Airline Stocks, Challenging Industry Recovery

[Asia Economy Reporter Song Hwajeong] The situation of airline stocks struggling due to the novel coronavirus infection (COVID-19) shows no signs of improvement. Even in the third quarter, the sharp decline in demand continues, making it difficult to predict the recovery timeline.

According to Samsung Securities on the 29th, concerns about delayed recovery in air passenger traffic are increasing due to the recent resurgence of COVID-19. In the second quarter, international passengers dropped sharply by 98% year-on-year to about 542,000, leading to poor performance among domestic airlines. International passengers in July also plummeted by 97.3% compared to the previous year, and in August, weekly passenger numbers remained around 50,000, showing little sign of narrowing the decline. Kim Young-ho, a researcher at Samsung Securities, said, "The number of countries restricting entry for Koreans, which had reached 183, decreased to 163 by the end of August, but daily COVID-19 cases have surged again since mid-August, making short-term passenger recovery unlikely," adding, "Low-cost carriers (LCCs), which heavily depend on passenger business revenue, will continue to struggle in the second half of the year."

There is a forecast that the air cargo freight rates, which led to the surprising performance of major full-service carriers (FSCs) in the second quarter, will gradually stabilize. Researcher Kim explained, "The global average air cargo freight rate in June rose 76% year-on-year to $3.12, but it fell 21% compared to the previous month, marking the first decline in four months since March, indicating a slowdown in the surge," and added, "The trade volume of personal hygiene products, which significantly contributed to the freight rate surge for domestic FSCs in the second quarter, also showed a negative growth trend in July, so the increase in freight rates is expected to slow down in the second half." However, since the overall air cargo decline rate has gradually decreased to 12% after recording -34% in May, expectations for the cargo peak season in the fourth quarter remain valid.

Researcher Kim said, "The end point of COVID-19 is uncertain, and industry restructuring has not occurred due to Jeju Air's withdrawal from acquiring Eastar Jet and the delay in Asiana Airlines' sale," adding, "While stock price volatility may increase depending on the progress of treatment and vaccine development, it is premature to discuss low-price buying as it may take considerable time for fundamental improvements."

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