Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Travel-related stocks yet to recover despite 'Living with COVID-19' scheme
The reception desk of a travel agency remains empty at Incheon International Airport in this photo taken in August. Korea Times file
By Yi Whan-woo
By Yi Whan-woo
The stock prices of travel agencies, airlines and duty free stores have yet to recover, although more than two weeks have passed since the beginning of the “Living with COVID-19” strategy, under which tourism and related sectors were anticipated to benefit promptly.
The current scene is different from the eve of the fourth wave of the COVID-19 pandemic back in the early summer, when the accelerated vaccination rate raised hopes for eased travel restrictions and positively influenced investor sentiment.
Analysts said Wednesday that, instead of “vague hope,” “tangible and practical” reasons are needed to draw investors to travel-related stocks, especially considering how some other industries are on the road to recovery under the “Living with COVID-19” strategy.
Under the current circumstances, the special advisory against non-essential overseas travel remains effective, and that is making it uncertain whether travel agencies can operate normally in terms of overseas tourism.
On Wednesday, Hana Tour, the country's largest tour operator, lost 2.94 percent to 75,900 won ($64.19) on the benchmark KOSPI. Other listed companies retreated as well: Mode Tour fell 3.43 percent to 22,500 won; Lotte Tour dropped 2.97 percent to 17,950 won; and Yellow Balloon Tour fell 3.38 percent to 15,700 won.
The gloomy outlook for group tour packages in the post-pandemic era adds to the sluggish performances of the travel agencies, said Lee Hyo-jin, an analyst at Meritz Securities. “Group tour packages have been losing market share even before the pandemic, and there is no sign of improvement after the end of the COVID-19 crisis,” Lee said, noting that young people prefer travelling individually or in smaller groups.
“It can be said that the companies specialized in package travel are not likely to benefit from the recovery of tourism,” the analyst said.
The travel advisory is a risk factor for The Shilla Duty Free and other duty free stores, according to analysts. For instance, Hotel Shilla, the parent company of The Shilla Duty Free, retreated 0.99 percent to 80,400 won.
Regarding airlines, the soaring oil prices and weakened won against dollar have caused the price of aircraft fuel to almost double from a year ago, and therefore, put burdens on Korean Air, Asiana Airlines and smaller companies.
Low-cost carriers (LCCs) have the extra risk of being cash-strapped, as unlike Korean Air and Asiana Airlines, they have failed to find a breakthrough during the pandemic and have continued to suffer from a sharp decline in the number of passengers.
Korean Air lost 1.97 percent to end at 29,850 won and Asiana Airlines fell 4.21 percent to 20,500 won.
Among the LCCs, Jeju Air retreated 3.26 percent to finish at 19,300 won, Jin Air dropped 4.51 percent to 19,000 won and T'Way Air lost 4 percent to finish at 3,600 won.
Ryu Jae-hyun, an analyst at Mirae Asset, said that the lucrative air cargo business may prompt the shares of Korean Air and Asiana Lines to rebound. Regarding the LCCs however, Ryu said, “It is too early for them to benefit from the 'Living with COVID-19' scheme.”