Hana Securities on the 23rd projected that Korean Air Lines will post an operating profit in the second quarter this year, as higher cargo rates offset the burden of high oil prices. It maintained its "buy (BUY)" rating and raised its target price to 38,000 won from 32,000 won. The previous session's closing price was 27,050 won.
Ahn Do-hyun, an analyst at Hana Securities, said, "Because of the war, jet fuel prices have risen to about double from before, making a deterioration in the passenger institutional sector's profitability inevitable, but higher cargo rates and greater cargo volume will offset a significant portion of that," adding, "We expect a standalone operating profit in the second quarter."
Hana Securities estimated that Korean Air Lines' second-quarter international passenger revenue will total 250.8 billion won, up 10% from a year earlier, with passenger fares rising 7% to 133 won per km. Cargo revenue is expected to reach 151.5 billion won, up 44%, helped by higher rates and increased cargo volume.
However, it projected operating expenses will rise 32% due to a 94% surge in fuel costs from a year earlier. As a result, it estimated second-quarter operating profit at 64.7 billion won, down 84% from a year earlier.
It expected results to improve starting in the third quarter. Ahn said, "As discussions on ending the war proceed, jet fuel prices are set to continue a gradual decline," adding, "Within the third-quarter sales mix, tickets issued after the war will be fully reflected, lifting the sales growth rate by 24% and covering the increase in expenses."
Hana Securities estimated Korean Air Lines' standalone operating profit at 354.5 billion won in the third quarter and 467.4 billion won in the fourth quarter. It projected full-year operating profit at 1.403 trillion won, with the year-over-year decline limited to about 9%.
It also evaluated the Dec. 17 launch of the integrated Korean Air Lines with Asiana Airlines as a mid- to long-term growth driver. At a recent shareholder meeting, Korean Air Lines suggested that synergies of about 300 billion won per year will arise through revenue expansion and expense reductions after the merger.
Ahn said, "The most significant expected benefit of the merger is improved fleet allocation efficiency through schedule optimization and stronger negotiating power with airports and original equipment manufacturers (OEMs)," and saw Asiana Airlines' contribution to operating profit in 2027 reaching 416 billion won. Accordingly, the integrated airline's operating profit in 2027 is projected to reach 2.2 trillion won.