Asia-Pacific's flag carriers have begun to reveal the extent of damage done to their finances by the region's economic crisis, led by Cathay Pacific Airways showing profits cut in half and Korean Air (KAL) nursing a record loss.

Cathay, which has suffered a massive downturn in traffic, saw net profits slashed to just under HK$1.7 billion ($218 million). Sales also fell by 2.9% during what chairman Peter Sutch describes as "an exceedingly hard 12 months".

Sutch points to a sequence of factors, which began with the lack of visitors to Hong Kong for the handover of power to China in June, and ran through to the recent outbreak of "chicken flu". Traffic was also affected by the haze over much of South-East Asia and the collapse of currencies in neighbouring countries.

The expectation is that the situation will get worse for Cathay in 1998, with some analysts predicting the airline breaking even or incurring a small loss before the start of any recovery.

The airline has taken measures to reduce costs and excess capacity, including staff cuts and the planned withdrawal from service of five Boeing 747-200s. The future of its remaining two -200s and six 747-300s is also under review.

Preliminary figures from KAL show a loss of 397 billion won ($246 million) for 1997 - nearly double the 210 billion won deficit in 1996 and the worst in the airline's history.

Losses ballooned in the second half of the year as the result of Asia's currency crisis, including the dramatic collapse of the South Korean won against the US dollar. That has helped inflate the airline's debt from 5.7 trillion won to over 8.2 trillion won.

The results, however, were not as bad as predicted earlier by some local analysts. Damage was limited by the fall in aviation fuel prices and a stretch out in the aircraft depreciation period from 10 to 13 years.

KAL is hoping for improved results in the first half of 1998, with an anticipated increase in traffic as many rival international carriers discontinue services to Seoul.

Source: Flight International