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Japan-South Korea rift

South Korean airlines' profits vanish as Japan travel slumps

Losses extend from top-ranked Korean Air to budget carriers

Flag carrier Korean Air Lines reported a net loss exceeding $180 million in the third quarter.   © Reuters

SEOUL -- Six leading South Korean airlines all swung to losses in the July-September quarter, as Seoul's frayed relations with Japan curtailed passenger traffic during a peak period.

Flag carrier Korean Air Lines announced Thursday a net loss of 211.8 billion won ($181 million), a reversal from the company's 267.8 billion won profit in the year-earlier quarter. Sales shrank 3.7% to 3.28 trillion won, precipitating the first loss in four years.

Tensions between South Korea and Japan worsened in July, when Tokyo restricted exports of crucial semiconductor materials. South Koreans have shunned Japan as a travel destination and boycotted Japanese-made goods.

The unrest in Hong Kong also undercut Korean Air's ridership during the period. The grim business conditions continue in the current quarter, the carrier said.

Second-ranked player Asiana Airlines, which is undergoing a bailout, suffered a quarterly net loss of 232.5 billion won, falling from a profit of 49.6 billion won a year earlier.

Budget carriers, which derive 20% to over 40% of revenue from connections to Japan, face similar woes. Jeju Air reported a loss of 31.3 billion won in the quarter, wiping out the 31.2 billion won profit from a year earlier.

Jin Air, an affiliate of Korean Air, swung to a loss of 18.1 billion won after posting a profit of 18.7 billion won in the year-ago period. T'way Air and Air Busan were in the red as well.

A generally lackluster economy has also sapped air travel demand for South Korean carriers. The weaker won has squeezed earnings by raising costs for fuel and aircraft leasing.

South Korea has eight airlines, including unlisted rivals. The number is due to rise to 11 under deregulation, which will heighten the competition.

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