News
Asiana and Korean Air report second quarter losses despite record sales
August 17th 2018
South Korean flag carrier, Korean Air, this week posted a KRW304.7 billion (US$270 million) net loss for the three months ended June 30, a worse result than the KRW200.3 billion loss the airline reported in the corresponding year-ago quarter. Read More »
Korean Air’s operating profit slumped 61%, from KRW172.8 billion to KRW66.7 billion. The airline blamed higher fuel costs for the declining bottom line. Nevertheless, the carrier’s sales revenues increased 6.9%, to KRW3.12 trillion, during the quarter, which Korean Air attributed to the launch of its trans-Pacific joint venture with Delta Air Lines in May.
Korean Air said it would focus on developing new markets in the third quarter to improve its financial standing.
South Korea’s second largest carrier, Asiana Airlines, has posted a KRW49.4 billion (US$44 million) second quarter net loss, despite a record 10% year-on-year revenue growth, to KRW1.6 trillion. Like Korean Air, the Star Alliance member said the loss was largely due to a surge in fuel cost and foreign exchange losses.
Asiana’s net loss for the six months through to June 30 was KRW54.8 billion, reversing a KRW21.3 billion net profit achieved in the first six months of 2017. Nevertheless, Asiana said it had reduced its debts by KRW443.4 billion during the first half.
As of June 30, Asiana operated seven A320ceo, 19 A321ceo, 15 A330-300s, six A350-900s, six A380s, 13 B747-400s including eleven freighters, eight B767-300ERs and nine B777-200ERs.
Asiana will launch a year-round Incheon-Barcelona route on August 30. This forms part of a strategy to enhance the airline’s long-haul network by 2020.
Asiana is still reeling from an in-flight catering scandal in July, which prompted shareholders to consider a class action against the Kumho Asiana board, including airline chairman Park Sam-koo, alleging loss of reputation as a result of the poor handling of an in-flight catering crisis earlier this month.
For approximately a week in early July, scores of Asiana flights departed without in-flights meals. Asiana compensated affected passengers with US$30-50 vouchers. Nevertheless, local media claimed that Asiana board members travelling throughout the period were still served hot meals.
In the latest development, Asiana has said it would refund 10% of the ticket cost to passengers affected by the service failure.
In the interim, the operating environment for Asiana and arch rival Korean Air is about to get more difficult. This week, South Korean authorities announced they would cancel tens of billions won worth of exemptions in provincial taxes granted to both carriers.
In 2018, Asiana received KRW5 billion; Korean Air got a staggering KRW28.9 billion. Under the revised ruling, airlines with more than KRW5 trillion in assets will be exempted from tax breaks going forward, while those with less than KRW5 billion in collateral will continue to receive the subsidies.
