Korean Air Spent 4 Trillion Won on Fuel Costs Alone Last Year

The Largest Scale in 5 Years

Korean Air poured more than 4 trillion won into fuel costs last year. This is the largest amount in five years. It is attributed to the surge in crude oil prices due to the rise in exchange rates and the Russia-Ukraine war last year.

According to Korean Air's business report on the 15th, the fuel expenses (consolidated basis) last year amounted to 4.1362 trillion won. This is an increase of 2.3501 trillion won, or 131.58%, compared to 1.7861 trillion won in 2021. This is the largest scale in the past five years. Korean Air spent 3.2831 trillion won in 2018, 3.1732 trillion won in 2019, and 1.2382 trillion won in 2020 on fuel costs.

The sharp rise in exchange rates and raw material prices caused by the Russia-Ukraine war last year influenced the increase in fuel costs. The average KRW-USD exchange rate last year was 1,292 won, a 12.9% surge from the 2021 annual average of 1,144 won. In September last year, it even soared to 1,400 won. The oil price followed a similar trend. The international crude oil price, based on Dubai crude, was $77.03 per barrel on January 3 last year but rose to $117.50 per barrel on June 8.

This rise in the dollar and crude oil prices is a burden for airlines. Airlines usually pay fuel costs in dollars. The increase in exchange rates and oil prices last year inevitably became a double burden for airlines.

Labor costs also increased. Korean Air's salaries and retirement benefits last year amounted to 1.6762 trillion won, an increase of 333.2 billion won from 1.343 trillion won. This is because employees who had been on leave returned. In June this year, Korean Air plans to end the rotation system for cabin crew. As the number of travelers decreased due to COVID-19, employees who took turns resting are all being called back to the company. Labor costs may increase further in the future.

Despite the increase in fuel and labor costs, which are factors reducing operating profit, Korean Air achieved record-high performance last year. Last year's sales amounted to 140.961 trillion won, a 56.33% increase from the previous year, and operating profit also rose by 99.62% to 2.8305 trillion won. This achieved a profit margin of 20.08%. It was the first time Korean Air recorded an operating profit margin in the 20% range, surpassing the 10% range. Given the nature of the airline industry, which incurs high fixed costs such as fuel and labor, achieving a double-digit operating profit margin is a difficult feat.

Such strong performance also improved the financial structure. Last year, Korean Air's debt ratio was 212.06%, down more than 70 percentage points from 288.48% in 2021. Retained earnings also increased by 1,765.68%, from 110.1 billion won in 2021 to 2.0537 trillion won last year.

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