The author is an analyst for NH Investment & Securities. He can be reached at ys.jung@nhqv.com -- Ed.
International passenger traffic climbed 11% m-m in October on the back of holiday season effects, with demand arriving strong for all routes except China. Air cargo volume also strengthened. However, the introduction of aircraft for short-haul flights has been faster than expected, raising concerns toward oversupply in the mid/long term.
Aircraft introduction concerningly brisk for short-haul routes
As of Nov 2023, the number of passenger aircraft registered at domestic airlines has recovered to 353, the level of 2018. For LCCs, the number of aircraft in operation has increased to 142 (+12 vs end-2022). The pace of aircraft introduction for short-haul routes is proving faster than expected, and at the current pace (146 total by end-2023, 162 within 2024), there is the risk of oversupply. In our view, it is time to reconsider this aggressive rollout strategy.
October international passenger traffic +161% y-y, +11% m-m; cargo +0.7% y-y
In October, international traffic at national airports jumped 161% y-y and 11% m-m to 6.62mn passengers on the back of peak seasonality at the start of the month. Driven by holiday effects, demand reached 87% of the 2019 level. By airline, October’s international passenger traffic growth (y-y) came to +109% for KAL, +123% for Asiana Airlines, +232% for Jeju Air, +238% for Jin Air, and +337% for T-way. On a route-by-route basis, demand proved robust across the board, if excluding China. For long-haul routes (Americas, Europe) and Japan, demand remained strong in October, with Southeast Asia routes also enjoying a demand rebound thanks to holiday effects. Meanwhile, for China routes, demand growth remained comparatively tepid, recovering to only 57% of the 2019 average.
Cargo volume in October increased 0.7% y-y to 0.23mn tons (KAL +0.8% y-y, Asiana Airlines -2.2% y-y). When excluding base effect, absolute volumes strengthened slightly.