Korean Air reported a record quarterly operating profit on Friday, powered by a boom in air cargo demand and consumer appetite for international travel. South Korea's No 1 airline expects its earnings to peak in the third quarter on a firmer won and with passenger demand showing no signs of slowing down.
"Continuous recovery of South Korea's outbound traffic and strengthening of the Korean won against major currencies will boost the per-passenger revenue further up in the third quarter," the company said in a statement.
The airline said third quarter air cargo demand would slow down but that it expected a pick up in the fourth quarter, a seasonally strong period.
Korean Air said operating profit in the April-June quarter rose to KRW352.1 billion won (USD$297.9 million) versus the prior year's loss of KRW127.3 billion.
The company filled 77 percent of available passenger seats on international flights during the period versus last year's 66 percent. Its cargo space utilisation rate also improved to 78 percent from 76 percent a year ago.
The airline reported a net loss of KRW233.1 billion (USD$197.2 million) for the quarter ended in June due to currency exchange rate fluctuations and an increase in interest expenses.
The won fell against the US dollar in the first six months of this year, leading to a KRW209.5 billion exchange related loss for Korean Air due to increased costs of servicing dollar-denominated debt and for imported fuel.
Korean Air announced an increase in passenger and freight charges last month of five to 10 percent on many of its most popular routes. Three more passenger aircraft and an additional cargo plane will begin operations for the airline during the second half of the year because of improved demand, the company said.
"The rise in international flight fares beginning August is a good indication of overwhelming demand for the third quarter of the year," said Song Chang-min, analyst for KB Investment.
However the emergence of low-cost Asian airlines may crimp Korean Air's earnings on key routes. Malaysian budget carrier Air Asia has announced it will begin flying between Kuala Lumpur and Seoul's Incheon Airport in November.
Last month, domestic rival Asiana Airlines reported a KRW177.5 billion (USD$150.2 million) second quarter operating profit, recovering from a KRW129.5 billion loss a year ago.
*Reuters