Korean Air Forecast to Post Improved Third-Quarter Results as Passenger and Cargo Rates Rise

[Financial News] Hana Securities said on the 23rd that it maintained its 'Buy' rating and target price of KRW 41,000 for Korean Air, citing higher passenger and cargo rates that would ease the burden of fuel costs and expectations for increased profits at the integrated airline next year.
Ahn Do-hyun, a researcher at Hana Securities, forecast Korean Air's standalone revenue at KRW 5.152 trillion and operating profit at KRW 497.6 billion for the third quarter of this year. Those figures represent increases of 29% and 32%, respectively, from the same period a year earlier. The operating margin was expected to rise 0.3 percentage points to 9.7%.
Higher rates were the main factor behind the improved results. Hana Securities estimated that international passenger fares would rise 18% year on year in the third quarter. It said higher costs would be reflected in fares as the proportion of tickets issued before the increase in fuel costs declines. Cargo rates were also expected to rise 39% from a year earlier.
Fuel cost pressure is expected to continue. Fuel costs in the third quarter are estimated at approximately KRW 1.7 trillion, up 71% from the same period a year earlier. However, that would be lower than the KRW 2 trillion estimated for the second quarter. Ahn said, "Air cargo is passing on the increase in oil prices to fares more quickly than passenger traffic," adding, "With the peak season for cargo also approaching in the fourth quarter, it will support profitability."
Foreign-currency translation gains resulting from the weaker exchange rate were also cited as a factor in improved net income. Assuming the exchange rate at the end of the third quarter will be lower than at the end of the second quarter, standalone net income is expected to reach KRW 764 billion.
Ahn said, "We forecast the integrated airline's operating profit in 2027 at a minimum of KRW 2 trillion," adding, "From the perspective that air cargo will support profitability and growth is expected through premiumization of the passenger business, MRO, and aerospace, the company remains undervalued."

[email protected] Choi Doo-sun Reporter