Hana Securities announced on June 23 that it has raised its target price for Korean Air from 27,000 won to 38,000 won, citing rising cargo rates and anticipated benefits from the merger of Korean Air. The firm maintained its "buy" rating on the airline.
Analyst Ahn Do-hyun stated, "Despite a sharp increase in jet fuel prices due to the war, cargo rates have risen by 40% compared to last year, and cargo volume has increased by 3%. This will offset losses in the passenger segment."
Hana Securities projects that Korean Air's international passenger revenue for the second quarter will increase by 10% year-on-year to 2.508 trillion won, while cargo revenue is expected to rise by 44% to 1.515 trillion won during the same period. However, operating profit is forecasted to decline by 84% to 64.7 billion won.
Ahn noted, "The second quarter typically sees most revenue from tickets booked prior to the war, making losses in the passenger segment unavoidable. However, from the third quarter onward, rising fares on routes to North America and Europe are expected to turn the passenger segment back to profitability."
The outlook for the third quarter suggests that the annual decline in profits will be limited. Ahn added, "As discussions on peace progress, jet fuel prices are expected to gradually decline. The impact of tickets booked after the war will be reflected in the third quarter's revenue, compensating for increased costs."
The merger's effects are also seen positively. The integrated Korean Air is set to launch on December 17. During a recent shareholders' meeting, the airline announced that it expects to achieve annual synergies of approximately 300 billion won through increased revenue and cost reductions post-merger.
Ahn stated, "While the total merger costs for Korean Air are estimated at about 1 trillion won, most of these expenses have already been incurred, limiting additional costs related to the merger. By 2027, the operating profit for the integrated airline is projected to reach around 2.2 trillion won."
* This article has been translated by AI.
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