Despite Slower-than-Expected Passenger Recovery... "Airline Stocks Will Get Back on Track"

Some Countries Still Have COVID Measures
Recovery Expected to Pre-2024 Levels

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[Asia Economy Reporter Myunghwan Lee] As the skies have fully reopened, a recovery in air passenger numbers is anticipated, but the recovery appears to be slow for now. The securities industry expects the normalization of air travel to be slower than expected but to gradually show signs of recovery.

According to the Korea Tourism Organization and others on the 30th, the cumulative number of domestic travelers departing abroad as of September was approximately 3.25 million. This represents an increase of more than 300% compared to the same period last year. However, it only reached about 15% of the 2019 level before the COVID-19 pandemic, indicating a slower recovery than expected.

This is believed to be influenced by some countries implementing measures such as mandatory vaccination or COVID-19 testing for incoming travelers. According to Samsung Securities, currently 101 countries impose such restrictions on Korean entrants.

The challenging economic situation also seems to be affecting the recovery of international flights. As the U.S. Federal Reserve (Fed) continues its high-interest-rate policy, the won-dollar exchange rate once surged to the mid-1400 won range, while consumer prices continued to rise. This triple pressure (high inflation, high interest rates, and high exchange rates) has worsened the economy, dampening consumer sentiment and preventing travel demand from rebounding.

However, forecasts suggest that from next year onward, the normalization of international flights will enter a full-fledged trajectory. Securities firms diagnose that normalization of air travel is steadily progressing, it is just a matter of time. Samsung Securities projects that the number of outbound travelers in 2023 will recover to 19.74 million, which is 73% of the 2019 level, and in 2024, it will reach 27.63 million, a 2.6% increase compared to 2019.

Recent stock prices of airline companies have also reflected these expectations. The KOSPI Transportation and Warehousing Index, which includes major domestic airlines, fell to around 1440 in early October but rebounded to reach the 1700 level by mid-month. The index closed at 1674.85 on the 29th, up 2.46% (40.20 points) from the previous day.

Kim Young-ho, a researcher at Samsung Securities, explained, "Although slow, demand inflow due to the advent of the endemic era is expected to be certain. Since the beginning of this year, entry restrictions on Koreans have been lifted worldwide, and government regulations on overseas travelers, such as pre-departure PCR tests, have been eased."

Meanwhile, there is also a diagnosis that China, which still adheres to a 'Zero COVID' policy, will need more time for the recovery of air routes. Yang Seung-yoon, a researcher at Eugene Investment & Securities, predicted, "The China route, which accounted for 20% of total international passengers before COVID-19, is expected to take a little longer to fully recover due to the continuation of strict quarantine policies in China."

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