[Click eStock] "Korean Air, Cargo Supply Shortage Acts as an Opportunity"

Daishin Securities Issues 'Buy' Investment Opinion and Sets Target Price at 28,000 Won... Closing Price on 29th Last Month Was 20,700 Won

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[Asia Economy Reporter Geum Bo-ryeong] As the shortage of cargo supply emerged amid the ongoing COVID-19 pandemic, an analysis suggests that this has actually become an opportunity for Korean Air.

According to Daishin Securities on the 1st, based on data from the International Air Transport Association (IATA), Korean Air ranked 6th among global airlines in cargo transport performance (FTK) in 2018. The 5th place was Cathay Pacific Airways.

Yang Ji-hwan, a researcher at Daishin Securities, explained, "The reason Korean Air and Cathay Pacific Airways rank high in cargo transport is that over 45% of global air cargo is accounted for by Asia-America (23.6%) and Asia-Europe (21.4%) routes," adding, "Korean Air operates 23 cargo aircraft including 1 B737-300F, 4 B747-400F, 7 B747-8i, and 12 B777F, with a cargo aircraft supply capacity of 2,590 tons."

With international passenger flights worldwide suspended by more than 90% since April due to COVID-19, it is analyzed that airlines with air cargo business divisions are seeing this as an opportunity. Researcher Yang said, "Although airlines including Korean Air will resume some international routes, it is expected to take a long time before full-scale expansion," emphasizing, "The suspension of passenger flights contributes significantly to improving profitability in the cargo sector due to cargo supply shortages and a sharp drop in jet fuel demand leading to lower jet fuel prices. The years when Korean Air recorded operating profits exceeding 1 trillion won in 2010 and 2016-2017 were all periods when the cargo business division made a large contribution."

It is estimated that the profitability of the cargo business division has greatly improved as jet fuel prices have fallen. Researcher Yang said, "Considering that most of the costs in the cargo business division are fuel costs, profitability must have improved significantly."

Daishin Securities gave Korean Air a 'Buy' investment rating with a target price of 28,000 won. The closing price on the 29th of last month was 20,700 won.