[Click eStock] "Jeju Air, Slower Recovery Than Expected... Short-Haul Route Recovery Needed"

[Asia Economy Reporter Lee Myunghwan] NH Investment & Securities announced on the 19th that it maintains a neutral (hold) investment rating and a target price of 18,000 KRW for Jeju Air. It also pointed out that the recovery of passenger demand on short-haul key routes is necessary for Jeju Air's performance recovery.

Jeju Air's sales in the second quarter of this year increased by 68% year-on-year to 126.1 billion KRW, while operating losses continued at 55.7 billion KRW. This slightly exceeded NH Investment & Securities' estimates. The analysis attributed the strong performance to a significant increase in domestic fares by 17.1% compared to the same period last year.

NH Investment & Securities forecasted that Jeju Air's international flights, centered on Southeast Asia, will expand as it operates on a peak season schedule starting from July. Although the rising exchange rate is a burden, the decline in international oil prices is expected to ease cost pressures. Passenger Available Seat Kilometers (ASK) in the second quarter recovered to 18.3% of the 2019 average, and the third quarter ASK is expected to rise to 31% of the 2019 average.

At the end of the second quarter, Jeju Air's cash and cash equivalents stood at approximately 173.2 billion KRW, NH Investment & Securities noted. The increase in advance payments due to rising reservations has reduced liquidity concerns. However, the increase in short- and long-term borrowings to 393.3 billion KRW was pointed out as a burden.

NH Investment & Securities emphasized that the recovery of Jeju Air's performance requires the revival of short-haul key routes such as China and Japan. They analyzed that the recovery of China and Japan routes is slow from the supply side. While the Japan route is assumed to gradually resume from the fourth quarter, the China route is expected to be difficult to resume within this year. NH Investment & Securities explained that if route diversity shrinks, operations will concentrate on specific routes such as Southeast Asia, intensifying price competition.

Jeong Yeonseung, a researcher at NH Investment & Securities, analyzed, "International passenger demand has entered a recovery phase, but the speed is slower than expected," adding, "Domestic consumer sentiment has also worsened, creating medium- to long-term demand uncertainties."

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