S-K: Asiana Air Posts First Loss in Almost 3 Years on Fuel

Asiana Airlines Inc., South Korea’s second-biggest carrier, posted its first loss in almost three years as the price of jet fuel, the airline’s single-biggest expense, rose to a record.

Jet fuel surged an average 87 percent from a year earlier, eroding earnings at airlines worldwide and forcing at least 25 carriers to cease flying or file for bankruptcy. Korean Air Lines Co., the country’s largest carrier, has also forecast an operating loss for the quarter.
“With this level of fuel prices, the result was inevitable,” said Kim Seung Churl, a Seoul-based analyst at Meritz Securities Co. in Seoul. “It’s difficult to see how airlines can be profitable unless jet fuel prices drop.”

Asiana had an 18 billion won operating loss. The loss was the first since the third quarter of 2005 when pilots held a 25- day strike.

The airline declined 0.6 percent to 4,770 won, the lowest in two weeks, at the close of trading in Seoul. The shares have dropped 44 percent this year compared with a 16 percent fall in the benchmark Kospi Index.

Airlines globally may post a combined loss of $6.1 billion this year, the worst since 2003, on higher fuel costs, the International Air Transport Association has said. At least 25 airlines have gone out of business worldwide this year.

Asia-Pacific airlines, including Asiana, Korean Air Lines Co. and Qantas Airways Ltd., Australia’s biggest carrier, have already announced trimming of routes and job cuts in response to higher fuel costs.

“Even if oil price drops, it won’t help the shares much as the weakening economy may threaten demand for air travel,” Meritz’s Kim said.

South Korea’s economy grew 4.8 percent in the second quarter from a year earlier, after a 5.8 percent gain in the first quarter, the government said on July 25. Soaring fuel costs and a weaker won drove the fastest inflation in almost 10 years, squeezing household spending.

Bloomberg