Hana Securities Report
[Asia Economy Reporter Kwangho Lee] Hana Securities analyzed on the 3rd that Air Busan's performance turnaround will be achieved due to the explosive increase in travel demand.
Researcher Dohyun Kim of Hana Securities stated, “Air Busan's existing routes were centered around Busan, but from this year, eight new routes from Incheon have been added, enabling simultaneous expansion of scale and improvement of profitability,” adding, “Specifically, the new routes include three to Japan: Osaka, Narita, and Fukuoka; two to Southeast Asia: Bangkok and Nha Trang; and three more to China and others: Taipei, Hong Kong, and Macau are planned to be added.”
Researcher Kim explained, “The number of new routes departing from Incheon could increase up to 11 in the future, and with the explosive growth in travel demand, both prices and passenger numbers are expected to rise together. Profitability is expected to improve significantly due to the boom in travel to new Incheon routes and Japan-bound travelers,” adding, “Since the second half of last year, favorable exchange rates and oil prices, which have been declining compared to the past, are expected to result in strong performance in the first quarter and throughout this year.”
He said, “Air Busan currently operates 21 aircraft, among which two A321-CEO planes will be returned and two new A321-NEO planes will be introduced,” adding, “Compared to the CEO, the NEO has about 18% more seats and is suitable for medium- to long-distance flights, allowing for profitability-focused route operations.”
He further stated, “The most promising routes in terms of profitability are Incheon-Japan routes. Japan-bound routes have higher prices compared to domestic flights with similar flight times, resulting in good profit margins. Recently, due to the surge in travel demand, the increase in ASP and load factors will enable achieving high operating profit margins.”
It was explained that routes departing from Incheon have higher ASP compared to Busan, and the load factors for Japan/Southeast Asia routes have increased to around 90% currently, compared to 85%/80% in 2018, showing an upward trend.
Additionally, the number of flights on the Incheon-Japan route increased from 310 in December last year to 322 in January this year, and the number of passengers rose from 58,844 to 63,961.
Researcher Kim predicted, “Although the Incheon-Southeast Asia routes have slightly lower profitability compared to Japan routes due to long-distance flights, the number of flights increased sharply from 77 in December last year to 124 in January this year, and the number of passengers surged from 15,207 to 24,029, contributing to performance improvement.”
Hana Securities forecasted that Air Busan's annual sales for 2023 will reach 799 billion KRW, a 93.9% increase, and operating profit will turn positive to 82.3 billion KRW.
Researcher Kim said, “Sales exceeding 70 billion KRW are estimated for January alone,” adding, “Demand for highly profitable Japan and Southeast Asia routes is concentrated at the beginning of the year, and even considering fewer days in February and a slight decline in demand in March, operating profit exceeding 40 billion KRW in the first quarter is expected.”
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