![[강세 토픽] Airline theme, Jeju Air +4.64%, Jin Air +3.36%](https://image.chosun.com/sitedata/image/202102/24/2021022401066_0.png "[강세 토픽] Airline theme, Jeju Air +4.64%, Jin Air +3.36%")
Input 2021.02.24 10:47
Theme description
Airline is an aircraft transport business operator that carries passengers and cargo.
In the aviation industry, demand increases and decreases repeatedly according to the peak season (1st and 3rd quarter) and off-season (2nd and 4th quarter) due to seasonal factors. It is also sensitive to oil prices and exchange rates because the aircraft’s fuel is purchased in dollars. If oil prices fall and the dollar weakens, profitability improves.
Airlines are divided into large airlines (FSC: Full Service Carrier) and low cost carriers (LCC: Low Cost Carrier) airlines. Large airlines require a large amount of capital to purchase and operate aircraft, but low-cost airlines have relatively low entry barriers for renting aircraft from lessees.
As of May 2020, the Korean aviation market consists of 2 FSC and 12 LCC, totaling 11 passenger airlines. From 2012 to 2018, as the outbound demand continued to grow at an annual average of 13.1%, LCCs continued to supply and enter new markets (Korea Tourism Organization).
From the second half of 2018, the overall outbound demand began to slow down due to a decline in demand for Japan, the largest travel destination for Koreans. In fact, the outbound demand in the first half of 2018 grew 13.4% year-on-year, but only 3.6% in the second half of the same year. Among them, demand, which had been slowing due to the corona 19 effect, has also evaporated. According to the Ministry of Land, Infrastructure and Transport, the number of air passengers decreased by 66% from 92.7 million in January to September in 2019 to 3138 million in the same period in 2020, and as of October 2020, 187 out of 363 domestic airliners were suspended.
Nevertheless, in the second quarter of 2020, when the aftermath of Corona 19 was severe, two domestic FSC companies recorded operating profit in the black. As the number of international flights plunged due to Corona 19, the demand for personal protective equipment (PPE) such as masks and sanitary products surged, resulting in a shortage of air cargo supply and an increase in air freight rates. In particular, FSC 2, which has quickly shifted its center of gravity toward the cargo business by predicting a long-term recession in international travel from the beginning of the Corona 19 crisis and remodeling passenger aircraft into freighters, is more positive about this environment.
The Ministry of Land, Infrastructure and Transport issued flight approval after safety review for three low-cost airlines (LCC), including T’way Air, Jeju Air, and Jin Air, which submitted cargo transport plans using passenger aircraft (2020.06.20). Accordingly, when loading cargo in the cabin, it is possible to increase the cargo loading capacity from 4 tons (B737 model) to up to 10 tons (B777 model) compared to using only the existing lower cargo compartment. It is known that the government is also considering introducing a travel bubble. The Travel Bubble is a system in which mutual travelers are exempted from self-quarantine for two weeks through a safety barrier (bubble) between countries with excellent quarantine, allowing free travel. This is expected to help boost air passenger demand as the inbound passengers are exempted from self-isolation if they board the plane after receiving a negative Corona 19 test in advance.
According to IATA, global airline sales in 2020 due to Corona 19 are expected to record $419 billion (about 500 trillion won), down 50.4% from the previous year. As movement between countries is restricted due to the Corona 19 pendemic, sales in the passenger segment are expected to decline by 62.5% compared to the previous year to record $241 billion. The cargo division is expected to record USD 110.8 billion (8.2% YoY) in 2020 on rising freight rates amid continued increase in cargo demand.
Meanwhile, the Korean industry is expected to change its perception due to the sale of Asiana Airlines. Kumho Asiana Group, which is in financial difficulty, submits a self-reliance plan to the Korea Development Bank for normalization (2019.04.09), and HDC Hyundai Development Company and Mirae Asset Daewoo Consortium selected as the preferred negotiator for the acquisition of Asiana Airlines (2019.11.12). Kumho Industrial notified HDC Hyundai Development Company to terminate the contract (2020.09.11). Korea Development Bank announced that it plans to integrate Korean Air and Asiana Airlines by signing an investment contract worth KRW 800 billion with Hanjin Kal (November 16, 2020). As for the acquisition method, Hanjin Kal will participate in Korean Air’s paid-in capital increase (2.5 trillion won), and Korean Air will invest a total of 1.8 trillion won in Asiana Airlines’ new shares (1.5 trillion won) and permanent bonds (0.3 trillion won).
According to related media reports and securities company reports, as of 2019, the total number of Korean international passengers accounted for 48.9% of both companies and their respective subsidiaries. We believe that the city will be able to fully enjoy the benefits. In addition, it is expected to improve profitability by rationalizing route operations, reducing operating costs, and reducing interest expenses. However, some pointed out that Korean Air’s stock value dilution, controversy over management rights, delays in restructuring, and low-cost airlines still need attention as no clear plans have been made.
(Last update Nov 17, 2020)
※ The topics are for informational purposes, not for item recommendation. Investors are responsible for investing in the above items.
Related Events
| event | Fluctuation rate | Item description |
|---|---|---|
| Jeju Air (089590) | +4.64% | Aekyung Group’s low-cost airline. The largest shareholder of AK Holdings with a 53.5% stake (as of September 30, 2020). |
| Jin Air (272450) | +3.36% | As an affiliate of Korean Air, it is the second largest low-cost airline in Korea. Hanjin Kal’s largest shareholder with a 60% stake (as of September 30, 2020). |
| Asiana Airlines (020560) | +2.38% | The second largest domestic airline affiliated with Kumho Asiana Group. The largest shareholder of Kumho Industrial with a 30.77% stake (as of September 30, 2020). |
| Korean Air (003490) | +2.10% | Korea’s No. 1 large airline affiliated with Hanjin Group. The largest shareholder with 29.27% of Han Ji-Kal (as of September 30, 2020). |
| T’way Air (091810) | +1.96% | Ranked 3rd in domestic low-cost airlines. The largest shareholder of T-Way Holdings with a 58.32% stake (as of September 30, 2020). |
| Air Busan (298690) | +0.38% | Kumho Asiana Group’s low-cost airline. The largest shareholder of Asiana Airlines with a 44.1% stake (as of September 30, 2020). |
| Yerimdang (036000) | -0.79% | Children’s book publishing company. As a subsidiary, 50.55% of T-Way Holdings is held (as of September 30, 2020). |
Airline themed chart
[이 기사는 증권플러스(두나무)가 자체 개발한 로봇 기자인 ‘C-Biz봇’이 실시간으로 작성했습니다.]