Weak Korean won, increased fuel costs and soft cargo demand erodes Korean Air's bottom line in 3Q
South Korea's largest airline Korean Air Lines swung to a third quarter (three months to Sep-2011) net loss as increased fuel costs, a weak Korean won and soft cargo demand eroded the carrier's bottom-line. The result highlights how closely tied the carrier is to currency fluctuations and cargo demand from Europe and the US, which is expected to remain sluggish throughout 4Q2011 and into 2012 as a consequence of Europe's debt crisis and weak demand in developed economies.
Korean Air senior VP Cho Won Tae earlier this month noted that while revenue in 2011 is relatively on-par to 2010 levels, costs have surged due to increased fuel costs. Korean Air, and its peer in the South Korean market, Asiana Airlines, are highly exposed to weakness in the freight market and have echoed comments made by North Asian peers such as China Southern, Cathay Pacific and China Airlines in noting that cargo has been weak in 2011, with freight demand failing to meet expectations. Korean Air has stated it expects the situation in 2012 "to be worse".
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