Korean Air Buys $3.7 Billion of Boeing Planes to Upgrade

Korean Air Lines Co. (003490), the country’s biggest carrier, agreed to buy $3.7 billion of aircraft from Boeing Co. (BA) to modernize its fleet amid growing travel demand.

The carrier is buying five 747-8 Intercontinentals, five 777-300ERs and one 787 Dreamliner, the Seoul-based airline said in a regulatory filing. Korean Air’s board today approved the purchase, for which initial agreements were announced earlier.

The orders for the new stretched version of the 747 jet, known for its iconic fuselage hump, will help the carrier retire 15 older 747-400 jumbos from its fleet by 2017. Korean Air, which competes with Asiana Airlines Inc., is part of a growing number of Asian carriers buying new planes from Boeing and Airbus SAS as economic growth in the region lifts business and leisure travel demand.

Korean Air will hold orders for 10 passenger versions of the stretched 747 jet with the latest deal. It has received three of the seven jumbo freighters it ordered.

The company expects to start taking delivery of the new planes starting in 2016, it said in June, when it reached an initial agreement with Boeing on the order. The company operates 35 747-400 jets and three of the new freighters, according to its website.

The airline posted third-quarter net income of 338.5 billion won ($319 million), boosted by foreign exchange translation gains, Korean Air said in a regulatory statement today. That was little changed from a year earlier. Sales dropped 3 percent 3.18 trillion won. Korean Air shares climbed 5 percent, the most since Oct. 18, to 38,750 won in Seoul.

On international services, the airline filled 80.6 percent of its passenger seats in the third quarter, compared with 82 percent a year earlier. Yields dropped 2 percent to 9.8 cents.

Cargo demand dropped 6.2 percent in the July-September period, Korean Air said. It filled 76.6 percent of its space on planes, compared with 75.8 percent a year earlier. Yields fell 2.1 percent to 28.2 cents.

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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