[Click eStock] "Korean Air Maintains 3Q Profit Trend... Travel Demand Still Uncertain"

Steady Growth in Cargo Revenue... Passenger Revenue Still Sluggish

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Korean Air is expected to continue its profitability in the third quarter following the second quarter. However, analysts note that this performance is based on cargo demand, and the recovery of travel demand remains uncertain.

On the 5th, Eugene Investment & Securities forecasted that Korean Air would achieve consolidated sales of 1.862 trillion KRW and an operating profit of 40.9 billion KRW in the third quarter of this year. Although these figures represent declines of 45.0% and 57.5% respectively compared to the same period last year, the company is expected to maintain its profit trend following the second quarter.

Passenger segment sales are estimated to decrease by 86.0% year-on-year due to sluggish passenger demand, with minimal signs of recovery in international flight demand until recently. In contrast, cargo sales are expected to grow robustly by 75.6% compared to the same period last year. Minjin Bang, a researcher at Eugene Investment & Securities, explained, "As the cargo composition shifts from urgent quarantine supplies to general cargo (semiconductors, machinery, agricultural and marine products, etc.), the rate increase has somewhat slowed compared to the previous quarter, but volume is expected to remain solid with a 17.1% increase year-on-year."

Additionally, ancillary revenue from passenger routes and profits in the hotel sector are expected to continue to decline due to weak passenger demand. However, due to a sharp drop in the year-end exchange rate, non-operating foreign exchange gains exceeding 200 billion KRW are anticipated, which should result in net income for the period.

Currently, Korean Air's cash inflow is considered sufficient to cover operating expenses. This is seen as a differentiating factor compared to competitors who are experiencing cash burn. However, since competitors in various countries are also receiving government support, market restructuring is being delayed.

Researcher Bang stated, "It is still difficult to predict when the COVID-19 pandemic will end and when passenger momentum will recover. In particular, it means that it may take considerable time before Korean Air undertakes further financial restructuring to secure a stable net income structure."

Against this backdrop, Eugene Investment & Securities maintained a 'HOLD' investment rating and a target price of 18,000 KRW for Korean Air. The closing price on the previous trading day was 18,850 KRW.

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