[Click eStock] "Korean Air Expected to Benefit from Russia-EU Airspace Restrictions"

Daishin Securities Report

[Asia Economy Reporter Minji Lee] On the 4th, Daishin Securities maintained a buy rating and a target price of 43,000 KRW for Korean Air. Although rising oil prices are a burden, the mutual sanctions between Russia and Europe are expected to act as an opportunity factor for the company.

The UK, EU, and the US have implemented restrictions on Russian airlines flying over their airspace as part of economic sanctions in response to Russia's invasion of Ukraine. In response, Russia has decided to restrict Western airlines from passing through its airspace. A total of 36 countries have been restricted by Russia from airspace passage.

Accordingly, European airlines are expected to face a situation where they must significantly increase fares due to increased fuel costs caused by route changes. With jet fuel prices rising to $117 per barrel due to Russia's invasion of Ukraine, the burden on European airlines is expected to increase. Ji-hwan Yang, a researcher at Daishin Securities, explained, "European airlines' East Asia flight services are expected to decrease," adding, "This will lead to a strong demand for air cargo freight rates, which are already experiencing a supply shortage."

Korean Air's operating profit for the first quarter of this year is likely to exceed market expectations, with 555.3 billion KRW on a consolidated basis and 560.7 billion KRW on a separate basis. The jet fuel price applied in the first quarter was $100 per barrel, and the strength of air cargo freight rates is expected to offset the cost increase due to high oil prices. Researcher Yang said, "Korean Air's average air cargo yield per 1 km in January and February is estimated to exceed approximately 800 KRW," adding, "Due to the airspace restrictions between Russia and Europe, the air cargo yield in March is also expected to remain firm."

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