow its passenger network in North America and Southeast Asia. For cargo, it is looking to expand operations for fashion goods from Europe to Asia, as well as e-commerce freight to Europe.
As at 30 September 2019, the carrier’s current assets stood at W3.80 trillion, up 6.5% from last year.
It has 146 passenger aircraft in its fleet – 105 widebodies and 41 narrowbodies – having added two Boeing 777, one 787-9 and one Airbus A220, while phasing out one 737, between January and September 2019, but unchanged from the previous quarter. Its freighter fleet hold steady at 23.
