Korean Air Posts Q1 Loss On Weaker Currency

Korean Air on Thursday reported its sixth consecutive quarterly net loss as the benefit of lower fuel prices was outweighed by currency-related losses and higher interest costs.

While a quick recovery in travel and cargo demand is unlikely, Korean Air, the world's biggest air cargo carrier, is expected to benefit from the recent strengthening of the won and stabilizing oil prices.

The won's ongoing recovery is expected to reduce costs at Korean Air, which pays dollars for imported fuel, aircraft rentals and also to service foreign currency debt.

But concerns linger over an outbreak of swine flu which could chill travel demand further.

"Second-quarter results will likely be better than the first quarter's," said Um Kyung-a, an analyst at Shinyoung Securities. "The impact from swine flu is seen limited as it has so far spread less compared with bird flu."

Airlines globally have suffered losses as the economic downturn saps demand for travel and shipping.

Lufthansa last week announced contingency plans to cut flights after reporting a worse-than-expected quarterly loss. Hong Kong's Cathay Pacific Airways also warned last month of a challenging year.

Korean Air posted a KRW526.3 billion won (USD$409.7 million) net loss in the January-March quarter. The result compares with a KRW325.5 billion loss a year earlier and a revised KRW644 billion deficit in the fourth quarter last year.

It reported an operating profit of KRW6.6 billion, slightly better than a forecast for a KRW5.3 billion loss.

Quarterly sales were KRW2.26 trillion, flat from a year earlier.

Sales from its cargo business fell 18 percent from a year ago as the economic downturn kept overseas traffic low, but demand from South Korean electronics exporters has shown signs of recovery since March, the company said.