Shim Yi-taek, president of Korean Air, says the airline has outperformed financial expectations, with operating revenue hitting 2.2 trillion won ($1.9 billion). This is "112% of what we originally planned", he says, resulting in a 333.39 billion won pre-tax profit and a net profit of 229.631 billion won.
Shim predicts that the full year's revenues could amount to about 120% of original planning, or close to $4.8 billion. "Then we can expect an operational net profit of about $60 million," he says. Although KAL, a Hanjin Group subsidiary, posted a healthy 296.6 billion won net profit for the whole of 1998 (after its worst ever net loss in 1997 when Asia's financial crisis hit) this was mostly due to aircraft sales. Operating figures last year were poor.
Airline analysts say that the 1999 financial figures reflect a strong recovery in South Korea's economy and exports, adding that the effect of public criticism of KAL's safety record on load factors has been, surprisingly, minimal.
The carrier's seating capacity is to increase about 3-5% annually over the next few years, aiming for a 115-aircraft passenger and cargo fleet by 2002 - substantially less ambitious plans than it had in 1996, before the regional economic crisis. Then, KAL predicted a 200-aircraft fleet by 2005. The airline now flies a 91 passenger aircraft and 17 freighters.
The airline has embarked on a fleet simplification and modernisation programme for the next few years. Boeing 747-200/300 Classics are being retired this year and long-haul routes will be served by 747-400s and Boeing 777s. Mid-size, medium-haul services are being transferred from the Airbus A300-600 to new Airbus A330s.
In the narrowbody, short-haul fleet, KAL is trading in its Boeing MD-82s, MD-83s and Fokker 100s in anticipation of the delivery of Boeing 737-800s from next year and 737-900s from 2002. The older narrowbodies will be gone by 2004, says KAL.
As far as its cargo fleet is concerned, KAL's 10 remaining 747-200F Classics are being replaced by 747-400Fs. Two ageing A300F4s are to be sold this year and KAL may also phase out its two remaining Boeing MD-11Fs, although this is not yet firmly decided. The conversion of two remaining passenger MD-11s into freighters is going on as planned this year.
The company says it is also rationalising its network to eliminate unprofitable routes. In this year's winter schedule, the airline will resume flights to Cairo, suspended two years ago because of the economic crisis. "We are also considering Amsterdam," says corporate planning manager Lee Hak.
KAL suspended 10 routes as a result of the economic collapse. Lee says if it does not resume the services within two years, the government will re-allocate them.
Source: Flight International