Yuanta Securities Korea noted on the 12th that JIN AIR's annual operating profit is expected to decrease by 70% compared to the previous year. The investment opinion of 'buy' was maintained, but the target price was lowered from the previous 12,000 won to 11,000 won. JIN AIR's closing price the previous day was 8,840 won.
JIN AIR recorded revenue of 306.1 billion won and an operating loss of 42.3 billion won in the second quarter. Revenue decreased by 0.7% compared to the same period last year, and operating profit turned to a loss. The results significantly fell short of the consensus for operating profit.
International passenger revenue was healthy at 220.4 billion won, up 3.1% compared to the same period last year, while domestic passenger revenue recorded 62.5 billion won, down 14.9% compared to the same period last year.
Choi Ji-woon, a researcher at Yuanta Securities Korea, said, "As domestic travel demand has slowed, both passenger revenue per kilometer (RPK) and yield have decreased compared to the previous year."
Operating expenses increased by 13% compared to the same period last year. Researcher Choi analyzed that "as the number of aircraft increased, depreciation costs rose, and maintenance costs increased as aircraft maintenance expanded, while airport-related expenses grew due to increased passenger business volume."
He further explained, "Although the aviation fuel price dropped by more than 10% in the second quarter, the reduction in fuel costs was insufficient to offset the increase in non-fuel expenses."
He projected that it would be inevitable for profitability to decline in the second half of the year as well. Researcher Choi noted, "Since February this year, the number of passengers on LCC's key Southeast Asian routes has continued to decline compared to the same period last year," and added, "The number of passengers on the Japan route, which had been expected to have solid demand, also decreased by 1% compared to the same period last year due to the heat wave and concerns about major earthquakes in July."
He added, "The possibility of profitability declining due to intensified competition in short-haul routes for LCCs in the second half of this year cannot be ruled out," and said, "This year, annual operating profit is projected to record 48.6 billion won, a 70% decrease compared to the previous year."