[Click eStock] "Jeju Air, Q2 Earnings Shock... Labor Cost Burden"

Korea Investment & Securities maintained a target price of 14,000 KRW and a 'Buy' rating for Jeju Air on the 7th, stating that the airline recorded earnings in the second quarter that significantly missed consensus estimates.

Researcher Choi Go-woon said, "On a separate basis, second-quarter revenue reached 427.9 billion KRW, a 16% increase compared to the same period last year, driven by increased international flights and strong passenger demand," adding, "However, operating losses of 9.5 billion KRW were recorded due to higher-than-expected increases in labor costs, airport-related expenses, and one-time maintenance costs."

Researcher Choi noted, "Low-cost carriers (LCCs), including Jeju Air, had been experiencing operating losses since 2019, which limited wage increases during that period. However, thanks to an unprecedented boom starting last year, the previously deferred labor cost increases are now being reflected. This trend is similarly observed not only in employee wages but also in airport handling fees and maintenance expenses."

He continued, "In the first quarter, the strong peak season performance masked these fixed cost burdens, but in the second quarter, which is the slowest off-season of the year, it was difficult to overcome them."

He added, "From next year, as the labor cost growth rate normalizes, profit growth is expected to resume, which is why we maintain a Buy rating on Jeju Air."