[Click e-Stock] Korea's Flagship Airline Stock Looks Promising for Next Year

NH Investment & Securities raised its target price for Korean Air from 34,000 won to 41,000 won. It maintained its Buy rating.

On November 11, Jeong Yeonseung, a researcher at NH Investment & Securities, said, "We raised our operating profit estimates for this year and next year by 34% and 11%, respectively, to reflect strong passenger and cargo fares and the downward stabilization of fuel costs. We also factored in Korean Air's leading role in long-haul and premium demand originating in Korea, as well as growth in transfer passengers and its strong position in the cargo market."

Jeong said, "Korean Air's passenger demand remains solid, supported by strong inbound travel and robust routes to the Americas, while international fares are also holding at high levels. Its negotiating power over cargo rates is improving, driven by strong demand for high-tech cargo and a higher proportion of long-term contracts."

However, he added, "Despite revenue growth, high fuel costs have limited profit improvement. Given the easing of war-related risks and the narrowing of risk premiums in maritime transport, fuel costs are also expected to stabilize at lower levels, with a time lag."

The effects of the merger are expected to gain momentum starting next year. Jeong noted, "International route adjustments are already underway, particularly for the winter schedule. On the revenue side, key factors include expanding transfer demand by adjusting overlapping flight times, normalizing Asiana Airlines' international fares as competition eases, and increasing cargo capacity by making greater use of Asiana Airlines' belly cargo space." He added, "Cargo capacity after integration will increase 10% from this year, and revenue synergies will gradually expand."

The merger is also expected to lower costs by reducing maintenance expenses and ancillary costs such as lease payments and insurance premiums. Jeong explained, "The new engine maintenance facility is scheduled for completion in the fourth quarter of this year and is expected to begin operating in the second half of next year. The number of engine types it can service will increase from six to 12, while the number of engines serviced annually is expected to rise in stages from 130 to 500." He added, "By bringing maintenance in-house at the integrated airline, the company can reduce costs incurred through schedule adjustments and outsourcing. Even a 10% reduction in the combined maintenance expenses of Korean Air and Asiana Airlines, which total 1.2 trillion won, could generate savings of about 120 billion won."

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