Oil surcharge has airlines flying high
Stocks in local airline companies rose sharply yesterday following the government’s decision to allow them to raise the oil surcharge they charge customers.Korean Air, the country’s flagship carrier, gained 4.4 percent, closing at 52,100 won ($50.1) while No. 2 Asiana Airlines advanced 3.0 percent to 5,780 won. The benchmark Kospi, on which the two companies are listed, rose 0.8 percent in the day.
Last Friday, the Ministry of Land, Transport and Maritime Affairs announced it will expand the surcharge system for international routes from a 16- to a 33-phase system, beginning in July, which allows airlines to add higher surcharges to tickets.
In a report yesterday, Daishin Securities Company forecast the surcharge system will enable airlines to increase annual profits up to 56 percent.
Yang Ji-hwan, a researcher at Daishin, said the systems will significantly relieve the burden of rising oil costs for airlines. He recommended buying in both Korean Air and Asiana Airlines, with a target price of 62,500 won and 10,000 won, respectively.
Yun Hee-do, a researcher at Korea Investment and Securities, said the new surcharge system will raise the airfare by 12.7 percent. But, it won’t do much to reduce demand, he said.
“Demand for flight service, stemming from the five-day work-week system, overseas study and business trips is independent of prices,” Yun said.
By Moon Gwang-lip Staff Reporter [joe@joongang.co.kr]
with the Korea JoongAng Daily
To write comments, please log in to one of the accounts.
Standards Board Policy (0/250자)