Fuel costs and currency losses erode Korean's first-half profits

Korean Air has reported a massive decline in operating profit for the first half of the year, after fuel costs and foreign exchange losses eroded earnings. Strong growth in the passenger segment offset declines in the cargo business, and the carrier posted a W6.07t ($4.99b) operating revenue, up 0.6%. Amid a focus on mid- to long-distance routes, capacity as measured in available seat-kilometres was raised 1.2%. Revenue passenger-kilometres grew 3%, which pushed the load factor up 1.5 percentage points to 81.4%. Passenger yield increased 1.1% and operating revenues grew 4.1% to W3.85t. Likewise, the cargo yield strengthened 1.2%, underpinned by a 2.8% increase in freight tonne-kilometres versus a 10.7% gain in revenue tonne-kilometres. Operating revenue, however, declined 9.6%. The carrier attributes this to the US-China trade row and macroeconomic conditions. Meanwhile, operating costs rose 4.4% over the same period, nearing operating revenue at W6.02t. Over the same period, fuel oil cost remained persistently high, while consumption increased by 0.7%. This sent operating profit tumbling 82% to W47b, from W259b in H1 2018. Korean highlights that its debt to equity ratio increased from 707% to 835% as the result of a change in lease accounting standards plus currency effects. Compared with H1 2018, the won weakened against the dollar by 6.5%.<br/>