[Into the Stocks] T'way Air Stock Price Depends on February Airfare

Stock Price Up 33% This Year... Rapid Recovery in Passenger Demand
February Passenger Decline and Airlines' Increased Flight Competition as Variables

[Asia Economy Reporter Hyungsoo Park] T'way Air's stock price has continued to rise this year. This is due to growing expectations of improved performance as passenger demand, which plummeted during the COVID-19 pandemic, has entered a recovery phase. However, since these expectations have been priced in advance, there is also increasing sentiment to verify actual performance, leading to analyses that more time is needed before the stock price can rise further.

According to the financial investment industry on the 6th, T'way Air's stock price has risen 32.9% since the beginning of this year. Considering that the KOSPI rose 10.9% during the same period, the return compared to the market is 22.9 percentage points.

NH Investment & Securities estimated that T'way Air's sales in the fourth quarter of last year were 208.1 billion KRW, with an operating loss of 3.5 billion KRW. It was understood that sales increased by more than 200% compared to the same period last year, and the deficit size was reduced. The number of passengers on Southeast Asia and Japan routes is increasing, so a return to profitability in the first quarter of this year seems possible.

The number of passengers transported on T'way Air's Southeast Asia routes in January this year was 150,000, recovering to the level of January 2019. The number of departures was 392 flights for T'way Air, down 8% compared to January 2019. The number of passengers on Japan routes increased by 2% to 180,000, while the number of flights decreased by 8%. By deploying large aircraft to reduce the number of flights and increase the number of passengers, efficiency was improved. T'way Air introduced three large aircraft A330-300s last year, when it recorded large losses due to the COVID-19 pandemic. This was an investment in anticipation of passenger demand recovery after the pandemic ended.

Researcher Yeonseung Jeong of NH Investment & Securities explained, "We expect annual international passenger demand this year to recover to 74% of the 2019 level," adding, "International passenger demand is recovering faster than expected as travel demand to Japan surges."

As passenger demand surged faster than expected, the stock price also rebounded quickly last month. However, the problem is that from February, the pace of passenger number recovery has slowed, and fares may fall compared to January. It is not easy to maintain high fares as domestic airlines compete to increase flights.

Researcher Sooyoung Park of Hanwha Investment & Securities said, "The key to airline stock prices is the direction of passenger fares," adding, "Considering that consumers' spending power has weakened due to inflation and competition has intensified due to increased flights by airlines, international passenger fares may decline from the second quarter." He also analyzed, "The market capitalization of low-cost carriers (LCCs) has risen to the level of the first half of 2018, when passenger demand was strong and fares were rising," adding, "Expectations for demand recovery have been fully reflected."