Korean Air Reports 56.6 Billion KRW Operating Loss in 1Q... 'Holding Up Well' Despite COVID-19 Impact

Reduced Deficit Due to Cost Savings and Strong Cargo Sales
Revenue Drops 22% Amid 'Sky Route Shutdown'

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Je-hoon] Korean Air recorded an operating loss of 56.6 billion KRW in the first quarter despite the large-scale suspension of international flights due to the novel coronavirus disease (COVID-19). This is attributed to cost-cutting efforts such as employee furloughs and strong performance in air cargo sales.

Korean Air announced on the 15th that it posted sales of 2.3523 trillion KRW and an operating loss of 56.6 billion KRW in the first quarter. Compared to the same period last year, sales decreased by 22.7%, and operating profit turned into a loss. Net loss for the period was 692 billion KRW due to foreign exchange translation losses caused by the rise in exchange rates, continuing the deficit.

Initially, the securities industry had forecasted that Korean Air would incur an operating loss in the range of 100 billion to 200 billion KRW in the first quarter. This was because the main source of revenue was cut off as international passenger flights decreased by more than 90%. In fact, the passenger business segment saw a sharp decline in demand due to COVID-19, with transport performance based on Revenue Passenger Kilometers (RPK) decreasing by 29.5%.

Nevertheless, cost reduction was cited as the reason Korean Air performed better than expected. Korean Air reduced operating expenses by 14.1% compared to the same period last year through company-wide furloughs and cost-cutting efforts targeting all employees.

The strong air cargo market also played a significant role. Despite the reduction in supply due to decreased passenger flights, the cargo business expanded cargo aircraft operations by converting passenger aircraft to cargo-only use and improved cargo load factors, resulting in a 3.1% increase in transport performance based on Freight Ton Kilometers (FTK).

Meanwhile, Korean Air expects the business environment to worsen in the second quarter due to COVID-19 but anticipates gradual demand recovery. For the passenger segment, international flights are expected to recover gradually as lockdown measures within the US and European countries ease after May, and domestic flights are predicted to recover progressively once the number of new confirmed cases stabilizes.

Woo Ki-hong, CEO of Korean Air, commented on the results, "We sincerely thank the government and policy banks for their support. Although this crisis is due to unavoidable external circumstances, we will do our best to implement self-help efforts and take this opportunity to improve the company’s structure."

This content was produced with the assistance of AI translation services.