Airline Stocks Soar Despite Sharp Rise in COVID-19 Cases

Airline Stocks Hold Up Well Despite Global COVID-19 Cases Surpassing 200 Million
Foreign and Institutional Buyers Return Together After a Long Time

On June 17, when the operation of the 4th runway at Incheon International Airport began, a Korean Air passenger plane took off from the 4th runway at Incheon Airport on Yeongjongdo. [Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] While COVID-19 continues to rage globally with cumulative confirmed cases surpassing 200 million, airline stocks collectively showed an upward trend. Attention is focused on whether the industry can safely overcome this latest resurgence, the final hurdle before the recovery of the aviation market in 2022.

According to the Korea Exchange on the 5th, Korean Air's stock price closed up 5.05% compared to the previous day. This was the largest single-day increase since June 2. For the first time in a while, both foreign investors and institutions simultaneously bought shares, with net purchases of 35.3 billion KRW and 20.2 billion KRW respectively. Foreign investors recorded their largest single-day net purchase since June 2, and institutions since June 4. Although at 10:34 AM on the same day the stock price slightly dipped by about 1.6% to 30,700 KRW compared to the previous day, it still maintained its gains without giving them back.

Asiana Airlines also showed an upward trend after a while, jumping 3.04% just the day before. At 10:34 AM on the same day, it recorded 18,500 KRW, down 0.80% from the previous day, but has generally been trending upward since May 20. Additionally, low-cost carriers (LCCs) such as Jin Air (6.17%), T'way Air (8.04%), and Jeju Air (3.35%) also closed with significant gains.

Considering that the COVID-19 spread remains persistent and airline stocks fell in the U.S. stock market, this performance is regarded as a strong showing. The number of new COVID-19 cases, which had dropped to the 1,200 range, surged back to the 1,700 range from midweek. According to the international statistics site Worldometer, the global cumulative confirmed COVID-19 cases exceeded 200 million as of the previous day. U.S. airlines American Airlines and United Airlines closed on the 4th (local time) down 2.51% and 2.71% respectively compared to the previous day.

Nonetheless, domestic airline stocks performed well due to expectations driven by expanded COVID-19 vaccinations and the perception that the previously declining stock prices presented a buying opportunity at a low point. Choi Go-woon, a researcher at Korea Investment & Securities, explained, "Concerns about the COVID-19 resurgence will dampen travel demand, but even without strengthened social distancing measures, the normalization of the aviation market was only possible next year anyway. Unless there are issues with the vaccination schedule until next year, there is no reason to be more disappointed with the air passenger market, and the mid- to long-term benefits from supply restructuring remain valid."