Outlook for Korean air and sea transport stocks foggy for this year

Kim Je-gwan, Kang Min-woo and Lee Ha-yeon 2022. 1. 10. 14:09
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[Photo by Han Joo-hyung]
South Korean airliners and shippers this year cannot expect the shipping boon of last year amid easing in supply bottleneck and weakening in the Korean won that would translate into higher fuel import cost.

Business outlook for airliners will be dependent on the recovery pace of passenger flight business, while shippers would see softening in shipping rates.

Korean full-service carriers’ income last year entirely hinged on freight business amid ongoing standstill in international travel. The factors will remain unchanged in the first half as air freight delivery remains 15 percent below pre-pandemic levels, according to Daishin Securities.

Income of full-service carriers could fall during the transitional period before passenger business overtakes cargo demand.

This year’s outlook for sea carriers is not as bright as last year.

Most industry observers expect freight rates to peak out. “There is more downside than upside pressure in shipping rates,” said Jung Yeon-seung, an analyst at NH Investment & Securities.

[Photo by Hyundai Glovis Co.]
Container freight rates are projected to soften amid an easing in the bottleneck in the marine shipping. Dry bulk shipping rates also are undergoing correction. The Baltic Dry Index (BDI), which tracks rates for capsize, panama and supramax vessels ferrying dry bulk commodities, crashed to 2,289 on Jan. 5 after the peak at 5,650 in October last year.

Amidst foggy outlook, analysts nevertheless stayed positive about earnings outlook for Korean Air Lines Co. and Hyundai Glovis Co.

Flag carrier Korean Air Lines will be able to defend bottom line with increased transport of passenger in place of reduced cargo demand. Daishin Securities expected Korean Air Lines’ quarterly revenue from passenger flight business to gain five-fold on year throughout this year. The full-service carrier is forecast to earn an operating profit of 1.08 trillion won ($898.9 million) on sales of 10.47 trillion won this year, according to local financial data tracker FnGuide.

Hyundai Glovis will inevitably face a loss from falling shipping rates but will be able to maintain its profitability with expanded automobile transportation amid a recovery in finished vehicle production. Its operating profit this year is estimated to gain 3.5 percent on year to 1.14 trillion won with sales up 4 percent to 22.27 trillion won, said FnGuide.

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