Airlines gain ground in Q2

Though the figure isn’t huge, Korean flag carriers posted improved second-quarter performances compared to a year ago as the strong Korean won helped them lower costs. They expect a better performance in the third quarter due to summer vacations.

Asiana Airlines, the nation’s second-largest air carrier, said yesterday it had an operating profit of 3 billion won ($2.8 million) in the second quarter, putting it back in the black for the first time in three quarters. The affiliate of Kumho Asiana Group had 29.9 billion won of operating loss in the same period last year.

It recorded a net loss of 11.8 billion won in the second quarter, but that was a 68.4 billion won improvement from a year ago. Revenue went up 2.7 percent to 1.41 trillion won in the April to June period.

“In the passenger transport business, we increased supply by operating A380 aircraft, while there was good demand in China, Europe and Southeast Asia,” said an Asiana spokesman. “For cargo, profitability increased from a year ago with increased demand for mobile device and UHD TV parts going to the United States and Europe.”

Korean Air Lines (KAL), which announced its second-quarter results last week, found itself in a similar situation.

The country’s largest air carrier had an operating loss of 19.7 billion won in this second quarter, but it was a big improvement from last year’s 50.8 billion won loss. Its second-quarter revenue increased 2.1 percent to 2.89 trillion won.

In particular, KAL’s second-quarter net profit was a major turnaround from last year’s 358.7 billion won loss as it collected 346.7 billion won for the April to June period.

“The strong value of the Korean won helps us in business because our costs decrease since aircraft leasing and fuel cost are paid in dollars,” said a KAL spokesman.

Despite the speedy rise of low-cost carriers, data from the Ministry of Land, Infrastructure and Transport showed that the two flag carriers served 13.98 million passengers on their international flights in this first half, up 1.5 percent from a year ago, while their seat occupancy rate increased 2 percentage points year-on-year to 74.7 percent.

Due to the currency situation, both air carriers have now escaped from the red to post operating profit for the first half, although the profit is small. KAL’s first-half operating profit is 1.4 billion won, while Asiana’s is 900 million won.

Analysts expect that the positive performance will continue in the third quarter, which is usually a peak period for air carriers as people take their summer vacation then.

“For air carriers, it is positive that the strong won is continuing and their passenger reservation rate is increasing fast,” said Hana Daetoo Securities’ researcher Shin Min-seok. “Although the performance in cargo is not very good, the long-haul business is seeing solid increases, so the momentum will continue for the third quarter.”

KAL and Asiana’s start of the second half seems promising. According to a report from Meritz Securities, KAL’s passenger transport volume is expected to increase 1.8 percent year-on-year, while Asiana’s is expected to increase 10.7 percent.

“The passenger volume on Chinese flights is expected to increase 20.3 percent, while Northeast Asia flights will increase 29.1 percent due to summer vacations,” said Meritz Securities analyst Kim Seung-cheol in a report. “Cargo volume overall increased 5.5 percent year-on-year in July.”

The July data from the International Air Transport Association, which represents 240 airlines, also showed positive signs for air carriers.

The association said that jet fuel prices eased slightly last month, falling 4 percent from June. The decline followed a fall in crude oil prices, it said.

What may concern the flag carriers is the continuing weakness in flights to Japan, where a weak yen is suppressing travel demand amid political tension.

By joo kyung-don [kjoo@joongang.co.kr]