Korea Investment & Securities noted on the 26th that while the airline industry is shaken by political instability and exchange rate burdens, the fact that Korean Air is the main player in the restructuring of the airline market following the merger with Asiana Airlines remains unchanged.
Choi Woo-hyun, a Research Institute analyst at Korea Investment & Securities, said, “Although the exchange rate has risen due to the 12·3 martial law and there are short-term variables affecting long-distance inbound demand, the possibility of fare fluctuations is limited since Korean Air is essentially in a position to control supply.”
Choi noted, “It is true that the U.S. was startled by the martial law, but that does not mean they will choose a Chinese major airline instead of Korean Air,” adding that “the merger of the two national carriers can be a factor for a re-rating as it strengthens supplier dominance.”
Choi stated that Korean Air's profitability has also improved. Korean Air's annual operating profit forecast for this year has increased from 1.7 trillion won at the beginning of the year to 2.2 trillion won currently. The stock price has not changed significantly, keeping the price-to-earnings ratio (PER - market capitalization ÷ net income) at around 6 times.
Choi predicted that this profit structure could also be maintained through the merger. He said, “The decisive reason for the improvement in Korean Air's profitability is thanks to long-haul North America routes, business seats, and the cargo business,” and added, “All of these are unique business areas of the major airlines, and since Korean Air has secured an oligopolistic position through the acquisition of Asiana Airlines, the current profitability will be structurally maintained.”
Choi also positively assessed that Korean Air has consistently reduced the size of its net foreign currency liabilities. This is because it has relatively less burden in a situation where the won has surged against the U.S. dollar. Choi said, “Korean Air's net foreign currency liabilities have remained at around $3 billion since 2022, and now it is at a scale that can fend off foreign exchange-related profit and loss fluctuations through currency hedging.” He also mentioned that Korean Air's non-operating losses were 849 billion won in 2018 and 990.9 billion won in 2019, but have improved to around 200 billion won since 2022.