On the 29th, Choi Min-ki, an analyst at Shinhan Investment Securities, stated, “We expect annual synergies of around 3000억 won following the merger with Asiana Airlines,” adding, “Approximately 80% of the 1조 won in merger costs has already been incurred, and we expect cost savings (in financing and maintenance expenses) resulting from economies of scale to be rapidly reflected starting in 2027.”
Shinhan Investment Securities projected that KoreanAirLines’ second-quarter standalone revenue would reach 4.9903 trillion won, a 25% increase year-over-year, while operating profit would decline by 86% to 57.9 billion won but remain in the black.
Analyst Choi noted, “We estimate that operating expenses (+38%) will surge due to the lingering impact of the sharp rise in jet fuel prices since March and the weakening of the Korean won,” adding “International passenger traffic (revenue +19%) showed robust transport volume due to the absorption of transfer demand resulting from reduced capacity by Middle Eastern airlines and the recovery of inbound traffic from the Americas; however, fare revenue was insufficient to offset rising fuel costs, even with increases in fuel surcharges,” he explained.
On the other hand, the cargo segment was expected to help shore up overall performance. He said, “We expect the cargo segment (revenue +42%), where fuel costs can be easily passed on and IT demand driven by AI capital expenditures (CapEx) remained robust, to have offset the passenger segment’s slump thanks to strong freight rates.”
He also predicted that passenger profitability would improve in the second half of the year. Analyst Choi noted, “Since negotiations for an end to the war in the Middle East began, both crude oil and jet fuel prices have been trending downward,” adding, “Passenger profitability is expected to improve in the third quarter as fuel surcharges gradually decline relative to fuel costs.” He continued, “We expect cargo rates to remain at levels higher than pre-war levels, supported by IT cargo demand, despite the stabilization of jet fuel prices and the recovery of supply in the Middle East.”
He cited integration synergies and improved profitability as the reasons for raising the target price. Analyst Choi explained, “We revised the baseline to 2027, when the merger is expected to be completed, and raised our operating profit estimate by 6% to reflect the stabilization of jet fuel prices and the rise in air cargo rates.” He continued, “As the sole domestic full-service carrier (FSC) operating out of Incheon Airport, we applied an EV/EBITDA multiple of 6.4x—a 20% premium over the average for Asian FSCs—to account for the improved business environment on long-haul routes.” He added, “The dilution rate for existing shareholders resulting from the issuance of new shares during the merger process is 5.5%, so the impact is limited.”
