[Click eStock] "Korean Air, Strong Air Cargo Demand Continues in Q1"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating and a target price of 41,000 KRW for Korean Air on the 25th, expecting favorable operating results in the first quarter due to strong cargo demand.

Korean Air is estimated to have achieved sales of 2.9 trillion KRW and an operating profit of 706.9 billion KRW in the fourth quarter of last year, representing growth of 50.2% and 485.5% respectively compared to the same period last year. Seongbong Park, a researcher at Hana Financial Investment, said, “Although global expectations for overseas travel expanded with the introduction of ‘With Corona,’ overseas travel demand remained sluggish due to entry bans or extended quarantine periods caused by the spread of the Omicron virus.”

Korean Air’s international passenger transport is predicted to fall by 90% compared to the fourth quarter of 2019. The international flight load factor is also expected to remain at around 40%. However, cargo transport is expected to increase by 13.2% year-on-year due to the recovery of global cargo exports centered on routes to the Americas and the expansion of air cargo demand caused by a shortage of container ships. Freight rates also surged by 36.1%, and the cargo business is expected to achieve the highest quarterly sales.

Demand in the air cargo sector is expected to continue in the first quarter. This is because major countries are still experiencing logistics disruptions, and container ship freight rates remain high. It is difficult for passenger demand to recover in the short term. However, domestic airlines are expanding operations mainly on resort routes such as Hawaii and Saipan, where self-quarantine is exempted, and in Europe and the United States, there are projections that the peak of the Omicron spread has passed. The UK recently announced plans to ease quarantine measures, raising expectations for international travel demand recovery in the second half of the year.

Researcher Seongbong Park explained, “As logistics disruptions in major countries prolong, strong air cargo demand will continue for some time,” adding, “Since international travel demand recovery is expected in the second half of the year, strong performance is likely to continue this year as well.”