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Korean Air makes Q2 loss on rising oil prices

Analysis

SEOUL (XFNews) - Korean Air Co said it made a net loss of 42.5 bln won in the second quarter to June, reversing from the year-earlier profit of 21.1 bln, hit hard by a surge in fuel costs arising from record-high oil prices.

Operating profit also dropped 17.3 pct year-on-year to 77.2 bln won in the second quarter.

Sales, however, improved 4.8 pct from a year ago to 1.78 trln won in the June quarter, with higher passenger demand for international routes and fuel surcharges effectively offsetting a slowdown in cargo demand.

It noted that its won-based fuel costs surged 38.3 pct year-on-year in the second quarter, with a strong won cushioning against a 52.3 pct rise in dollar-based costs.

"Oil prices are really a big concern but not to such an extent that a downward revision of our yearly target is needed," chief financial officer Kyung H Chang said.

The flag carrier targets an operating profit of 600 bln won on sales of 7.8 trln this year.

"The second half will see better numbers, given the third quarter is typically the strongest season," Chang said, without providing specific figures.

He said the company is trying to hedge more oil purchases, possibly up to 30 pct from the present 15 pct.
He added that he sees much upside potential in stock prices with the company placing more focus on enhancing profit base and diversifying revenue streams.

The company is looking at the low-fare flight sector in East and Southeast Asia, he said.

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