NH Investment & Securities has maintained its "buy" rating on Korean Air and raised its target price from 34,000 won to 41,000 won, reflecting a 21% increase. This adjustment is based on expectations that synergies from the merger with Asiana Airlines will begin to materialize.
On November 10, Jeong Yeon-seung, a researcher at NH Investment & Securities, stated, "Given the robust demand for long-haul and premium travel from Korea, along with the expansion of transfer passengers and dominance in the cargo market, we can apply a premium compared to global major airlines."
In the passenger segment, inbound demand and strong performance on routes to North America are expected to support results. As of the third quarter, Korean Air's international fare stood at a high level of 140.8 won per passenger-kilometer. In the cargo sector, demand for high-tech shipments and an increase in long-term contracts are improving pricing power.
NH Investment & Securities anticipates that the effects of the merger with Asiana Airlines will be fully reflected in performance starting next year. Korean Air has already begun adjusting its international routes, focusing on the winter schedule. Key revenue synergy factors include expanding transfer demand through adjustments in overlapping flight times, normalizing Asiana Airlines' international fares due to reduced competition, and increasing cargo capacity through enhanced utilization of Asiana Airlines' belly cargo.
Cost-saving effects are also expected. Analysts suggest that maintenance costs, leasing fees, and insurance expenses could be reduced immediately after the merger. A new engine maintenance facility, scheduled for completion in the fourth quarter of this year, is expected to begin operations in the second half of next year. The types of engines that can be serviced will increase from six to twelve, and the annual number of engines serviced is projected to rise from 130 to a maximum of 500.
Jeong noted, "The combined maintenance costs for Korean Air and Asiana Airlines are approximately 1.2 trillion won, so even a 10% reduction could yield around 120 billion won in savings."
* This article has been translated by AI.
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