[Click eStock] Asiana Expected to Return to Profit in 2Q Thanks to Cargo

Operating Profit Expected at 77.7 Billion Won... 4 Consecutive Quarters of Losses STOP
Revenue UP Due to Increased Airfare... Passenger Demand Remains Uncertain

Asiana Airlines, expected to renegotiate the acquisition with HDC Hyundai Development Company, held an extraordinary general meeting of shareholders on the morning of the 15th at its headquarters in Osoe-dong, Gangseo-gu, Seoul, where it resolved to increase the total number of shares to be issued and the limit of convertible bonds for capital expansion. After the shareholders entered, employees were removing the guide signs. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Minwoo Lee] Asiana Airlines is expected to stop its consecutive losses over the past four quarters in the second quarter of this year. Despite the impact of the novel coronavirus disease (COVID-19), the cargo division's soaring sales helped the company perform well.

On the 26th, Eugene Investment & Securities forecast that Asiana Airlines would achieve consolidated sales of 1.133 trillion KRW and an operating profit of 77.7 billion KRW in the second quarter of this year. Although sales fell by 35.1% compared to the same period last year, operating losses turned into profits. This marks the end of four consecutive quarters of losses since the second quarter of last year.

The increase in cargo division sales was crucial. Sales are expected to rise to 654 billion KRW, up 104.8% from 319 billion KRW in the second quarter of last year. Minjin Bang, a researcher at Eugene Investment & Securities, explained, "Due to the COVID-19 pandemic, global passenger flights were suspended, reducing cargo supply that utilized cargo space within passenger planes, while cargo demand, centered on quarantine supplies such as masks, was maintained, causing freight rates to surge." He added, "Additionally, the sharp drop in aviation fuel prices and reduced business volume led to a decrease in fuel costs by more than 380 billion KRW compared to the same period last year, and efforts to cut fixed costs such as expanding unpaid leave contributed to the solid performance."

However, the passenger division has yet to recover. Sales in the second quarter of this year are expected to be around 120 billion KRW, only one-eighth of 959 billion KRW in the same period last year. Even the domestic routes, which are showing relatively better recovery, are facing intense price competition. As some international routes resumed this month, expanding business volume, concerns arise that if passenger demand does not increase, cost burdens may grow. Researcher Bang said, "Since an increase in cargo supply is also expected, freight rates may be adjusted," and added, "With the acquisition by HDC Hyundai Development Company becoming uncertain, it will take considerable time to improve the company's fundamentals."

For these reasons, Eugene Investment & Securities maintained a 'Hold' rating on Asiana Airlines and lowered the target stock price to 3,800 KRW. The closing price on the previous day was 3,840 KRW.

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