Korean Air, Asiana to Reorganize Cargo Services amid Losses | Be Korea-savvy

Korean Air, Asiana to Reorganize Cargo Services amid Losses

A B787-9 passenger jet in flight. (image: Korean Air)

A B787-9 passenger jet in flight. (image: Korean Air)

SEOUL, Aug. 19 (Korea Bizwire)South Korea’s two full-service carriers said Monday they will suspend some domestic cargo services beginning in October as parts of efforts to trim its ballooning losses.

Starting Oct. 1, Korean Air Lines Co. and Asiana Airlines Inc. said they plan to halt cargo delivery services at the country’s three regional airports in Daegu, Cheongju and Gwangju where cargo demand on domestic routes is low.

The move comes as the country’s two biggest airlines posted hefty losses in the first half of the year due mainly to the won’s weakness against the U.S. dollar, which jacked up fuel costs and financial costs related to foreign currency-denominated debts.

“The three airports have continued to report losses in spite of diverse efforts to improve profitability in the cargo business. So we decided to stop providing freight delivery services in the airports,” a Korean Air spokeswoman said over the phone.

Cargo delivery services will remain available in the main Gimpo-Jeju and other domestic airports, she said.

“The restructuring of the cargo business is part of the company’s efforts to seek profitability. Asiana’s domestic cargo services will be available on the Gimpo-Jeju route only,” an Asiana spokesman said.

Demand for cargo delivery services has been on the decline amid a global economic slowdown, dealing a blow to the Korean airlines’ bottom line this year.

A weak won has pushed up not only the value of dollar-denominated debts when converted into the local currency but also fuel purchasing costs.

Korean Air and Asiana are widely expected to come up with widened losses in the July-September quarter as well amid a fall in travel demand to Japan.

A nationwide anti-Japan campaign here amid a trade row with the neighbor and China’s unexpected announcement that it won’t accept applications for new and additional flights from foreign airlines for two months through Oct. 10 are set to further drive down travel demand to Japan.

In early July, Japan restricted exports of three high-tech materials used in chips and display panels in apparent retaliation against a series of South Korean court rulings last year over Japan’s wartime forced labor.

Early this month, it officially excluded Korea from its “whitelist” of trusted trading partners that enjoy fast-track export clearance.

Worse still, Hong Kong’s pro-democracy protests prompted by a hated bill allowing extradition of Hong Kong residents to China is also affecting local travel demand to the country, one of Koreans’ favorite destinations for shopping.

In the first half, Korean Air’s net losses deepened to 458 billion won (US$378 million) from 315 billion won a year earlier. Asiana’s also widened to 292 billion won from 43 billion won during the same period.


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