[Click eStock] "Korean Air, Passenger Fare Strength... Performance Contribution Begins in Earnest"

[Asia Economy Reporter Minji Lee] NH Investment & Securities maintained a buy rating on Korean Air on the 18th, stating that passenger fares are recovering rapidly. However, reflecting concerns over mid- to long-term consumption slowdown, the target price was lowered by 11% to 31,000 KRW.

As of September this year, international passenger transport volume was only 26% compared to the 2019 pre-COVID-19 average, but Korean Air's passenger transport volume recovered by about 32%. Considering distance, the FTK (freight ton kilometers) recovered by 30%, showing better performance compared to the market. This reflects recovery mainly on mid- to long-haul routes such as the Americas and Europe, along with demand inflow from transfer routes. Low-cost carriers reduced flight frequencies due to demand concerns, but Korean Air's limited increase in supply also had an impact.

Although the speed of demand recovery is slow, airfares remained strong. The international fare in the third quarter was 135 KRW, 45% higher than the 2019 average. It appears that pricing power increased due to a strategy of proactively confirming demand and increasing supply. Jeong Yeonseung, a researcher at NH Investment & Securities, said, “Despite rising fuel and labor costs, these were successfully passed on to airfares, and the premium demand that had continued since before COVID-19 also drove the price strength,” adding, “Considering the current supply strategy and demand trends, the strong fares are expected to positively reflect on earnings.”

Meanwhile, on a consolidated basis including Jin Air, the company's sales in the third quarter are expected to increase by 66% year-on-year to 3.8334 trillion KRW. Operating profit is forecasted to grow 47% to 614.7 billion KRW, exceeding market expectations by 14%.

On an individual basis, passenger segment capacity and volume are expected to increase by 102% and 266% year-on-year, respectively. International fares are estimated to rise 10% year-on-year to 138 KRW. Cargo segment capacity and volume are expected to decrease by 11% and 16% year-on-year, respectively, with cargo fares forecasted at 805 KRW, down 6% from the previous quarter. Researcher Jeong Yeonseung stated, “Although there are concerns about cargo peak-out and demand slowdown due to economic deceleration, passenger demand recovery is still ongoing, and the effect of strong passenger fares is believed not to have been reflected in the stock price.”

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