NH Investment & Securities evaluated on the 1st that Jeju Air faces concerns of oversupply, particularly in short-haul routes, limiting the potential for fare rebounds even during the peak season. Therefore, it maintained an investment opinion of 'neutral (Hold)' and lowered the target stock price to 7,500 won, a 6% decrease. The closing price for Jeju Air on the previous trading day was 6,620 won.
Starting in the second quarter of this year, the domestic airline market's growth rate has slowed, focusing on short-distance routes. For the key Southeast Asian routes, passenger growth rates turned negative compared to the previous year starting in March, while for Japanese routes, this trend began in July.
Jeong Yeon-seung, a researcher at NH Investment & Securities, noted, 'The continuous entry of new aircraft by domestic low-cost airlines and the integration process of Korean Air and Asiana Airlines mean that related airlines must maintain more than 90% of their supply compared to 2019, which restricts supply adjustments even if demand shrinks on short-haul routes.' He analyzed that the excessive expansion of aircraft by unlisted low-cost carriers, although it is the peak season, also complicates fare increases.
However, it was positively assessed that in July of this year, issuing perpetual bonds worth 100 billion won alleviated concerns about capital reduction due to the current net loss.
NH Investment & Securities projected Jeju Air's revenue for the third quarter of this year to be 424.3 billion won, a decrease of 11.7% compared to the same period last year, and the operating profit for the third quarter to fall 73% year-on-year to 12.3 billion won. It also forecasted that international ticket prices would drop by 12.3% compared to the previous year, estimating at 64.6 won per person per km.
Researcher Jeong evaluated, 'This reflects the decrease in demand for Japanese routes beginning in July,' and added, 'It is disappointing that due to strong refining margins for aviation fuel and the strengthened won to dollar exchange rate, the expense reduction effect in operating costs is limited.'