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(2nd LD) Korean airlines fall deeper into Q1 losses on virus impact, further slump in store

All News 18:46 May 15, 2020

(ATTN: CHANGES headline and lead; COMBINES stories; RECASTS throughout)
By Choi Kyong-ae

SEOUL, May 15 (Yonhap) -- South Korean airlines, led by Korean Air Lines Co., reported their worst-ever first-quarter earnings on Friday in the face of the new coronavirus outbreak that has led to a sharp fall in demand and lockdowns around the globe, and their second-quarter performance is also dim.

Korean Air said its net losses widened to 736.86 billion won (US$598 million) for the January-March quarter from 116.95 billion won a year earlier.

"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.

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

The country's biggest and 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.

Also on Friday, Asiana Airlines Inc., the country's No. 2 carrier, said its first-quarter net losses deepened to 683.26 billion won from 89.18 billion won a year ago due to a sharp decline in travel demand amid virus fears.

Asiana shifted to an operating loss of 292.02 billion won in the first quarter from an operating profit of 7.16 billion won a year ago. Sales fell 25 percent to 1.29 trillion won from 1.72 trillion won.

Looking ahead, Korean Air and Asiana 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 Korean Air spokeswoman said.

Incheon International Airport, west of Seoul, is almost empty, on April 10, 2020, as the novel coronavirus pandemic has effectively halted international travel around the world. (Yonhap)

The two full-service carriers plan to resume flights on dozens of their international routes from June as they prepare for increased travel demand after countries ease entry restrictions.

Korean Air is reopening 19 routes, which include those to Washington, D.C., Seattle, Vancouver, Toronto, Frankfurt, Singapore, Beijing and Kuala Lumpur. Asiana's 13 routes include Seattle, Beijing and Shanghai.

The two have suspended most of their flights on international routes since March as countries strengthened entry restrictions on incoming passengers to prevent the spread of the respiratory illness.

In its 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 (KDB) and the Export-Import Bank of Korea (Korea Eximbank) -- plan to inject 1.2 trillion won into the carrier.

Asiana also had all of its 10,500 employees take unpaid leave for 15 days a month from April until business circumstances normalize. Its executives have agreed to forgo 60 percent of their wages, though no specific time frame was given for how long the pay cuts will remain in effect.

The KDB and Eximbank plan to inject a combined 1.7 trillion won into the cash-strapped carrier.

Airplanes are parked at Incheon International Airport, South Korea's main gateway, west of Seoul, on May 15, 2020. (Yonhap)

Analysts said it remains to be seen whether the state banks' capital injection and the airlines' self-help measures will help them ride out the unprecedented coronavirus crisis because the virus continues to spread in some countries.

Low-cost carriers also suffered heavy losses in the first quarter in the face of worsened business environments.

Jeju Air Co., the country's biggest low-cost carrier, swung to a net loss of 101 billion won in the first quarter from a net profit of 42 billion won a year ago.

Korean Air's affiliate Jin Air Co. also shifted to a net loss of 45.8 billion won from a net profit of 31.8 billion won during the same period. Asiana's affiliate Air Busan Co. also swung to a net loss of 61.8 billion won from a net profit of 1.9 billion won.

kyongae.choi@yna.co.kr
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