Korean Air Profit Rises on Travel Demand, Strong Won

Korean Air Lines Co., South Korea’s largest carrier, said third-quarter profit rose 3.9 percent as economic growth spurred overseas travel and a stronger won helped cut fuel costs.

Net income rose to 131.7 billion won ($145 million) in the three months ended Sept. 30, from 126.8 billion won a year earlier, the Seoul-based carrier said in an e-mailed statement. Sales gained 8.1 percent to 2.37 trillion won.

Expansion in Asia’s fourth-biggest economy boosted passenger numbers at Korean Air and smaller rival Asiana Airlines Inc. The Korean government may allow the carriers to raise surcharges, limiting the effect from the price of fuel, the biggest expense at the airlines.

“You can raise surcharges when demand is strong, which we are seeing now,” said Park Chang Suk, who manages about $427 million at NH-CA Asset Management Co. in Seoul. “I believe the strong demand will offset all other concerns, including higher oil prices.”

Third-quarter passenger yield, or average revenue per seat, on international flights increased 6.8 percent from a year earlier as the airline sold more business and first class tickets, it said.

It carried 8.4 percent more passengers from the main Incheon airport in the third quarter, according to Incheon International Airport Corp.

Korean Air fell 1.5 percent to 77,800 won at the close of trading in Seoul. The stock has more than doubled this year, compared with a 43 percent climb in the benchmark Kospi index.

Operating Profit

Net income in the quarter lagged behind an average estimate of 143.8 billion won by six analysts compiled by Bloomberg.

Korean Air’s operating profit, or sales minus the cost of goods sold and administrative expenses, jumped 45 percent to 281.4 billion won from 193.8 billion won, boosted by international passenger demand.

The airline’s international passenger traffic, or the number of paying passengers multiplied by the distance flown, climbed 6.4 percent from a year earlier, while cargo traffic increased 7.3 percent, the statement said.

A 2.9 percent gain in the South Korean currency against the dollar from a year earlier helped Korean Air cut fuel expenses.

Korean Air paid $2.18 a gallon to buy jet fuel during the third quarter, 1.5 percent less than a year ago. The company’s fuel bill totaled 692.5 billion won during the July-September period, accounting for 33 percent of its total operating costs, according to the statement.

South Korea’s government is considering raising the ceiling on jet fuel surcharges, which would enable Asiana and Korean Air to increase levies, the transportation ministry said on Oct. 23.

Jet fuel traded at an average of $87.08 a barrel in Singapore in the July-September period, 1.5 percent higher than in the same period a year earlier, according to Bloomberg data. It closed at a record high of $104.05 per barrel in Singapore yesterday.