Korean Air posts profit amid stronger currency

Korean Air posts third-quarter profit amid cheaper fuel costs, stronger local currency

• By Kelly Olsen, AP Business Writer
• On 5:06 am EST, Tuesday November 10, 2009

SEOUL, South Korea (AP) -- Korean Air, South Korea's biggest airline, said Tuesday it posted a third-quarter net profit compared with a big loss the year before thanks to cheaper fuel costs and a stronger local currency.

Korean Air Lines Co. earned 264 billion won ($227.6 million) in the three months ended Sept. 30, the company said in a regulatory filing. Korean Air posted net loss of 684.1 billion won a year earlier.

Revenue, however, fell 10 percent to 2.48 trillion won from 2.76 trillion won the year before.

It was Korean Air's second straight profit after six straight quarterly losses. The airline's third-quarter loss last year was its worst in 14 years, resulting from high fuel costs and weakness in the South Korean won.

This year, fuel costs dropped 40 percent from 2008 and the average price per gallon fell 50 percent, the airline said in a statement.

Further, Korean Air said it recorded no foreign exchange conversion loss in the third quarter after booking one of 901 billion won the year before. It had a gain of 459.8 billion won this year.

The South Korean won has been volatile against the dollar since last year. It fell 25.7 percent against the dollar in 2008 and continued to slide early this year, hitting 11-year lows in March. Since then, however, the won has surged 37 percent.

International fuel is priced in dollars so a stronger local currency can bring down the cost for Korean Air and South Korea's other major airline, Asiana Airlines Inc.

A stronger won can also ease Korean Air's burden of servicing its foreign-denominated debt. The airline said it had $5.16 billion in dollar-denominated debt at the end of September.

Korean Air said its international passenger traffic rose 4.4 percent from the same period last year. It said sales from Japan rose 37 percent from the same period last year as a strong Japanese yen enticed Japanese travelers to visit South Korea.

The airline also said that passenger traffic on routes to the United States increased as South Koreans no longer need to obtain a tourist visa to travel there. The U.S. implemented a visa-waiver program for South Korea in November last year.

Cargo traffic, however, declined 3.6 percent. Among passenger airlines, Korean Air is the world's biggest carrier of international commercial cargo.

Looking ahead, Korean Air expects better results in 2010 amid what it described as continued stabilization in oil prices and a further strengthening in the won.

Shares in Korean Air, which released earnings results about two hours after the stock market opened, rose 1.3 percent to close at 46,350 won. Its stock price has risen 22 percent so far this year.

Korean Air flies passengers to 117 cities in 39 countries. Destinations include New York, London, Singapore, Los Angeles, St. Petersburg, Russia, Ulan Bator, Mongolia and Tashkent, Uzbekistan.

Buzz up!