[Click eStock] "Jeju Air, Prolonged Impact of COVID-19... Must Approach from a Long-Term Perspective"

[Asia Economy Reporter Eunmo Koo] Hi Investment & Securities analyzed that the impact of the novel coronavirus disease (COVID-19) on Jeju Air is lasting longer than expected, and it is necessary to approach it from a long-term perspective. The investment opinion was maintained as 'Buy,' but the target price was lowered to 16,000 KRW.

Hi Investment & Securities estimated that Jeju Air's sales in the third quarter of this year would be 57.5 billion KRW, down 84.4% compared to the same period last year, and operating losses would continue at 69.1 billion KRW. On the 6th, researcher Junyoung Ha of Hi Investment & Securities stated in a report, "Due to the longer-than-expected impact of COVID-19, international passenger demand remained sluggish, resulting in operating losses. International demand (RPK) is expected to be around -99% compared to the same period last year, similar to the second quarter." Most airlines have seen a significant decrease in international passenger revenue compared to the same period last year due to the prolonged COVID-19 situation.

Domestic routes are expected to see improvements in both demand (RPK) and supply (ASK) compared to the previous quarter, with load factor (LF) rising to around 90%. Researcher Ha said, "Jeju Air's domestic passenger numbers turned positive year-over-year for the first time since the COVID-19 outbreak in July and continued this trend in August," adding, "In September, due to the Chuseok holiday, Jeju Air's domestic passenger numbers likely grew compared to the same period last year." He explained, "This phenomenon occurred as demand that could not travel abroad shifted to domestic travel."

There were no notable issues regarding operating expenses. Researcher Ha noted, "Due to the decline in oil prices and a sharp decrease in flight frequency, fuel costs are expected to have decreased by 92.4% compared to the same period last year." The average jet fuel price in the third quarter (Singapore basis) was $43.2 per barrel, down 42.5% from $75 per barrel in the second quarter.

He pointed out the need to approach from a long-term perspective. Researcher Ha evaluated, "As the COVID-19 situation prolongs, the timing of Jeju Air's profit recovery is being delayed. International demand will likely revive only after vaccines are widely distributed globally, which is expected in the second half of next year, so it is advisable to approach this from a long-term perspective."

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