Korean Air Lines has announced a reduction in its flight schedule until early June as the airline industry grapples with soaring oil prices and a strong U.S. dollar. The recent geopolitical tensions, particularly the conflict involving the United States, Israel, and Iran, have driven fuel costs up, significantly affecting airline operations. Low-cost carriers (LCCs) had already started cutting unprofitable routes, and now Korean Air is following suit.
As reported on the 22nd, the Incheon–Guam route will see a decrease in frequency from 14 flights per week to seven beginning on the 7th of next month. Additionally, flights on the Incheon–Phuket route will be suspended on the 19th, 28th, and 31st, totaling 64 flights eliminated. Although these reductions represent only 2% of Korean Air Lines’ total 103 routes, they mark the first cutback since the outbreak of hostilities in the Middle East.
The initial flight reductions were primarily undertaken by low-cost carriers, which are less equipped to hedge against fluctuating oil prices compared to full-service airlines. For instance, Jin Air has already reduced 176 flights across approximately eight routes, including Incheon–Guam, during April and May. Similarly, AIR BUSAN and AIR SEOUL have cut 212 and 51 international flights, respectively, on various routes, including Incheon–Da Nang and Bangkok.
In parallel, Eastar Jet Co. has also announced a reduction of 105 flights, while T’way Air and Air Premia have scaled back 53 and 73 international flights, respectively. Asiana Airlines has trimmed a total of 116 flights this month, affecting routes to Phnom Penh, Changchun, Harbin, Istanbul, Phuket, and Almaty. Collectively, these reductions from various airlines exceed 900 flights.
The decision to cut flights comes as domestic airlines, including Korean Air Lines, face deteriorating business conditions. The spot market price for jet fuel, which serves as the benchmark for fuel costs among domestic carriers, currently hovers around 400 cents per gallon. For the upcoming fuel surcharge application period from March 16 to April 15, the average jet fuel price reached 410.02 cents, representing a 101% increase compared to the period before the onset of the war (January 16 to February 15). In this month’s fuel surcharge application period, jet fuel prices even peaked at 511.21 cents.
With fuel expenses, which account for 30% to 40% of airline operational costs, rising sharply, profitability is being adversely affected. Furthermore, the dollar-based nature of most transactions means that airlines are also feeling the pinch from the elevated won-dollar exchange rate, which is currently trading around 1,500 won per dollar.
Due to these pressures, the Korea Air Transport Association projects that all 12 domestic carriers will incur a combined operating loss of 761.3 billion won in the second quarter of this year. In contrast, these airlines had reported an estimated combined operating profit of 152.5 billion won during the same quarter last year, indicating a staggering loss increase of over 900 billion won year-on-year.
An industry official remarked, “With high oil prices and a strong dollar persisting, the burden of expenses is growing and travel demand is being hurt,” while adding, “we are seeking ways to endure the difficult situation.”
Source: Chosunbiz
