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Asiana Airlines Loss Widens as Korea Travel Demand Slumps

Asiana Airlines Loss Widens as Korea Travel Demand Slumps
A worker opens a door of an Asiana Airlines Inc. passenger aircraft parked at Incheon International Airport in Incheon, South Korea. Photographer: SeongJoon Cho/Bloomberg

Aug. 9 (Bloomberg) -- Asiana Airlines Inc., the South Korean carrier that suffered a fatal jet crash in San Francisco last month, reported a second-quarter loss bigger than analysts estimated as travel demand waned.

The net loss was 80.4 billion won ($72 million) in the three months to June, compared with the 49.9-billion-won average of 11 analyst estimates compiled by Bloomberg. A year earlier, the airline had a loss of 37.7 billion won, the carrier said in a regulatory filing today.

The airline carried fewer Japanese passengers because of tensions with North Korea while the bird flu scare cut China travel demand in the second quarter, Asiana said. South Korea’s second-biggest carrier may take a charge of at least 20 billion won from the crash of its Boeing Co. 777, and that will push the company into a loss this year, five analysts said after the July 6 accident.

“The crash in San Francisco will further dent Asiana’s earnings in the third quarter as customers hesitate to fly its planes,” Park Eun Kyung, an analyst at Samsung Securities Co. in Seoul, said before the announcement. “The loss of the crashed plane also calls for a tighter flying schedule.”

Asiana fell 1.5 percent to 4,620 won in Seoul trading, the lowest level since April 5, 2010. The stock has declined 25 percent this year.

Three people were killed while more than 300 survived as the Asiana Boeing 777 struck a seawall short of a runway at San Francisco International Airport. The plane slammed to the ground and spun off the tarmac.

Insurance Payment

Insurance payment won’t cover the loss of aircraft, litigation and other charges and an erosion in passenger numbers following the accident, Cho Byoung Hee, an analyst at Kiwoom Securities Co., said last month.

The accident dented Asiana’s reputation as one of the top carriers in the world for service, honed over a quarter century since its formation in the run-up to the 1988 Seoul Olympics. South Korea plans to tighten aviation rules as the crash triggered concerns about the nation’s safety regulations.

The airline also faces the risk of losing customers to rivals including Korean Air Lines Co. as its second crash since 2011 raises safety concerns.

The July 6 accident was Asiana’s worst since 1993, when a Boeing 737 crashed in Mokpo, south of Seoul, killing 66 people, according to the National Archives of Korea. The airline’s previous disaster was the crash of its cargo freighter in the sea south of Jeju island in July 2011.

Five-Star Rating

Asiana is one of only seven carriers in the world with a five-star rating for services from Skytrax, which also named it airline of the year in 2010.

The number of visitors from Japan fell 26 percent to 1.34 million in the first six months, according to the Korea Tourism Organization. Asiana’s Japanese routes bear the highest yields, followed by China and the Commonwealth of Independent States, according to its first-quarter earnings report.

The yen has weakened more than 10 percent against the U.S. dollar this year.

Asiana increased the number of flights by 16 percent and added 10 more planes in the last three years as it expanded services to the U.S., Europe and other regions, according to the South Korean transport ministry.

The carrier will hire 118 pilots, 100 maintenance staff and 116 cabin crew every year until 2016 as it aims to have 96 planes by 2017 from 79 at the end of last year, the ministry said. The airline will receive four more aircraft this year.

To contact the reporters on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net; Rose Kim in Seoul at rkim76@bloomberg.net

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

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