Fuel Cost Burden Decreases and Overseas Travelers Increase... Airline Stocks Soar

Korean Air and Others' Stock Prices Rise 7-10% from Late Last Month
Decline in International Oil Prices, Increase in International Passenger Traffic... Growing Optimism for Winter Peak Season

Airline stocks have been soaring since November. This is attributed to the decline in international oil prices and strong overseas travel demand, which have raised expectations for improved earnings.

Korean Air's stock price closed at 22,350 KRW on the 20th, up 9.02% compared to the end of the previous month. Jeju Air (10.13%), T'way Air (10.80%), Jin Air (10.54%), and Air Busan (7.68%) also all saw increases.

Airline stocks struggled in the third quarter. The significant rise in oil prices and uncertainties surrounding the merger of Korean Air and Asiana Airlines had a negative impact. Third-quarter earnings also fell short of market expectations. Due to these factors, the leading stock Korean Air continued its downward trend from August through last month.

However, with the recent drop in oil prices and confirmation of strong travel demand, airline stocks began to rebound this month. West Texas Intermediate (WTI) crude oil rose above $90 per barrel in September but has since fallen to around $76. For airlines, fuel costs constitute a large portion of fixed expenses. Based on third-quarter figures, a $1 increase per barrel results in approximately $26 million (about 34 billion KRW) in additional costs for Korean Air. Particularly, as international oil prices decline, consumer burdens are expected to ease. Korean Air's international fuel surcharges ranged from 30,800 KRW to 226,800 KRW this month but will decrease to 25,200 KRW to 190,400 KRW next month.

Additionally, strong travel demand is considered a positive factor. In September, 5,957,948 passengers used international flights through domestic airports, rebounding to 6,623,981 passengers last month. This figure is close to the highest number of international passengers this year, 6,682,933. Jeong Yeonseung, a researcher at NH Investment & Securities, explained, "In October 2023, international passengers at nationwide airports reached 6.62 million, a 161% increase compared to the same period last year. By route, demand was strong except for the China routes."

With the winter peak season approaching, the possibility of a sustained rise in airline stocks is increasing. Moreover, uncertainties that have weighed down airlines are gradually disappearing. Choi Goun, a researcher at Korea Investment & Securities, advised, "The negative factors such as third-quarter earnings disappointment, rising oil prices, and uncertainties related to Asiana Airlines have all passed their peak, so the seasonal rebound this winter is expected to be valid. It is the right time to aim for upside from the bottom."

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