[Click eStock] "Jeju Air, Mid-to-Long-Term Fare Decline Inevitable"... Target Price ↓

On the 10th, NH Investment & Securities downgraded the target price of Jeju Air from 18,000 KRW to 14,000 KRW while maintaining a hold rating, citing a decline in the valuation of global low-cost carriers (LCCs) and downward revisions in earnings estimates.

Jeong Yeonseung, a researcher at NH Investment & Securities, explained, "Considering the faster-than-expected introduction of aircraft by domestic airlines, Jeju Air's international fares in 2024 are expected to fall by 10% compared to the 2023 average." He added, "The number of aircraft operated by domestic airlines is expected to increase by about 6%, from 325 at the end of last year to 345 by the end of this year."

He further stated, "In 2024, the number is expected to return to the 2019 level, raising concerns about oversupply and intensified fare competition on medium- to short-haul routes in the mid to long term." He also noted, "In the first quarter of this year, the imbalance between passenger demand and supply peaked, causing fares to surge sharply, but the market has now entered a downward stabilization cycle."

Jeju Air's consolidated sales for the second quarter rose 196% year-on-year to 373 billion KRW, and operating profit turned positive, reaching 22.5 billion KRW. The decline in fares during the second quarter's supply expansion was larger than expected, mainly due to significant fare drops on Southeast Asia and Oceania routes during the off-season period.

However, the third quarter is expected to see a rebound in fares as it is a peak travel season. Jeju Air expanded its fleet by two aircraft at the end of the second quarter and plans to add one more aircraft during the third quarter, operating a total of 39 aircraft excluding cargo planes. Researcher Jeong added, "While the fleet expansion and peak season effects are positive for fare increases, it is difficult to expect fares as high as those in the first quarter." He projected the third quarter operating profit to be 55 billion KRW.

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