Korean Air Lines will cut some flights through early June. Low-cost carriers (LCCs) have recently declared emergency management and reduced low-yield routes, and now Korean Air Lines is also moving to cut flights. Surging 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 cutbacks began on the 7th. Korean Air Lines also decided not to operate flights on the Incheon–Phuket route on the 19th and on the 28th and 31st. On a one-way basis, that totals 64 flights.
The routes subject to cuts account for only 2% of Korean Air Lines' total 103 routes, but it is meaningful as this is the first reduction since war broke out in the Middle East. Flight cuts due to oil price spikes triggered by the war began with LCCs. Compared with full-service carriers, LCCs have weaker hedging capabilities and are more affected by surging oil prices.
Jin Air reduced 176 flights on 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–Da Nang 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 trimmed a total of 116 flights this month on routes from Incheon to Phnom Penh, Changchun, Harbin, Istanbul, Phuket, and Almaty. The flights reduced by these airlines amount to more than 900.
The reason most domestic airlines, including Korean Air Lines, which had not initially planned cuts, are reducing flights is that their business environment has deteriorated. The Singapore spot market price (MOPS) of jet fuel, which serves as the benchmark for domestic carriers' fuel costs, is around 400 cents per gallon.
For the next fuel surcharge application period (Mar. 16–Apr. 15), jet fuel MOPS averaged 410.02 cents, up about 101% from the fuel surcharge application period before the war (Jan. 16–Feb. 15). During this month's fuel surcharge application period, jet fuel MOPS even hit 511.21 cents.
When fuel costs, which account for 30%–40% of airlines' expenditures, jump sharply, profitability inevitably declines. Moreover, because most transactions are dollar-based, carriers are also heavily affected by the won–dollar exchange rate. Recently, the exchange rate has remained elevated as well. As of the day, it was trading in the 1,500 won per dollar range.
Amid these factors, the Korea Air Transport Association estimated that all 12 domestic carriers will post a combined 761.3 billion won operating loss in the second quarter of this year. Considering that these airlines booked an estimated combined operating profit of 152.5 billion won in the second quarter last year, losses will have widened by more than 900 billion won in one year.
An airline industry official said, "With high oil prices and a strong dollar persisting, the burden of expenses is growing and travel demand is being hurt," adding, "we are seeking ways to endure the difficult situation."