Korean Air reports Strong Third Quarter Results

Korean Air's third quarter results for the three months ended September 30, 2007, show operating revenue increased by 8.1% to 2,371.8 billion Korean won as compared to 2,193.2 billion Korean won for the same period last year. Operating income increased by 45.2% to 281.4 billion Korean won and net income increased by 3.9% to 131.7 billion Korean won compared to the same period last year. Operating income  margin increased by 3.1 percentage point to 11.9% for the period under review.

The strong results were mainly attributable to the increase in international passenger revenue and the 6.8% growth in US dollar yield. Increased traffic during the summer high season and the Thanksgiving holiday fuelled the demand for Korean Air’s passenger service. Expanded sales in overseas markets, sales increased for First and Business Class and the addition of charter flights to popular holiday resort destinations have driven the international passenger revenue up by 9.8% to 1,306 billion Korean won in the third quarter of 2007. For domestic passenger operations, load factor and yield have both improved despite a slight decrease of 1.3% in revenue compared to the same period last year.

The cargo operation was another contributor to the profit growth. During the period under review, Korean Air slowed down the increase in capacity and focused on enhancing profitability by concentrating on high-profit routes and restructuring existing routes. Benefiting from an increase in outbound cargo traffic and effective business strategies, the airline saw both cargo traffic and profitability improve on almost all routes. Korean Air is also developing new demand in regions such as South America and Africa. In the third quarter of 2007, revenue from cargo operations increased by 6.3% to 631 billion Korean won compared to the same period last year with a US dollar yield returned to a positive 0.2%.

Jonghee Lee, president of Korean Air, said, “We have continued to deliver impressive results in 3Q. We are particularly pleased to see the growth in international passenger and cargo margins, which have boosted the overall operating income margin. The exceptional effort of our strong sales team has resulted in higher sales and more orders in both passenger and cargo operations. For the remainder of 2007, we will continue to expand our market, improve our yield, and adopt stringent cost control to create even better value for our shareholders.” 

During the period, Korean Air recorded a 4.6% increase in total operating expenses, reflecting increased traffic. Fuel consumption increased by 7.7% while the fuel expense increase was contained at 4.9% due to the lowered marginal unit price and strong Korean won.

To meet the robust growth of traffic between Korea and China, a new route was added between Incheon and Zhengzhou, China, in the third quarter. A cargo route was also extended to Munich, Germany, in September.

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