[Click eStock] Cargo Business Boom and International Flight Recovery Expected... Maintaining 'Buy' on Korean Air

[Asia Economy Reporter Lee Myunghwan] Hana Financial Investment announced on the 23rd that it maintains a buy rating and a target price of 41,000 KRW for Korean Air, expecting a recovery in international flight demand along with strong performance in the cargo business.

Hana Financial Investment forecasts Korean Air's sales and operating profit for the first quarter of this year to be 2.9 trillion KRW and 525.7 billion KRW, respectively. Compared to the same period last year, sales increased by 62% and operating profit surged by 423.1%. Despite the global lifting of entry bans and easing of self-quarantine measures, overseas travel demand remained sluggish due to the rapid spread of the Omicron variant domestically. Hana Financial Investment expects Korean Air's international passenger transport (RPK) in the first quarter of this year to decrease by 88.5% compared to the first quarter of 2019, before the COVID-19 pandemic. The international flight load factor is also estimated to be only 39.3%.

The cargo sector performed well in the first quarter. Although it slightly declined compared to the previous quarter due to the cargo off-season and fewer working days in February, it increased by 8.0% year-on-year. Cargo freight rates are also expected to rise by 37.1% year-on-year, having set a record high again in the fourth quarter.

However, benefits from the full-scale resumption of overseas travel are expected starting from the second quarter. Major countries such as the United States and Europe have eased entry quarantine measures as COVID-19 cases declined. Domestically, from the 21st, self-quarantine has been exempted for fully vaccinated entrants. Consequently, sales of overseas travel packages have sharply increased, especially to Southeast Asian tourist destinations, the Americas, and Europe. Korean Air is also scheduled to increase flights to Japan, Guam, and Europe starting in April, with international flight demand expected to recover from the second quarter.

For air cargo, freight rates in the second quarter are expected to slightly decline due to the recent weakness in container ship freight rates and reduced durable goods consumption following the resumption of overseas travel.

Researcher Park Seongbong of Hana Financial Investment said, "The recent surge in oil prices due to the Russian invasion is a burden as fuel costs increase, but a significant increase in fuel surcharges from April is expected to allow partial pass-through of costs," adding, "International flight demand recovery is also expected from the second quarter."

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