South Korean domestic airlines are projected to record an operating loss of 7,613 billion won [1] for the second quarter of 2024.
This financial downturn represents the deepest deficit for the industry since the COVID-19 pandemic. The losses signal a precarious recovery period for carriers struggling against volatile global energy markets and currency instability.
The projected loss is more than 9,000 billion won larger than the deficit recorded a year ago [1]. This surge in losses is primarily attributed to rising fuel costs triggered by war-related oil price spikes and a significant depreciation of the Korean currency.
Fuel costs typically account for 30% of operating expenses [1]. However, the burden of these costs has more than doubled [1]. While jet fuel prices have decreased 20% compared with the previous month [1], they remain more than twice as high as levels seen before the war [1].
Currency fluctuations have further strained the industry. The exchange rate has climbed to over 1,500 won per U.S. dollar [1], increasing the cost of purchasing fuel and servicing dollar-denominated debts.
Reporter Cha Yu-jeong said that although the spike in oil prices originating from the Middle East has calmed and jet fuel prices have dropped slightly, the costs remain at a burdensome level [2].
The industry is now facing a convergence of pressures that offset the return of passenger demand. The combined impact of high energy prices and a weak won has created a financial environment where operational growth does not translate into profitability.
“The projected loss is more than 9,000 billion won larger than the deficit recorded a year ago.”
The projected losses highlight the extreme vulnerability of the aviation sector to geopolitical instability and currency volatility. Because fuel and aircraft leases are typically priced in U.S. dollars, the simultaneous spike in oil prices and the weakening of the won create a compounding effect that erodes profit margins even as travel demand recovers.
