Korean Air Records its Highest Ever Q1 Operating Profit

Korean Air recorded its highest ever operating profit numbers for the first quarter of 2010 ended March 31, 2010. Thanks to the surging growth in international passenger business and Korea-outbound traffic, as well as the rising demand for premium class services in the first quarter of 2010, the airline posted an operating revenue of 2,599 billion KRW, a year-on-year increase of 14.8%, while operating profit recorded a historic jump of 33.3 times to 220.2 billion KRW.

 Income before tax turned to the black from a loss of 673.9 billion KRW in Q1 2009 to a surplus of 226.9 billion KRW during the reporting period. International passenger and cargo businesses remained the major revenue contributors for the airline in Q1, accounting for 55% and 33% of the operating revenue respectively.

The airline posted overall growth of 1.8% and 14.4% in international passenger capacity and traffic compared to the corresponding period last year, reaching 18,386 million ASK and 14,153 million RPK respectively.

 Thanks to the rebound of the global economy in the reporting period, the demand for premium class services rose sharply, up 22% year- on-year, and became a significant contributor to profit. Moreover, the airline saw a steady pickup of transit passenger volume since 2008, which also facilitated the overall surge in profitability.

Attributable to the faster recovery of the economy in China and South East Asia compared to other parts of the world, travel demand also saw a quicker rebound in these regions. Korean Air saw 16% and 27% growth respectively on these routes during the reporting period. A stronger Korean Won in Q1 2010 also led to an increase in Korea-outbound traffic.

Demand for world cargo rose steadily as reflected in a significant improvement in the performance of Korean Air’s cargo business in the first quarter of 2010. Capacity and traffic increased by 10.8% and 21.1% to 3,001 million AFTK and 2,315 million FTK respectively. Revenue generated from this segment posted a year-on-year increase of 57%, with China and Japan routes reaching new heights and exceeding their performance in 2008, a year when worldwide cargo business was substantial. Moreover, cargo revenue generated from Korea surged markedly by 134%, attributable to the increasing exports of Korean IT companies.

2010 Operational Environment and Outlook

Korean Air said it expects 2010 will be a thriving year for the aviation industry, driven by the positive operating environment both domestically and internationally. International air traffic demand is expected to be boosted by the rebound of the global economy, together with international events such as the 2010 World Expo and the 2010 World Cup. Passenger traffic from China should benefit from the increase in US visa issuing posts in the country. Favorable factors in Korea such as a stable dollar exchange rate, US visa waiver program influence, and the G20 Summit to be hosted in Seoul should also be positive for Korean Air in the year to come.

Apart from passenger traffic, world cargo business is also expected to prosper in 2010, thanks to the healthy export of IT products (such as LCD, semi-conductor and cell phones), high growth of intra-Asia demand, the introduction of economic partnership and trade agreements between Korea and India and the EU, and stability in the US exchange rate and fuel costs.

 The airline expects to see double- digit growth in its operating revenue and cargo business in 2010. Korean Air sees the cargo business as a strong growth driver in 2010, and will continue its concerted efforts to maximize the profitability of this business segment through a range of initiatives.

With competitive, renovated next generation aircraft with new premium seats, Korean Air will continue its efforts to strengthen its premium class service, and will introduce new fleet with enhanced fuel, maintenance and environmental efficiency. In terms of fleet size, Korean Air targets to operate 132 aircraft in 2010 (126 as of March 2010). The airline will also add Boeing 787s and Airbus 380s to its fleet mix in the coming years.

With the turnaround of the aviation industry, Korean Air has set high goals for the coming ten years, with a target of reaching 140 geographical destinations, 20 million in passenger traffic and 2.5 million tons of cargo carried in 2019, the airline’s 50th anniversary year.

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