"Growing Expectations for Japan Route Resumption... Low-Cost Airlines and Leisure to Benefit"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Myunghwan] As the possibility of resuming tourism between Korea and Japan arises, securities analysts predict that low-cost carriers (LCCs) and leisure sectors will primarily benefit.

On the 7th, Shinhan Financial Investment analyzed that expectations are growing for the resumption of Japan routes starting in June. This is because the Korea-Japan Policy Consultation Delegation, dispatched by President-elect Yoon Seok-yeol, mentioned in interviews with the media the resumption of Korea-Japan routes, restoration of visa exemptions, and expansion of quarantine exemptions.

According to Shinhan Financial Investment's analysis, in 2019 before COVID-19, flights to Japan accounted for 22.4% of all flights. However, due to COVID-19, flights to Japan were completely blocked from 2020, dropping to fewer than 10,000 flights last year. For pure tourism purposes rather than business trips, visas must be issued.

Shinhan Financial Investment reported that the delegation emphasized the resumption of the Gimpo-Haneda route. Not only Korean Air and Asiana Airlines but also major Japanese airlines such as Japan Airlines (JAL) and All Nippon Airways (ANA) have applied to resume operations on the Gimpo-Haneda route. However, it is analyzed that a comprehensive review of various variables is necessary before an official stance on the timing, speed, and intensity of route resumption can be made.

They also predicted that LCCs would clearly benefit if the air route to Japan reopens. These carriers have a large revenue share from short-distance Japan routes. The LCC share of passenger demand to Japan was close to 55% in 2019. The revenue share by individual stocks is explained in the order of Air Busan, T'way Air, Jin Air, and Jeju Air.

The leisure sector was also presented as a representative beneficiary. Specific stocks mentioned were Paradise and Hana Tour. For Paradise, Japan is a market that fully compensated for the lost Chinese market, and there are no regulations on casino VIPs. Hana Tour, with its listing on the Japanese stock market, operates hotels, duty-free shops, and bus businesses targeting all inbound Japanese tourists, maintaining the highest exposure to Japan among travel agencies.

Ji Inhae, senior researcher at Shinhan Financial Investment, analyzed, "Japan holds the largest share in outbound travel (domestic citizens traveling abroad) by a single country and the second largest share in inbound travel (foreigners traveling domestically) after China," adding, "Japan is very important for the entertainment and leisure sectors."

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