Lifting Lockdown and Resuming International Flights... Soaring Airline Stocks

Korean Air and Jin Air Soar 9% and 11%

[Asia Economy Reporter Minji Lee] The stock prices of airlines, which were hit hard by the novel coronavirus infection (COVID-19), are finding their footing. This is interpreted as reflecting expectations that passenger demand can recover as major countries open their air routes starting this month.

On the 18th of last month, when the aviation industry was hit hard by the novel coronavirus disease (COVID-19) and facing massive layoffs, airplanes stood still at Incheon International Airport. Photo by Moon Honam munonam@

According to the Korea Exchange on the 5th, as of 10 a.m., Korean Air was trading at 20,900 won, up 9% from the previous close. On that day, Korean Air surged about 18% in early trading. Jeju Air rose 6% in early trading, and Jin Air also increased by 11%. Korean Air is judged to have recovered to pre-COVID-19 levels.

At the same time, Asiana Airlines and its affiliate Air Busan, which had shown relatively weak performance compared to other airline stocks, rose 10% and 6%, respectively. Until now, Asiana Airlines had a relatively smaller increase compared to other airline stocks due to delays in acquisition by HDC Hyundai Development Company and exclusion from the government's period industry stabilization fund support targets.

The stock price increase was influenced by the fact that major countries are resuming international flights as the spread of COVID-19 slows down. The United States, as well as European countries such as Germany, Belgium, and Norway, plan to lift travel restrictions starting the 15th and will accept limited entry for European Union (EU) member countries. Next month, tourist countries such as Spain and Greece, as well as Southeast Asian routes, are expected to reopen.

The significant increase in cargo freight rates, which could boost earnings, also influenced demand improvement. For Korean Air and Asiana Airlines, the provisional transport volume in May is estimated to have increased by 15% and 6%, respectively, compared to the previous year. Researcher Kim Young-ho said, "Ironically, the impact of COVID-19 caused an improvement in cargo supply and demand," adding, "Asiana is expected to record its highest-ever profit in the second quarter, and Korean Air is expected to return to profitability."

Following the lifting of lockdown measures in various countries, China succumbed to pressure from the United States and announced an expansion of flight operations, causing airline-related stocks to surge sharply in the New York stock market the previous day. After Chinese aviation regulatory authorities refused to approve the resumption of operations for major U.S. airlines, the U.S. announced retaliatory sanctions, and just one day later, China changed its policy to allow one flight per week. American Airlines' stock price surged more than 41% in one day, while United Airlines (16%), Delta Air Lines (14%), and Boeing (6.4%) also rose.

Credit rating agencies removed Korean Air from the downgrade review list (BBB+) the previous day. Although they judged that liquidity burdens could increase due to decreased airline demand caused by COVID-19, the positive performance of cargo demand due to the resumption of manufacturing production in China and domestically, as well as exports of medical supplies, positively influenced the assessment. The plan for a large-scale capital increase of around 1 trillion won also offset downward pressure on credit ratings.

However, since concerns about the spread of COVID-19 still exist, the dominant opinion is that a conservative approach is necessary. Park Seong-bong, a researcher at Hana Financial Investment, said, "The International Air Transport Association forecasted that global passenger numbers will recover to last year's levels only by 2023," adding, "The recovery of passenger demand remains uncertain at this point."

This content was produced with the assistance of AI translation services.