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(LEAD) Korean Air's losses widen in Q1 on virus impact, currency losses

All News 17:13 May 15, 2020

(ATTN: RECASTS headline, lead; ADDS details in paras 5-14)

SEOUL, May 15 (Yonhap) -- Korean Air Lines Co., South Korea's biggest carrier, said Friday that its first-quarter net losses deepened from a year earlier due to the impact of the coronavirus on the airline industry and currency losses.

Net losses widened to 736.86 billion won (US$598 million) for the three months that ended in March from a loss of 116.95 billion won in the year-ago period, the company said in a statement.

"Suspended flights on international routes amid virus fears and the won's weakness against the U.S. dollar that drove up the value of foreign debt cut into the quarterly results," a company spokeswoman said over the phone.

The national flag carrier has gradually suspended more than 90 percent of its flights on international routes since March as an increasing number of countries closed their borders or imposed entry restrictions on incoming passengers.

Currency-related losses worth 536.8 billion won were factored into the bottom line, the statement said. The dollar rose to an average of 1,193.60 won in the first quarter from 1,125.08 won a year earlier.

Korean Air shifted to an operating loss of 82.79 billion won in the first quarter from an operating profit of 230.81 billion won a year ago. Sales fell 22 percent to 2.43 trillion won from 3.13 trillion won during the same period

On Friday, shares in Korean Air fell 3.7 percent to 18,200 won, and its parent Hanjin KAL Corp. declined 3.3 percent to 76,500 won, far underperforming the broader KOSPI's 0.1 percent gain.

This undated file photo shows planes of Korean Air and Asiana Airlines at Incheon International Airport, west of Seoul. (Yonhap)

Looking ahead, Korean Air expected business environments will worsen for airlines in the second quarter if the COVID-19 pandemic prolongs.

"The company will focus on increasing revenue from the cargo business to offset low demand in the passenger business until travel demand recovers. It will also make stepped-up efforts to cut costs and sell assets," the spokeswoman said.

Korean Air plans to resume flights on 19 international routes on June 1 as it prepares for increased travel demand after countries ease their entry restrictions. The reopening routes include Washington, D.C., Seattle, Vancouver, Toronto, Frankfurt, Singapore, Beijing and Kuala Lumpur.

It currently offers 55 flights a week on 13 international routes, sharply down from more than 900 flights on 110 long-haul routes before the airline industry was hit by the respiratory illness.

Starting in June, 146 flights on 32 international routes will be available.

As part of self-rescue efforts, Korean Air had 70 percent of its 20,000-strong workforce take paid leave for six months starting April 16, and it is in the process of selling non-core assets to secure cash.

The company plans to raise 1 trillion won by selling stocks, and the country's two policy lenders -- the Korea Development Bank and the Export-Import Bank of Korea -- plan to inject 1.2 trillion won into the carrier.

Analysts said it remains to be seen whether the capital injection and Korean Air's planned rights issue will help the company ride out the coronavirus crisis because the virus continues to spread in some countries.


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