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Korean Air loses USD5.4 million per day in cruel third quarter

Korean Air Chairman and CEO, Yang Ho Cho
Korean Air Chairman and CEO, Yang Ho Cho
  • Korean Air reports worst quarterly loss since the Asian Financial Crisis;
  • Investors look to improved fourth quarter result as fuel prices ease.

Korean Air's shares rose 6.4% on 17-Nov-08 despite the carrier unveiling its biggest quarterly loss in a decade in the third quarter (ended 30-Sep-08). The carrier's net loss reached a breathtaking USD495.7 million in the quarter, compared to a profit of KRW129.6 billion in the same period last year, despite a 16.4% year-on-year increase in revenue.

Korean Air stated, "given current economic conditions, air travel demand will continue to slow down during the fourth quarter and weak cargo demand will continue through the end of this year".

Despite the gloom, investors appear to have seized on management's predictions of an improvement in the airline's fourth-quarter performance on the back of a recent fall in oil prices.

Korean Air's fuel costs rose 83% in the three months to September, due to higher jet fuel prices and the won's sharp (13%) depreciation against the US dollar in the period, which contributed to larger foreign exchange losses and made overseas travel more expensive for Koreans. International travel demand departing from Korea fell 15% during the last quarter.

The confluence of bad news for KAL was enough to give it the worst net margin (-24.8%) among Asia Pacific carriers that have reported third quarter earnings to date. It was even worse than the chronic loss-maker, China Eastern, which turned in a negative 21.6% net margin in the quarter and now looks set to receive a multi-million dollar government bailout.

Selected Asia Pacific carriers' net profit margin for the three* months ended 30-Sep-08:

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