Korean Air, Asiana overcome China's THAAD backlash

The Korea Times

The Korea Times

Business

Fri, December 8, 2023 | 06:08

Companies

Korean Air, Asiana overcome China's THAAD backlash

Posted : 2017-08-11 16:30

Updated : 2017-08-11 18:43

Korean Air CEO Walter Cho

Asiana Airlines CEO Kim Soo-cheon

By Lee Hyo-sik

Korean Air and Asiana Airlines posted better-than-expected earnings in the second quarter despite a steep fall in the number of Chinese visitors.

The two flagship carriers were initially expected to have performed poorly during the March-to-May period because many Chinese chose not to visit Korea after the nation formally decided to deploy a U.S. anti-missile Terminal High Altitude Area Defense (THAAD) battery.

But with more Koreans heading abroad, the carriers have been able to weather China's so-called THAAD backlash. In addition, a rise in the number of inbound tourists from Southeast Asia, the Middle East and other regions helped the carriers cope with the unfavorable business environment.

Korean Air, headed by CEO Walter Cho, said Friday its sales rose 3.1 percent to 2.9 trillion won ($2.5 billion) in the second quarter

It posted a 172.8 billion won operating profit, up 8.5 percent from the same period last year. It was the largest second-quarter profit since 2010 when it reached 395 billion won.

The carrier attributed its better-than-expected second-quarter performance to more Koreans traveling overseas, adding the number of outbound passengers rose 12 percent from a year earlier.

"We were earlier concerned about the adverse effects of the deteriorating Korea-China ties on our business," a Korean Air official said. "But despite the falling number of Chinese visitors, we were able to beat market expectations thanks to a surge in outbound travelers."

"In particular, the number of passengers on our European and Southeast Asian routes jumped 14 percent and 11 percent, respectively," he said. "We are looking forward to our third-quarter performance, which will be much better than the previous year, as a record number of Koreans head abroad during this summer holiday season."

The official said the firm's cargo business will continue to recover on Korea's growing outbound shipments, which he said will further bolster the company's bottom line.

Asiana Airlines, which is more dependent on China than Korean Air, also posted an earnings surprise in the second quarter, despite declining Chinese passengers.

The carrier, headed by CEO Kim Soo-cheon, had sales of 1.49 trillion won, up 8.5 percent from the previous year. Operating profit jumped 48.7 percent to 42.8 billion won.

Asiana officials said the company expanded routes linking Korea with destinations in Europe, Southeast Asia and Japan while reducing the number of flights to and from China.

From March to June, the firm's sales in China dropped 38 percent, but it earned 55 percent more in Europe. Sales from operating flights to and from Jeju Island rose 11 percent as more Koreans visited the country's southernmost resort island.

Asiana's cargo business expanded 23.8 percent as the firm transported more semiconductors, LCDs, smartphones and fresh agricultural products.

"To maintain stable growth in sales, we will conduct a rigorous analysis on potential internal and external risks," a company official said. "We will operate A350 aircraft in our mid- to long-haul routes to secure competitiveness. For the cargo sector, we are planning to operate freighters based on fluctuating demand and increase sales for premium cargo products."

leehs@ktimes.com