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Korean Air on Tuesday reported a better-than-expected quarterly operating profit, fueled by higher traffic and a firmer won currency against the dollar.

Korean Air is set for a smooth flight in the coming quarters as travel demand should stay robust in Asia's fourth-largest economy and as a stronger won will cut the cost of importing fuel and servicing dollar-denominated debt.

That won strength is likely to offset skyrocketing oil prices, while the government is also considering allowing Korean Air to increase fuel surcharges and pass on to passengers the impact of rising costs.

On Monday, the won hit its strongest level versus the dollar in more than 10 years on lingering expectations for interest rate cuts by the US Federal Reserve.

Korean Air earned an operating profit of KRW281.4 billion won (USD$310.4 million) in the third quarter ended September 30. That compared to KRW193.8 billion a year ago and KRW75.4 billion in the previous quarter.

The rise was fueled by an 8.1 percent increase in sales as international passenger revenue, which accounts for more than half of the company's sales, rose 10 percent and cargo sales gained 6.3 percent.

Korean Air reported KRW131.7 billion in net profit for the third quarter, below a KRW142.7 billion profit forecast, as the company saw a 74 percent fall in non-operating income.

That compared to a KRW126.8 billion won profit a year earlier and a KRW214.4 billion won loss in the previous three months, when the company was hit by USD$300 million in fines for its role in a price-fixing conspiracy.

Korean Air used 7.7 percent more fuel in the July-September period from a year ago while fuel costs, the company's single-biggest cost item making up 30 percent of its operating expenses, rose 4.9 percent.

South Korea's demand for international flights is expected to rise on the won's strength, which will cut overseas travel expenses, and on the possibility the US government could include South Korea in its visa waiver program, analysts say.

(Reuters)