Korean Air to add flights to Xiamen as profit soars

Korean Air, the largest international air-cargo carrier, will add flights to Xiamen as profit soars

 

Korean Air Lines Co., the largest international air-cargo carrier, rebounded to a record operating profit in the second quarter as the global economic recovery stoked overseas travel and freight traffic.

 

Operating profit, or sales minus the cost of goods sold and administrative expenses, was 352.1 billion won ($ 296 million), compared with an operating loss of 127.3 billion won in the quarter a year earlier, the Seoul-based carrier said in an e-mailed statement today. The airline unexpectedly made a net loss of 233.1 billion won after currency losses.

 

Cargo sales jumped 86 percent to 1 trillion won as rising job security in the U.S. and Europe spurred shipments of Samsung Electronics Co. TVs and Apple Inc. iPads. The airline, South Korea's largest, also joined Cathay Pacific Airways Ltd. and Singapore Airlines Ltd. in announcing plans to add more flights as travel demand rebounds from last year’s global recession.

 

"Earnings came out strongly last quarter as demand for both outbound trips and cargo traffic was very high," said Kim Seung-Churl, a Seoul-based analyst at Meritz Securities Co. "The company's bottom line may improve in the third quarter as the won will likely be stronger against the dollar."

The carrier's overall sales rose 37 percent in the second quarter to 2.8 trillion won. The airline made a 209.5 billion won currency loss as the won depreciated 12 percent in the period, raising the local currency cost of its $5.2 billion in dollar-denominated debts.

 

Cargo Traffic

 

Analysts expected net income of 10.3 billion won, based on the average of 18 estimates compiled by Bloomberg.

 

The company rose 2.8 percent to close at 77,100 won in Seoul trading, compared with benchmark Kospi index's 1.4 percent gain.

 

Cargo traffic rose 26 percent, helping the airline fill 77.9 percent of its freight space. That was an increase of 2.1 percentage points from a year earlier. South Korea's economy expanded 7.2 percent from a year earlier as Samsung Electronics and Hyundai Motor Co. boosted exports.

 

"As global demand for smart phones remains strong and the global car industry has recovered, Korean Air will likely sustain resilient earnings in the third quarter," said Um Kyung A, a Seoul-based analyst at Shinyoung Securities Co.

 

The carrier's full-year freight volumes will probably surpass a record set in 2007, President Chi Chang Hoon said last month.

 

Korean Air's international passenger traffic rose 14 percent. The carrier filled 76.5 percent of available seats, 10.2 percentage points higher than a year earlier. The company expects passenger traffic to continue rising in the third quarter, partly helped by an anticipated appreciation of the won.

 

The carrier plans to start new services from Chungju, south of Seoul, to Hong Kong, Osaka and Bangkok in the second half, it said. It will also boost flights to cities including Atlanta, Los Angeles, Hong Kong and Xiamen, China from Incheon, South Korea's main international airport.

 

SOURCE: Bloomberg

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