US justice department fine sinks Korean Air Q2 profits

South Korea's largest airline, Korean Air Lines Co (KAL) said it will pay a record $300 million fine for price fixing, forcing it to post its first loss in two years, though investors are optimistic that strong travel demand would the airline to recoup its loss.

KAL, which flies to 114 cities in 37 countries including 11 passenger routes and 10 cargo destinations, recorded a second quarter loss of 214.4 billion won ($232 million), down from a profit of 14.9 billion won a year earlier.

The airline has accounted for the fine as a booked the fine as a one-time cost, the Seoul-based company said in a statement today. Sales rose 8.9 per cent to 2.11 trillion won, though the fine wiped out KAL's first-half earnings.

Korean Air and British Airways Plc were each fined $300 million by the US Justice Department for fixing prices for passenger and cargo flights. (See: BA coughs up $300 million more, settles probe)

Shares of the Korean carrier dropped 2.9 per cent to 67,000 won at the close of trading in Seoul, compared with a 0.2 per cent decline in the benchmark Kospi index. Shares have surged 89 percent so far this year.

The US agency said yesterday Virgin Atlantic Airways and Deutsche Lufthansa AG, Europe's second-biggest airline, are cooperating with the Justice Department's investigation. Both companies received conditional amnesty from prosecution after coming forward with information.