[Click eStock] "Korean Air, 1Q Operating Profit Exceeds Forecast... Cargo Freight Rates Remain Strong Despite Off-Season"

[Asia Economy Reporter Lee Jung-yoon] Eugene Investment & Securities maintained a buy rating and a target price of 41,000 KRW for Korean Air on the 29th, stating that the airline's operating profit for the first quarter of this year is expected to exceed previous forecasts.

Korean Air's sales for the first quarter of this year are expected to increase by 59.3% year-on-year to 2.86 trillion KRW, and operating profit is projected to rise by 461.4% to 570.3 billion KRW. The operating profit is anticipated to surpass the previous forecast of 443 billion KRW, which is attributed to steady cargo freight rates even during the off-season.

Cargo sales are expected to increase by 61.2% compared to the same period last year, with average freight rates not significantly lower than at the end of last year, resulting in levels approximately 50% higher than the same period last year.

International passenger sales are estimated to be around 14% of the first quarter of 2019. The international flight load factor, which recovered to about 40% in the fourth quarter of last year, retreated to the mid-30% range due to the spread of the Omicron variant.

The average jet fuel price applied in the first quarter of this year is around $93.9 (approximately 114,980 KRW), up about 7.9% from the previous quarter. Fuel cost increases are expected to be around 40 billion KRW. Additionally, non-operating foreign exchange losses due to the rise in the KRW-USD exchange rate are estimated to exceed 100 billion KRW.

Researcher Bang Min-jin of Eugene Investment & Securities explained, "With the easing of major restrictions on overseas travel, reservation rates are visibly recovering, and airlines are expected to fully resume international flights," adding, "However, since short-haul routes such as Japan and China still maintain foreign entry restrictions, the company currently has many options for increasing flights in the short term."

He continued, "If the recent oil price levels persist, the jet fuel price in the second quarter has surged more than 30% compared to the previous quarter, and the key from a profitability perspective is passing this cost onto prices," adding, "Ultimately, fares will be determined by the strength of passenger demand recovery and airlines' efforts to control supply."

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