By Lee Hyo-sik
Korean Air shares will likely fly higher in the second quarter on stronger earnings prospects bolstered by growing outbound travelers, analysts said Thursday.
The won’s strength against the yen, the euro and other currencies has made it cheaper for Koreans to travel abroad, while lower oil prices have cut airfares.
In addition to its passenger business, the carrier’s cargo operations will likely improve in coming months as it transports more goods to and from the United States, Japan and Oceania.
“Shares of Korean Air have dropped nearly 18 percent from its year-high, due to concerns that the carrier would have underperformed in the first quarter of 2015,” Korea Investment & Securities analyst Yoon Hee-do said. “The steadily rising oil prices also weighed on the stock. However, it turns out that the company performed well in the first three months of the year.”
Korean Air posted a 189.9 billion won operating profit from January through March, up 787 percent from 21.4 billion won in the first quarter of 2014.
Yoon said the company’s shares will resume an ascent in coming months as its profitability continues to improve, at least through September.
“Korea’s outbound travel demand will likely increase 14 percent in the second quarter from a year earlier, following a 5.2 percent jump in the first quarter,” the analyst said. “The number of travelers going to Japan has increased due to the yen's weakness against the won. Those going to China are also expected to grow at a rapid pace this year.”
Korean Air also has seen its cargo transport business post better-than-expected results. The carrier is projected to carry 4.5 percent more cargo in the second quarter from a year earlier, following a 9.9 percent jump in the first quarter.
“The April to June period is normally low season for air carriers because fewer people travel,” Yoon said. “But it will be different in the current quarter. Korean Air is expected to post a 181 billion won operating profit in the second quarter, providing a boost to its stock.”
A Korean Air spokesman echoed Yoon’s views, saying the company will see its bottom line improve in the second quarter and beyond.
“We posted an operating loss in the second quarter of 2014 because people were reluctant to head overseas following the sinking of the ferry Sewol in April,” the spokesman said. “But it will be a different story this time. Both passenger and cargo transport businesses have rebounded in April and May from the previous year. Things will continue to improve well into the third quarter, a peak summer holiday season.”
On Thursday, Korean Air shares inched down 0.34 percent to 43,600 won. The benchmark KOSPI fell 0.78 percent, or 16.73 points, to 2,122.81.