[Click eStock] "Jeju Air, Q3 Operating Loss... Additional Government Support Needed"

by Oh Jooyean

Published 07 Oct.2020 08:07(KST)

[Asia Economy Reporter Oh Ju-yeon] Daishin Securities diagnosed that due to the slump in the aviation industry caused by the novel coronavirus infection (COVID-19), Jeju Air's operating loss in the third quarter will reach 72.6 billion KRW, and additional government support is necessary.

According to Daishin Securities on the 7th, Jeju Air's estimated sales for the third quarter of this year are 54.6 billion KRW, a decrease of 85.2% compared to the same period last year, and the operating loss is expected to continue at 72.6 billion KRW. Domestic sales are estimated at 42.9 billion KRW, and international sales at 4.1 billion KRW.

This performance is at the level of market expectations. However, market interest is seen to be more focused on the future restructuring of the aviation industry due to COVID-19 and the cash flow and financial risks of each airline rather than the quarterly performance.

Researcher Yang Ji-hwan stated, "Jeju Air successfully completed a paid-in capital increase of about 150 billion KRW in August, and considering the cash held at the end of the second quarter, it has secured cash liquidity of 240 to 250 billion KRW," adding, "The forward 12-month EBITDA (from Q3 2020 to Q2 2021) is estimated to be about -80 billion to -90 billion KRW, and interest expenses are estimated at about 60 billion KRW."

Therefore, the necessary cash related to operating and financial costs for the next 12 months is expected to be around 140 to 150 billion KRW.

Researcher Yang analyzed, "If financial institutions extend the repayment of borrowings, cash liquidity for the next year will be sufficient, but considering the borrowings to be repaid within one year (short-term borrowings + current lease liabilities) of 260 billion KRW, the financial situation is judged to be not ample."