Falling Oil Prices Boost Airline Earnings

Domestic airlines' earnings are recovering due to several positive factors, not least a continuing fall in oil prices. Another factor has been an increase in parcel deliveries as more Koreans shop on overseas websites like Amazon.

Earnings in the second and third quarters, by contrast, were poor as consumer spending slumped after the April 16 ferry disaster.

Aircraft fuel sold on the Singapore oil exchange fell from US$126 a barrel early this year to $87 late last month. A Korean Air spokesman said, "We saved W130 billion on fuel costs alone this year (US$1=W1,112)."

That has led to a drop in fuel surcharge for passengers, which has attracted more travelers. Fuel surcharges on international flights have fallen almost W100,000.

Asiana Airlines says seats on popular flights to China are mostly booked.

Low-cost carriers are benefitting even more, since fuel costs account for up to 45 percent of their operating expenses.

Passenger and cargo traffic have started to rise in the fourth quarter. According to the Ministry of Land, Infrastructure and Transport, airline passengers totaled 7.46 million in October, up 16 percent on year and the most ever for that month.

Incoming Chinese visitors increased more than 30 percent. A ministry official said the number of flights to and from China has grown, while Korean passengers flying to Japan and Europe increased more than 10 percent.

Cargo traffic totaled 330,000 tons, up more than five percent over the same period. Cargo for mobile phones, IT equipment and LCD parts surged, prompting the carrier to add 26 more cargo flights to Los Angeles and Chicago.

Asiana saw cargo traffic rise 14 percent over the last two months due to backlogged container traffic following a go-slow at western Los Angeles port.

But aviation analysts say oil prices and currency volatility could pose risks. If oil prices rise again, carriers could take a direct hit due to the slow pace of economic recovery. They are particularly vulnerable to foreign exchange volatility since they have to purchase fuel in dollars.

View the original article here

Russian Ruble Falls as Oil Prices Tumble Further

The ruble looked set for its steepest one-day fall since the Russian financial crisis of 1998, plunging about 4 percent on Monday as oil prices slid below $70 a barrel.

Battered by low oil prices and the conflict in eastern Ukraine, the ruble has been declining throughout the year, losing about 42 percent of this value since January.

The Russian currency fell for a third day in a row Monday, to 52.45 against the dollar and 65.39 against the euro, hitting fresh record lows.

The price of oil, the backbone of the Russian economy, has dropped roughly 25 percent since the summer. Brent crude, an international benchmark, fell 3 percent on Friday and was down another 1 percent on Monday to $69.47 a barrel, following a decision by OPEC last week to leave its output target unchanged.

People walk past a display with currency exchange rates in central of Moscow, Russia on Dec. 1, 2014. /AP

OPEC's shock decision means markets are increasingly pricing in the likelihood of cheap oil for an extended period, causing a fundamental reassessment of Russian asset prices, analysts said.

Oil and gas account for about two-thirds of Russia's exports and half of federal budget revenues, making its economy and asset prices heavily dependent on global energy prices.

"In the short term, the Russian market is a victim of OPEC's apparent decision to reduce the volume of high-cost production through lower prices," Moscow-based investment bank Sberbank CIB said in a morning note. "The market and the ruble will not stabilize until oil does."
Russian monetary officials sought to assuage fears of a ruble free fall.
Ksenia Yudayeva, deputy chairman of the Russian Central Bank, told Russian news agencies on Monday there is enough currency liquidity in the market and that the Central Bank has prepared new economic forecasts based on a price of $60 per barrel.

Some material for this report came from Reuters, AP and AFP.

View the original article here

Watchdog to Study IKEA Prices in Korea

The Fair Trade Commission will launch an inquiry into pricing at IKEA, the world's largest furniture chain, which will open its first store in Korea next month.

The move comes in response to allegations that prices here are in some cases nearly double those elsewhere.

The watchdog plans to publish its survey by February so that consumers can compare prices. It says the findings will pressure IKEA to voluntarily adjust its prices.

View the original article here