"Airline Stocks: Passenger and Cargo Fares Both Stable... Stock Price Correction Presents Buying Opportunity"

[Asia Economy Reporter Minji Lee] Although airline stocks have recently shown a sluggish trend due to concerns over an economic recession and rising jet fuel prices, there is a forecast that it is still good to continue investing as strong freight rates persist.

According to the Korea Exchange on the 12th, Korean Air has traded at 27,900 KRW, down 4.3% over the past month. Asiana Airlines (-3%), T'way Air (-4%), and Air Busan (-18%) have also declined. The downtrend has continued due to rising jet fuel prices and recession concerns.

Jet fuel prices are currently hovering around $160, maintaining a strong price trend. As jet fuel prices continue to rise, concerns about the performance of major domestic and international airlines are growing. Soo-young Park, a researcher at Hanwha Investment & Securities, said, "The performance and stock price direction of major domestic airlines depend on how much of the cost burden caused by the sharp rise in oil prices is passed on to consumers through basic airfares in addition to fuel surcharges."

However, since freight rates are strong in both passenger and cargo sectors, it is predicted that there will be no significant damage to airline sales. First, in the passenger sector, the policy easing that replaces pre-entry PCR tests with rapid antigen tests is driving the recovery of international passenger demand. A steep upward trend in international passenger demand is expected, with the resumption of visa-free tourism to Japan likely in the third quarter. The issue is the fare, as one-way ticket prices to Japan exceed twice the pre-pandemic levels, and other routes are also being sold at high prices. Researcher Park said, "Although there are concerns about aggressive supply expansion due to reports of flight operation restrictions (curfews), increasing load factors will be the airlines' priority business strategy rather than expanding supply."

In the cargo sector, although volume is decreasing, strong freight rates continue. Last month, domestic air cargo volume for arrivals and departures was 257,426 tons, down both year-on-year and month-on-month, but still exceeding the volume for the same month in 2019. In the case of Korean Air, the May volume exceeded that of the same month in 2019 by 23%, still performing well in volume defense. Researcher Park said, "Prolonged external uncertainties have led to a decrease in volume, but they have greatly contributed to strong freight rates," adding, "It appears that the supplier-dominant market is still continuing."

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