Eat Sushi, Slim Down With Mounjaro... Airline Stocks Smile [Weekend Money]

Japan Route Passengers Up 20% in January-October
International Oil Prices Also Fall on Hopes for an End to the War

Expectations for an end to the war in Iran and falling international oil prices are providing a boost, while demand for travel to Japan is also lending support, brightening the outlook for airline stocks.

Domestic airline stocks had already risen sharply on November 5 and 6. At the close on November 6, Jeju Air was up 18.4% from the previous week, Jin Air had risen 13.0%, and Korean Air was up 11.8%. The gains were greater for the low-cost carriers (LCCs) Jeju Air and Jin Air.

The sharp drop in international oil prices followed growing expectations for an end to the war in Iran after the U.S. midterm election results. As of November 6, West Texas Intermediate (WTI) crude had fallen 12.8% in a week to $90.8 per barrel.

Bae Seho, a researcher at iM Securities, wrote in a recent report, "If robust demand on Japan routes continues and the burden of fuel costs also eases, there could be greater room for upward revisions to earnings estimates for the fourth quarter of 2026 and the first quarter of next year, particularly for LCCs."

Sushi. Pixabay

Japan Route Passengers Up 20%... Jeju Air and Jin Air Have the Largest Japan Exposure

Japan routes are estimated to be the most profitable international routes for LCCs. From January to October this year, 24.55 million passengers traveled on Japan routes operated by domestic airlines, up 20.5% from a year earlier. The number of flights over the same period increased by 18.3%.

Jeju Air and Jin Air are highly dependent on Japan routes. Japan routes account for 57.1% and 62.6% of their international passengers, respectively, the highest shares among listed LCCs.

The trend was also reflected in Jeju Air's route-specific figures for October. The Incheon-Tokyo (Narita) route carried 80,000 passengers, up 40.8% from a year earlier, while the Incheon-Osaka (Kansai) route carried 74,000, up 42.6%. The estimated load factors—the share of seats occupied by passengers—were 95.0% for Narita and 90.4% for Kansai.

Based on the won-yen exchange rate decline and October airline data, Bae expects demand on Japan routes to continue at least through the first quarter of next year.

According to a BC Card analysis, Japan accounted for 38.7% of overseas trips taken by South Korean nationals in the first half of this year, up 8.9 percentage points from 2024.

There are also predictions that "medical tourism" to Japan could increase, following a change that took effect on November 12 allowing people to bring in up to six boxes (a three-month supply) of obesity treatments such as Wegovy and Mounjaro that were prescribed and purchased legally overseas.

Even a new term, "Sushijaro," has emerged. It refers to Mounjaro prescribed and purchased in Japan, combining "sushi," the Japanese word for the dish, with Mounjaro.

A four-week supply of the lowest dose of Mounjaro costs around 300,000 won in South Korea, but around 100,000 won at some medical institutions in Japan. However, industry observers say the Japanese government could step in if South Koreans use Japan's health insurance benefits to buy the drug at a lower price.

Every $1 Drop in Jet Fuel per Barrel Saves Jeju Air 1.3 Billion Won per Quarter

A gas station in Seoul.

Bae also calculated the impact of falling oil prices on earnings. Fourth-quarter operating profit is estimated at 22 billion won for Jeju Air and 402.1 billion won for Korean Air on a standalone basis, based on an assumed jet fuel price of $150 per barrel. If the actual average refueling price is $1 per barrel below that assumption, quarterly fuel costs would fall by about 1.3 billion won for Jeju Air and about 10 billion won for Korean Air on a standalone basis.

Among LCCs, Bae singled out Jeju Air, citing its low forward 12-month price-to-earnings ratio of just 6.0 times. The airline has 14 of the new B737-8 aircraft, representing 32.6% of its total 43 passenger aircraft, and that share is estimated to reach 50% by the end of 2027. Bae believes that replacing its fleet will improve cost competitiveness, and that lower jet fuel prices could further boost earnings.

"The market capitalizations of LCCs are currently at levels similar to those in March 2020, when the risks of the COVID-19 pandemic began to be fully reflected in airline share prices," Bae said. "Rising earnings levels can provide ample support for a recovery in LCC share prices."

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