NH Investment & Securities noted on the 27th that Jeju Air's supply is shrinking following the aircraft accident and that the boarding rate fell last month, making this year’s poor performance inevitable. It maintained a 'neutral (Hold)' investment opinion and lowered the target stock price by 13% to 8,000 won. Jeju Air's closing price the previous day was 7,320 won.
Jeju Air's revenue for the fourth quarter of last year recorded a 6.5% decrease compared to the same period last year, amounting to 450.4 billion won, and it turned to an operating loss of 40.3 billion won. It also fell short of market expectations. Jeong Yeon-seung from NH Investment & Securities said, 'International passenger transportation (RPK) only increased 0.8% compared to last year, and international fares dropped 10.1% from the previous year,' and added, 'While specific operating expenses were not disclosed, expenses were significantly higher than expected.'
NH Investment & Securities expressed concerns that Jeju Air's profitability would worsen, as transportation volume and fares are expected to decrease in the first quarter of this year. Research Institute Jeong said, 'Despite the first quarter being the peak season, it’s expected to be difficult to enjoy peak season effects due to reduced supply and impacts from refunds and price cuts.'
At the same time, the estimated operating profit for Jeju Air this year was revised down by 47% to 48.3 billion won. Research Institute Jeong projected, 'Following the aircraft accident, the reduction in supply and the decline in boarding rates during January, which is the peak season of the year, have been reflected,' and he added, 'Considering the competition, international fares are also expected to decrease by 3%.' He further noted that the decline in fares is expected to diminish in the second half of the year.
He continued, 'This year, the annual growth rate of total international passenger traffic in the country is expected to be 6%, indicating a slowdown in growth, and there are concerns about profit momentum due to falling fares resulting from intensified competition among low-cost carriers on short-distance routes.' Research Institute Jeong also added, 'The reduction of supply for Jeju Air is also a concern.'