[Click eStock] "Jeju Air, a Beneficiary of With-Corona"
Cargo volume is low, so passenger recovery benefits are expected to be greater than those of major airlines
SK Securities "Jeju Air investment rating upgraded from 'Neutral' to 'Buy'"
![[Click eStock] "Jeju Air, a Beneficiary of With-Corona"](http://www.asiae.co.kr/news/img_view.htm?img=2021032211045742814_1616378697.jpg)
[Asia Economy Reporter Gong Byung-sun] Jeju Air is being identified as a beneficiary stock of the "With Corona" phase, which signifies a gradual return to normal life. Low-cost carriers (LCCs) are expected to benefit more than full-service carriers (FSCs) because they carry relatively less cargo.
On the 3rd, SK Securities upgraded Jeju Air's investment rating from 'Neutral' to 'Buy.' The target price was maintained at 26,000 KRW. The closing price on the previous day was 21,700 KRW.
The reason for the upgrade is that Jeju Air is classified as a beneficiary stock of the With Corona phase. Unlike FSCs, which are expected to see a decline in revenue due to falling air cargo rates alongside passenger flight operations, LCCs carry less cargo.
In fact, domestic FSCs maintained profitability during COVID-19, supported by rising air cargo rates caused by the non-operation of passenger aircraft, which account for 40% of global air cargo capacity. Additionally, as sea freight rates increased, shippers shifted to air cargo. However, in the With Corona phase, as aircraft resume operations, a decline in air cargo rates is inevitable. On the other hand, LCCs are expected to largely benefit from the recovery in passenger demand.
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Furthermore, Jeju Air's capital expansion risk is also disappearing. It escaped concerns of capital erosion in the first half of this year and recently secured about 206.6 billion KRW in cash through a rights offering. SK Securities analyst Yoo Seung-woo explained, "Overseas travel demand is visibly increasing due to With Corona," adding, "It will be possible to raise additional cash without difficulty through refinancing existing borrowings (rollover), corporate bonds, and asset-backed securities (ABS) issuance."
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