Hana Securities announced on July 14 that Korean Air's second-quarter performance significantly exceeded market expectations, prompting the firm to raise its target price to 41,000 won while maintaining a 'buy' rating.
Analyst Ahn Do-hyun stated in a report that the second quarter confirmed the inelastic demand for premium air travel and air cargo. He projected that Korean Air's consolidated operating profit is expected to rise to 2.3 trillion won next year.
Ahn noted that Korean Air's standalone revenue for the second quarter increased by 26% year-on-year to 5.1 trillion won, while operating profit fell by 34% to 261.8 billion won, significantly surpassing both the firm's estimate (operating profit of 65 billion won) and market consensus. He assessed that while air cargo drove the second quarter's performance, the stronger-than-expected results were primarily influenced by the robust international flight demand.
Ahn highlighted that despite rising ticket prices, demand remained strong, which he viewed as the most positive aspect of the results. He pointed out that there was significant revenue growth across all international routes in the second quarter.
Specifically, he reported that revenue from routes to Japan and China increased by 32% and 31%, respectively, while revenue from routes to North America and Europe rose by 22% and 11%. This contrasts with low-cost carriers (LCCs), which have struggled to raise fares on short-haul routes.
Furthermore, Ahn noted that the preference for full-service carriers (FSCs) has increased since the war, and the substantial year-on-year revenue growth on short-haul routes to Japan and China is a positive sign. He anticipates that in the third quarter, the rising prices for North American routes will gradually be reflected, and while fuel surcharges are expected to drop to levels below those in April starting in August, strong demand will likely keep passenger and cargo rates elevated for the foreseeable future.
* This article has been translated by AI.
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