Korean Air net falls 35% as carrier shifts focus back to passengers

Korean Air's Boeing 787-9 [KOREAN AIR]

Korean Air’s net profit fell 35 percent on year to 355.4 billion won ($272.6 million) in the first quarter due to the rise in fuel prices and increase in aircraft operation costs, according to the company on Wednesday.

The figure still beat the market consensus of 232.33 billion won compiled by market tracker CompanyWise.

Sales climbed 14 percent on year to 3.2 trillion won, yet were below the market consensus of 3.65 trillion won. Operating profit came at 415 billion won, down by 47 percent on year, falling short of 462-billion-won expectations.

Korean Air shifted its focus from cargo to passengers this year as the coronavirus pandemic came to an end and on the resumption of mass overseas travel. The move resulted in increased revenue — yet also led to higher costs, causing a slight decrease in profits.

"The rise in fuel prices and increase in operation costs due to expanded aircraft operations has led the airline to record a decrease in the operating profit," Korean Air said in a press release on Wednesday.

Despite the dip in profits, Korean Air's passenger business revenue for the first quarter increased 394 percent from the same period last year, reaching 1.78 trillion won. The boost in revenue was attributed to the increase in demand for overseas travel as well as the recovery in capacity and passenger numbers, bringing revenue to a level similar to that of the first quarter of 2019 before the pandemic.

The airline's cargo business revenue, another primary source of revenue, fell 51 percent year-on-year in the first quarter to 1.49 trillion won. This was due to the continued global economic slowdown and a decrease in shipment rates resulting from the increase in passenger aircraft belly cargo capacity.

"We expect global passenger demand to rapidly recover in the second quarter, especially with the relaxation of travel restrictions around the world," Korean Air said.

"Air cargo demand is expected to continue weak in the second quarter due to the global economic slowdown and uncertainties in the air cargo market," it added.

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]