"Unexpected Surge in Passenger Demand... Airline Stocks Poised to Rise if Fuel Costs Stabilize"

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International Passenger Demand Surges Beyond Expectations
European Routes Benefit from Middle Eastern Carrier Suspensions

Yonhap News Agency

Passenger demand for air travel is showing higher-than-expected growth rates, particularly for short-haul routes. In the case of Korean Air, the company still has the capacity to withstand risks thanks to emergency cargo demand stemming from Middle East risks. As a result, market watchers expect that the stock price will also respond positively once oil prices stabilize.

On March 11, NH Investment & Securities provided this analysis regarding airline stocks. In February 2026, the number of international passengers at airports nationwide reached 8,415,936, an 11.6% increase compared to the previous year. In particular, routes to Japan and China, which are categorized as short-haul, saw a marked increase in demand. These routes tend to have higher average fares, resulting in better profitability. While the growth rate of passenger traffic on routes to North America and Europe was lower, the upward trend continued. Boarding rates by airline are also on the rise, leading the firm to forecast a slight increase in fares for the first quarter compared to the previous year.

NH Investment & Securities had initially estimated the annual passenger demand growth rate to be around 5–6%. The firm cited several factors for the higher-than-expected growth: friendly relations with neighboring countries stimulating travel demand; the resumption of demand that was deferred last summer due to concerns over heatwaves and major earthquakes; and the wealth effect stemming from rising domestic stock and asset prices.

Despite robust demand, rising fuel costs due to the war between the United States, Israel, and Iran are a burden. Concerns over increased operating costs due to the stronger won-dollar exchange rate have also weighed on domestic airline stocks, which are currently trending weaker. Although airlines have been responding by using their fuel reserves thus far, these costs are expected to have a tangible impact on earnings starting in April. Jeong Yeonseung, an analyst at NH Investment & Securities, explained, "However, given that demand remains strong and stock prices have already adjusted, airline stocks as a whole have sufficient upward momentum once fuel prices peak."

European routes are also expected to benefit indirectly from Middle East risks. This is because the supply of Far East Asia–Europe transfer flights by the three major Middle Eastern carriers—Etihad Airways, Qatar Airways, and Emirates—has declined significantly. As demand shifts to direct flights to Europe, fares have risen sharply. While the burden of rising fuel costs and exchange rates remains significant, some routes are seeing indirect benefits as well.

The rise in cargo rates has also been cited as a factor helping airlines withstand negative pressures. This is because air cargo operates largely on a short-term spot market basis, allowing cost increases to be passed on quickly. Analyst Jeong stated, "Korean Air has established a business structure that allows it to offset rising costs better than in the past, thanks to indirect benefits on direct European routes and the possibility of higher cargo rates." He added, "Once the war moves toward a resolution, investment strategies aiming for a rebound in Korean Air's stock price will remain valid."

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