South Korea’s second-largest full-service carrier Asiana Airlines Inc. reported a 15 percent on-year drop in its third-quarter operating profit due to higher fuel costs and a strong dollar despite delivering record revenue.
According to its regulatory filing on Tuesday, the company’s operating profit on a consolidated basis was 101 billion won ($90.2 million) in the quarter ended September, down 14.8 percent from a year ago, though in line with market expectations.
Sales rose 13.6 percent on year to 1.85 trillion won, hitting a fresh high for the seventh straight quarter, while net profit nearly tripled to 47.8 billion won on one-time property sales.
On Wednesday, shares of Asiana Airlines were up 0.64 percent to finish the day at 3,945 won.
The company’s margin was squeezed by higher fuel prices and the strengthened U.S. dollar against the Korean won, it said. Korean airlines face a higher cost burden if its local currency weakens against the greenback, which they use to pay for loans and fuel costs. Jet fuel costs also rose in line with the rising international oil prices.
The airline, however, performed well across the board. Revenue from international flights jumped 13 percent on year, driven by strong demand for long-haul flights to America and Europe during the busy summer season. Cargo profitability also surged thanks to reorganization of its supply system and strong component exports that must fly to their destinations.
Air Seoul Inc., its budget carrier unit, also swung into profit, generating 3.6 billion won in operating profit in the third quarter. Revenue more than doubled on year to 59 billion won on expanded routes including Hong Kong, Osaka and Vietnam’s Da Nang.
Asiana Airlines’ debt ratio fell to 623 percent in the third quarter from 720 percent in late December 2017, helped by the sale of the headquarters building of its parent company Kumho Asiana Group in central Seoul. Its borrowings during the same period dropped to 3.14 trillion won from 4.06 trillion won.
The airline expects its top and bottom line to further improve in the coming quarter, especially as Chinese tourist groups are starting to return to Korea after a two-year ban. In March 2017, the Chinese government imposed a travel ban on group tours to Korea in retaliation for Seoul’s decision to install a U.S. missile shield that Beijing feared was a threat to its national security. But the travel restrictions slowly showed signs of easing and last month, 600 Chinese employees on an incentive trip flew in to Korea on Asiana Airlines, the first group tour since the March ban.
By Park Eui-myung and Kim Hyo-jin
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