Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Korean Air, Asiana, budget airlines suffer from stronger dollar, soaring oil prices
Passenger jets from Korean Air, Asiana Airlines and domestic low-cost carriers are parked on a runway at Incheon International Airport, Oct. 30, 2023. Yonhap
By Lee Min-hyung
Shares of Korean Air, Asiana Airlines and other low-cost carriers (LCCs) have been hit by a strengthening dollar and soaring crude oil prices amid heightened tension in the Middle East, according to data and company officials, Tuesday.
Airline stocks are swayed by the ups and downs of the two key indexes. Airlines incur more operational costs at this period, as they shoulder a heavier financial burden from leasing aircraft and purchasing jet fuel.
According to data from the Korea Exchange, shares of Korean Air, the nation’s flag carrier, extended a losing streak on Tuesday, closing down 1.58 percent at 19,980 won ($14.28) per share.
The airline’s stock price has continued a downward curve from the beginning of April, when the won-dollar exchange rate started soaring at an alarming pace due to such external geopolitical risk factors. The rate surged to a 17-month high of 1,400 won per dollar at one time on the same day.
“We need to pay close attention to the volatility of not just the oil prices, but the won-dollar exchange rate,” a Korean Air spokesperson said. “When the exchange rate goes up or down by 10 won, this causes gains or losses on the appreciation of the foreign exchange for Korean Air.”
The situation is no different to other airlines whose stock prices display a curve similar to Korean Air. Asiana Airlines shares also inched down 0.29 percent and closed at 10,440 won per share.
“We stepped up monitoring of the volatile dollar and oil prices,” a spokesperson for the company said, declining to comment further.
Other LCCs also suffered stock falls for similar reasons. Shares of Jeju Air, the largest LCC here by market capitalization, suffered a bigger fall of 2.31 percent during the same period.
The company said it will focus on offsetting any possible losses from external factors by diversifying its business portfolio.
“No airlines can take any actions to deal directly with external risks,” an official from the LCC said. “Instead, we focus more on generating synergy by reaping revenues from non-aviation businesses.”
For instance, the airline operates Holiday Inn Express Seoul Hongdae and seeks to attract as many inbound tourists as possible to offset its potential losses from external risks, according to the official.
Other major LCCs — such as T’way Air and Jin Air — also saw their share prices fall on the surging value of the dollar and crude oil. T’way Air closed down 2.04 percent at 2,645 won per share, while Jin Air shares extended a bigger losing streak with a fall of 3.08 percent.
NH Investment & Securities analyst Jeong Yeon-seung said the outlook remains murky over whether airlines will be able to continue reporting robust earnings even throughout the second quarter.
“Concerns are rising that most airlines will end up expanding their expenditure stemming from the oil price hike and the surging dollar, which offsets once-prevalent expectations when they clinched solid earnings in the first quarter,” the analyst said.