[Click e-Stock] "Jin Air, Growing Importance of Top LCC Differentiation and Group Synergy"

On August 12, Korea Investment & Securities lowered its target price for Jin Air from 15,000 won to 13,000 won, citing difficulties in finding a rebound point in the second half of the year as demand for Japan routes and domestic flights?key drivers of low-cost carrier (LCC) performance?remains unstable. However, despite a series of short-term negative factors, the firm maintained its 'Buy' rating, noting that the growth potential for outbound travel demand remains unchanged.

In the second quarter, Jin Air's revenue decreased by only 1% year-on-year, but the company swung to an operating loss of 42.3 billion won. Choi Go-woon, a researcher at Korea Investment & Securities, explained, "Although fuel costs, which account for about 25% of total expenses, declined due to lower oil prices, this was not enough to offset increases in labor and maintenance costs." She added, "The impact of overall cost inflation in the airline industry is proving to be greater than expected." However, international route performance was relatively strong, with international passenger numbers up 13% year-on-year, making Jin Air the best performer among LCCs.

The outlook for the third quarter remains challenging. Choi noted, "Contrary to its traditional image as a peak summer season, the third quarter is actually a tough period for LCCs," explaining, "Southeast Asia routes are generally less profitable outside of winter, and travel patterns to Japan are gradually shifting away from the summer vacation season." This year, Japan's domestic economic slump, extreme heat, and concerns over major earthquakes led to a year-on-year decline in passenger numbers on Japan routes last month for the first time since the reopening of borders.

There are also projections that all LCCs except Jin Air and Air Busan will post losses this year. Choi stated, "Price competition among LCCs on short-haul routes will inevitably intensify, but during such difficult times, the gap between LCCs will widen." She added, "Jin Air has continued to maintain its position as the top LCC since the reopening. The integration of Air Busan and Air Seoul will also become more significant when market conditions are unstable."