Airline Stocks Face 'Final Hurdle' Amid COVID Resurgence... Vaccine Transport Optimism Rises

Stock Prices Are Expected to Enter a Period of Increased Volatility for the Time Being

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[Asia Economy Reporter Kum Boryeong] There is an analysis that airline stocks are overcoming the last hurdle amid the resurgence of the novel coronavirus infection (COVID-19).

According to Korea Airports Corporation and Incheon International Airport Corporation on the 10th, the number of international passengers transported at airports nationwide last month was 198,000, a 97% decrease compared to the same period last year.

Signs of recovery in passenger ship demand have not yet appeared. Although domestic flight demand increased by 2% compared to last year last month, raising expectations for recovery, it is expected that domestic flight demand will shrink again this month due to the escalation of social distancing measures.

Kim Yoo-hyuk, a researcher at Hanwha Investment & Securities, explained, "Starting with the Pfizer vaccine, other big pharma companies' vaccine candidates are expected to receive emergency approval within the year, but since supply and vaccination require time, it will take more time until international flight demand recovers."

The cargo sector is maintaining strong freight rates due to robust peak season demand and the belly cargo gap. Last month, international cargo volume increased by 3.9% compared to the previous year. In terms of monthly cargo volume, this is the highest ever since 2017. By route, cargo volume on the Americas and Japan routes increased by 20% and 23% respectively compared to the previous year. By airline, Korean Air increased by 13.3%, and Asiana Airlines by 5.4%.

In particular, it is estimated that about 8 billion doses will be introduced into the air cargo market during the vaccine transportation process. Researcher Kim analyzed, "This is judged to be a scale that can sufficiently drive market conditions, accounting for 3-6% of the annual cargo volume."

However, there is also an opinion that stock prices will enter a period of increased volatility for the time being. This is because mid- to long-term recovery expectations and short-term performance deterioration factors are conflicting. Jung Yeon-seung, a researcher at NH Investment & Securities, said, "There is still great uncertainty in airline investments, but the contraction of domestic passenger demand due to the COVID-19 resurgence in December is judged to be the last hurdle. From an investment strategy perspective, it is possible to selectively approach airlines that can increase market share during the industrial restructuring process of supply adjustment, and airlines that are less likely to suffer shareholder value damage until recovery to pre-COVID-19 levels."

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