South Korea’s smaller full-service carrier Asiana Airlines Inc. is likely to have bottomed out from its worst-ever year in 2015 hit by double-whammy of a sharp fall in air travel following an epidemic outbreak and heavier competition with low-cost carriers, thanks to low oil prices and improved passenger flight rates.

According to finance industry sources on Tuesday, Asiana Airlines’s operating profit in the first quarter is expected to have jumped 43.5 percent to 110.5 billion won ($9.6 million) in the first quarter from 13.3 billion in the previous quarter. It also would have beat earlier market estimate of 69.3 billion won. The airline’s full-year operating income stopped at 98.2 billion won in 2015.

The repercussions from the outbreak of the Middle East Respiratory Syndrome (MERS) lasted until the final quarter, but have been lifted from the first quarter, said an investor relations official at Asiana Airlines, forecasting a positive result in the quarter that finished in March.

Cheaper fuel prices were the biggest positive factor to its balance sheet. The international crude oil price based on West Texas Intermediate (WTI) was $33 per barrel on average during the first quarter this year, down by more than 30 percent compared to the same period last year. Airliners saved greatly from cheaper fuels as they paid $33.2 on average per barrel to fly between December and February, 54 percent less than the same period a year ago. KTB Investment & Securities estimated that local airliners would save 108.6 billion won in fuel prices in 2016 compared with a year ago.

In addition, cost per available seat mile improved. The fall in unit cost was less than the decline in fuel price in the first quarter, said one industry source. Profitability of local carriers worsened in the final quarter of last year as they competed heavily among themselves to win passengers after concerns over MERS were removed. Increase in passengers also helped to improve performance.

Korea’s total air passenger volume in the first quarter gained 13.6 percent on year, according to Incheon International Airport Corp., and monthly passenger tally has been rising more than 10 percent since October last year.

But longer-term outlook for Asiana Airlines won’t pick up unless it comes up with a winning strategy against increasing challenge from low-cost carriers (LCCs). With fast ascension of LCC counterparts, Asiana Airlines’s share in domestic lines slipped to 18.8 percent last year. Asiana Airlines has been preparing to launch its LCC version, but commercial service may not be possible within the first half as hoped due to delay in endorsement from aviation authorities.

By Kim Tae-joon

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