The more KORAIL runs, the more it loses money: Data

[Image source: KORAIL]

It was confirmed in 2022 that 22 out of 24 major routes operated by Korea Railroad Corp. (KORAIL) suffered operating losses, with expenses exceeding revenue. A glaring example is the Jungbunaeryuk Line, which cost more than 1 trillion won ($775.23 million) to build and earned only 700 million won in profit despite expenditures totaling 6.1 billion won. Experts raise the need for intense self-preservation efforts, including the normalization of railroad fares, which have remained frozen for more than a decade, and the reallocation of the workforce.

According to KORAIL’s operating coefficient data for 2022 obtained by Maeil Business Newspaper on Thursday, 22 out of 24 KORAIL routes suffered operating losses as their annual cost of transporting cargo and passengers exceeded revenue. The operating coefficient is an indicator derived by multiplying 100 after dividing the cost of operating a route by revenue. A figure over 100 indicates an operating loss, while one below 100 indicates an operating profit.

The route with the worst performance was the Jeongseon Line, which had an operating coefficient of a staggering 1,260, meaning it spent 1,260 won to earn 100 won, and is followed by the Jungbunaeryuk Line (875.9), Chungbuk Line (529.2), and Janghang Line (255.3). Only two routes, the Seohae Line (89.7) and Gyeongbu Line (96.9), reported profits.

Among the bottom 10 routes in terms of operating coefficients in 2022, none have recorded an operating profit over the past 10 years. The Jungbunaeryuk Line in particular, which opened in 2022 with an investment of about 1.2 trillion won, is facing a disastrous failure. It cost 6.1 billion won to operate the line for a year, but it only earned 700 million won, resulting in an operating loss of 5.4 billion won. Only 450 people used the line on average per day for 100 days after its opening. Given that there are eight trains per day, this means there were only 55 passengers on each train.

Given this situation, KORAIL continues to incur losses every year. The national railway operator has been in the red for eight years since recording an operating profit in 2015 thanks to organizational and operational consolidation as well as the introduction of a revenue management system. It recorded an operating loss of 204.4 billion won in 2016, which grew to top 1 trillion won in 2020 and 2021.

The issue is that the loss is expected to continue for the near future. According to KORAIL internal documents disclosed during the parliamentary audit in 2023, the railway operator is forecast to incur an additional loss of 1.2 trillion won until 2025.

KORAIL’s cumulative debt was approximately 18 trillion won as of 2022, with a debt-to-equity ratio of more than 280 percent.

“KORAIL is using its public status as a shield to plan new routes that are seriously unprofitable,” an industry expert said. “Unless it undertakes intense structural reforms, it will continue to post massive losses every year.”

The expert also called for the National Assembly to pass a proposed amendment to the Framework Act on Railroad Industry Development, which is currently pending in the legislature, to reallocate personnel. The amendment aims to remove a clause guaranteeing KORAIL’s monopoly on maintaining domestic railroad facilities, and “if KORAIL opens facility maintenance up and reallocates idle personnel, this could help improve its structure of loss.”