Travel-related stocks threatened by 4th wave of COVID-19 infections

The departures terminal of Gimpo International Airport is seen almost empty, Friday, with the tightened social distancing rules set to take effect on Monday, July 12. Yonhap

By Yi Whan-woo

Shares of travel agencies, airlines and cosmetics companies face risk of a sharp fall, as the fourth wave of COVID-19 infections wreaks havoc again on travel.

The business performance of industries related to travel relies on loosened social distancing measures.

Accordingly, prospects of normalized sales were growing until the coronavirus' Delta variant hit the greater Seoul area in late June and the number of infection cases soared to record-high levels.

The fourth wave of the pandemic, following the previous three last year, prompted the government to drop its plans to ease social distancing measures and instead, tighten them in Seoul, Incheon and Gyeonggi Province.

With the enhanced measures set to begin for two weeks starting Monday July 12, the prices of major travel agency stocks dropped on Friday.

Hana Tour, the country's largest tour operator, lost 1.69 percent to 75,700 won ($65.85) on the benchmark KOSPI. Other listed companies retreated as well: Mode Tour fell 0.81 percent to 24,500 won, Lotte Tour dropped 2.3 percent to 19,100 won and Very Good Tour fell 1.43 percent to 13,800 won.

Thus far, the range of the decline is “is not too serious at the moment” but may pose another challenge for travel agencies if infection cases do not improve as fast as possible, according to an analyst.

“It is important to note that July and August are the peak of the summer holiday season, so tightened distancing rules are a risk factor for travel companies,” a Daeshin Securities analyst said.

Flag carrier Korean Air lost 2.26 percent to end at 30,300 won. Among low-cost carriers (LCCs), Jeju Air retreated 1.08 percent to finish at 22,900 won, Jin Air dropped 2.54 percent to 19,150 won and T'Way Air lost 3.77 percent to finish at 3,825 won.

LCCs have been hit hard by the pandemic, due difficulties traveling overseas and a steep drop in the number of international visitors.

Domestic travel had been picking up in pace and raising prospects for budget carriers to bounce back in terms of their sales.

Korean Air managed to make a profit by successfully adapting to handle a surge in international cargo volume.

“But it does not mean that its profits will remain in the black, considering the fact that the passenger flight business is its major source of income,” an NH Investment and Securities analyst said.

Brokerage houses are lowering their expectations for the share values of cosmetics companies, notably Amorepacific, whose stock closed at 239,500 won, Friday, down 3.23 percent from a day earlier.