By Lee Hyo-sik
Shares of Korean Air, Asiana Airlines and budget carriers are soaring on plunging oil prices, which make it cheaper for airlines to operate their planes.
Airline stocks will likely continue to head upward in the coming months on continued weak crude prices and rebounding travel demand, analysts said Tuesday.
Following the overnight plunge of West Texas Intermediate (WTI), Korean Air shares surged 11.42 percent to close at 38,050 won a share, Tuesday.
WTI fell 4.1 percent to $45.17 per barrel for September delivery in New York, Monday, as weak global demand and the strengthening dollar weighed down on the value of black gold.
Shares of Asiana Airlines jumped 9.21 percent to 6,520 won a share, while T'way Holdings, which owns low-cost carrier T'way Air, soared 11.5 percent to 11,150 won per share.
"Given the fact that jet fuel accounts for the bulk of carriers' operating expenses, the overnight plunge in oil prices lifted airline shares," said an analyst at Hana Daetoo Investment & Securities.
"I think carriers will likely outperform the market on weak crude prices caused by declining global demand," he said. "In addition, airlines will post a better performance in the peak third-quarter thanks to the recovering travel demand."
Following the outbreak of Middle East Respiratory Syndrome (MERS) in early June, the number of Chinese and foreign visitors plummeted, wreaking havoc on airlines and other hospitality-related companies. Koreans also refrained from heading abroad.
But with no additional cases of MERS infection over the past month, foreign travelers are beginning to return to Korea. During the summer holiday season in July and August, more Koreans are flying abroad, providing a much-needed boost to carriers.
"Airlines performed poorly in the first half of the year, but they will fare much better in the second half as long as things remain stable," the analyst said. "It is not a bad idea to put money into airline shares at this time."
Shares of Korean Air, Asiana Airlines and budget carriers are soaring on plunging oil prices, which make it cheaper for airlines to operate their planes.
Airline stocks will likely continue to head upward in the coming months on continued weak crude prices and rebounding travel demand, analysts said Tuesday.
Following the overnight plunge of West Texas Intermediate (WTI), Korean Air shares surged 11.42 percent to close at 38,050 won a share, Tuesday.
WTI fell 4.1 percent to $45.17 per barrel for September delivery in New York, Monday, as weak global demand and the strengthening dollar weighed down on the value of black gold.
Shares of Asiana Airlines jumped 9.21 percent to 6,520 won a share, while T'way Holdings, which owns low-cost carrier T'way Air, soared 11.5 percent to 11,150 won per share.
"Given the fact that jet fuel accounts for the bulk of carriers' operating expenses, the overnight plunge in oil prices lifted airline shares," said an analyst at Hana Daetoo Investment & Securities.
"I think carriers will likely outperform the market on weak crude prices caused by declining global demand," he said. "In addition, airlines will post a better performance in the peak third-quarter thanks to the recovering travel demand."
Following the outbreak of Middle East Respiratory Syndrome (MERS) in early June, the number of Chinese and foreign visitors plummeted, wreaking havoc on airlines and other hospitality-related companies. Koreans also refrained from heading abroad.
But with no additional cases of MERS infection over the past month, foreign travelers are beginning to return to Korea. During the summer holiday season in July and August, more Koreans are flying abroad, providing a much-needed boost to carriers.
"Airlines performed poorly in the first half of the year, but they will fare much better in the second half as long as things remain stable," the analyst said. "It is not a bad idea to put money into airline shares at this time."
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