SEOUL, South Korea (AP) — Korean Air Line Co. reported a second quarter loss on Thursday as the global economic slowdown hurt its cargo business and a decline in the local currency made servicing its foreign debt more expensive.
South Korea's largest airline said its April-June net loss totaled 159 billion won ($140 million) on revenue of 3.3 trillion won.
The flag carrier said the performance of its cargo business reflected South Korea's sluggish exports. Cargo shipments decreased by around 12 percent from the same period a year earlier due to a sharp fall in cargos bound for Europe and America.
The fall in the South Korean won against the dollar increased Korean Air's interest payments on its foreign-currency debt, raising overall expenses even as fuel costs stabilized, it said.
The global airline industry is under pressure from the weak world economy. Air China Ltd., one of the three main Chinese government-owned airlines, warned Wednesday its first-half profit will be slashed by at least half from a year earlier.
Korean Air said a recovery in cargo shipments will be modest in the coming months, although it hopes that London Olympics-related travel will boost the number of passengers.
Shares of Korean Air narrowed gains after the earnings release. Its shares closed 1 percent higher in Seoul, while the Kospi benchmark rose 1.6 percent.
Despite lower cargo shipments, an increase in passengers returned Korean Air's operating profit to the black in the quarter.
Analysts said cost-cutting efforts and a hike in air fares will drive up the company's profit for the rest of the year.
"Its net income will turn to black in the third quarter," said Shin Min-seok, an analyst at Shinhan Investment. "Though cargo shipments will decline from the previous year, cost cutting will drive profit growth."
Korean Air said it will spend 641 billion won to purchase two Boeing long-distance 777-300ER passenger planes. The new aircraft will be delivered by the end of 2014.
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