Korea Investment & Securities Co. on the 23rd said that as the low-cost carrier (LCC) industry faces a test, Jeju Air is expected to clear the hump unlike rivals if it completes the ongoing sale of three aircraft. It maintained a "neutral (Hold)" rating. Jeju Air's previous closing price was 5,290 won.
Although Jeju Air introduced six new aircraft this year, it focused more on maintenance in the wake of the Muan Air accident, and available seat kilometers (ASK) are expected to fall 8% from a year earlier. On top of this, with sluggish domestic consumption and rumors of a major earthquake in Japan, fares are expected to drop 10%. Korea Investment & Securities Co. projected Jeju Air would post an operating loss approaching 160 billion won.
However, it said this slump is not unique to Jeju Air. Choi Go-un, an analyst at Korea Investment & Securities Co., said, "The more aggressively an LCC increased capacity, the more sharply its profit and loss deteriorated," adding, "This year is an environment in which LCCs' strategies of outward expansion are hard to pull off. Thanks to that, Jeju Air is maintaining the No. 1 spot by international passenger count."
In Jeju Air's case, the decline ended in August and returned to last year's level. Choi said, "Of course, it also expanded marketing by that much, but the fact that the price merit still resonates with consumers is indirect evidence that trust in safety and the brand is being maintained," adding, "In fact, the on-time performance rate this year is 77%, a marked improvement from 71% last year, showing results from focusing on strengthening fundamentals instead of outward expansion."
It also analyzed that with demand for travel to Japan recovering, the likelihood of turning a profit next year has increased. Demand for short-haul overseas travel is rebounding after bottoming in the third quarter.
Choi said, "Travel sentiment toward Japan rebounded quickly starting with the Chuseok holiday," adding, "Of course, Southeast Asia routes remain sluggish, so it will take more time to normalize earnings, but in the first quarter of next year, it is expected to swing to profit for the first time in six quarters."
However, it said it maintained a neutral view because a rapid turnaround in the LCC market is unlikely.
Choi said, "In the current downturn, the gap among LCCs will widen," adding, "For Jeju Air, if only the sale of three aircraft now underway is completed, it is judged to have effectively cleared the hump unlike competitors."
Choi added, "Industry restructuring is expected to pick up speed starting in 2026, and in this process, Jeju Air's role in keeping Hanjin Group's monopoly risk in check will be reassessed."