A rough ride lately for Korean Air

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A rough ride lately for Korean Air

For Korean Air Lines employees this has been a chaotic, busy period, as negative issues have surrounded the company.

From declining profits to a dented public image, the airline hopes for a turnaround, but the situation still seems uncertain.

Earlier this month, KAL reported that its first-quarter losses were much higher than a year ago due to low demand and fluctuating currency situations.

The company’s net losses grew to 300.6 billion won ($268 million) in the January-March period, which is nearly five times higher than a year ago, when it posted a 64.2 billion won loss.

It is also a big dive from the fourth quarter of 2012, when it reported a 140.1 billion won profit.

In addition, the airline posted an operating loss of 123.4 billion won, up from a 98.8 billion won operating loss a year earlier, while sales plunged 2 percent on-year to 2.9 trillion won in the first three months.

The carrier said that a weakening yen and continued threats from North Korea suppressed inbound demand from overseas through the second quarter. But it turned out that the situation is worsening.

According to data from Incheon International Airport this week, KAL’s international flight passenger volume plunged for the first time in 23 months. The company carried 1.068 million passengers in April, which is 4.6 percent lower than a year ago. The figure is also the lowest since November 2011, when only 1.067 million used KAL.

This is also opposite of its small competitor Asiana Airlines, which actually saw an increase in its international flight passenger volume last month. The No .2 airline served 792,588 passengers on international flights, up 4.6 percent from a year ago.

Some people pointed out that the passenger volume decrease in April might somehow be related to the “ramen incident,” in which a Posco Energy executive smacked a female KAL flight attendant over the quality of his ramen.

Although the majority of the criticism was directed to Posco and its executive, KAL was also accused of not securing passenger information as its cabin report was spread on social networking services. The company has recently launched an internal investigation to find the person who leaked the document.

However, KAL denied that the incident has damaged the business, citing that number of outbound Korean passengers has actually increased one percent compared to a year ago. The airline explained that the main reason of passenger volume decline occurred from inbound foreign passengers due to a weak yen.

“Since Korean Air offers more seats to Japan than Asiana, it is more vulnerable to a weak yen,” an industry official said. “The ramen incident might have dented KAL’s image, but it would not have affected their business transactions.”

KAL hopes that outbound Korean passengers to Japan, who are benefiting from a weak yen, will fill the void left by Japanese tourists. The company said that it will operate a flight schedule or supply seats flexibly to reduce vacancies, while trying to draw in transferring flights from other airlines.

By Joo Kyung-don [kjoo@joongang.co.kr]
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