Korean Air Lines will cut some flights through early June. Emergency management declarations and reductions on low-yield routes have recently continued among low-cost carriers (LCCs), and now Korean Air Lines has also moved to reduce flights. Soaring oil prices driven by the war between the United States and Israel on one side and Iran on the other, along with a strong exchange rate, are hobbling the airline industry.
According to the airline industry on the 22nd, Korean Air Lines will reduce its Incheon-Guam route from 14 weekly flights to seven through the 7th of next month. The reduced schedule has been in effect since on the 7th. Korean Air Lines also decided not to operate flights on the Incheon-Phuket route on on the 19th and on the 28th and 31st. All are 62 flights one way.
The routes subject to cuts account for only 2% of Korean Air Lines' total 103 routes, but it is meaningful as the first reduction since the war broke out in the Middle East. Flight reductions due to a surge in oil prices sparked by the war began with LCCs. LCCs are more vulnerable to oil price spikes than full-service carriers because their hedging capabilities are weaker.
Jin Air reduced 176 flights across about eight routes, including Incheon-Guam, in April-May. In May-June, AIR BUSAN and AIR SEOUL also cut 212 and 51 international flights, respectively, on routes such as Incheon-Danang and Bangkok.
During the same period, Eastar Jet Co. also cut 105 flights, and T'way Air and Air Premia reduced 53 and 73 international flights, respectively. Asiana Airlines also reduced a total of 116 flights this month on routes from Incheon to Phnom Penh, Changchun, Harbin, Istanbul, Phuket, and Almaty. The number of flights reduced by these airlines comes to more than 900.
The reason most domestic airlines, including Korean Air Lines, which had not initially planned reductions, are cutting flights is that their business environment has deteriorated. The Singapore spot market price (MOPS) for jet fuel, which serves as the benchmark for fuel costs for national carriers, is around 400 cents per gallon.
For the next fuel surcharge application period (Mar. 16–Apr. 15), the jet fuel MOPS averaged 410.02 cents, up about 101% from the March fuel surcharge application period (Jan. 16–Feb. 15) before the war broke out. During this month's fuel surcharge application period, jet fuel MOPS even reached 511.21 cents.
When fuel costs, which account for 30% to 40% of an airline's expenditures, rise sharply, profitability inevitably declines. Moreover, because most transactions are based on dollars, airlines are also heavily affected by the won-dollar exchange rate. Recently, the exchange rate has also remained elevated. As of the day, it is trading in the 1,500 won per dollar range.
Due to these effects, the Korea Air Transport Association estimated that all 12 national airlines will post a combined operating loss of 761.3 billion won in the second quarter of this year. Considering that in the second quarter of last year these airlines generated an estimated combined operating profit of 152.5 billion won, losses would widen by more than 900 billion won in just one year.
An industry official said, "As high oil prices and a strong dollar persist, they are hurting not only expenses but also travel demand," adding, "We are seeking ways to endure the difficult situation."