It’s a WONderful Life: Or maybe not. The strong Korean won helps Korean Air. But the airline has other worries.

Unlike so many airlines outside North America, Korean Air isn’t suffering from a weak home currency at the moment. But that doesn’t mean it’s sleeping well at night.

The Korean won has indeed been a rare currency that’s held relatively strong against the U.S. dollar, and that has, sure enough, provided Korean Air with major upside. In the third quarter, its fuel costs declined 7% y/y—and its total operating costs 3%—despite growing passenger ASK capacity 5%. Dollar-denominated jet fuel prices in Korea were down y/y, yes, but by less than 3%. The strong Korean won, on the other hand, deserves most of the credit. More importantly, these cost declines, as well as a boost from the strong won’s stimulative effect on outbound international demand, led Korean Air to an 8% Q3 operating margin, not quite the 12% it managed in the golden year of 2010, but well up from the 5% it earned in the same quarter last year. This 8% also meant Korean Air, with great satisfaction, indisputably outperformed its archrival Asiana.

Hold the celebration though. What lies ahead for Korean Air is a long list of challenges to its core markets, challenges that threaten an airline already performing disappointingly this decade, its pretty good Q3 operating result notwithstanding. Korean Air made major strides in the first decade of the 2000s, putting its safety problems and the Asian financial crisis of the late 1990s behind it, becoming a founding SkyTeam member, achieving a level of service regarded as top tier and earning solid if unspectacular operating profits in the boom years 2006, 2007 and 2010. It was also better positioned than any other global airline to take advantage of the historic boom in China’s economy. Seoul Incheon is the premier hub for many international travelers flying to and from China.

During the past four years, however, a severe downturn in cargo markets hit Korean Air hard. It flies 26 dedicated freighter aircraft—in 2013, cargo accounted for more than 24% of total group revenues. In addition, the airline was never able to shed its heavy debt burden, which…

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