BUSINESS

Airline stocks fall on Boeing 737 Max storm

By Jung Min-kyung
  • Published : Mar 20, 2019 - 15:50
  • Updated : Mar 20, 2019 - 17:08

Hit by waves of concern prompted by last week’s deadly crash of a Boeing 737 Max 8 jet and a possible spike in oil prices, South Korean airline stocks took a dive throughout Wednesday’s trading.

Asiana Airlines, the nation’s second-largest carrier by sales, closed 0.37 percent lower from the previous day, trading at 4,050 won ($3.58) per share.

Budget airlines T’way and Jin Air also slipped 1.35 percent and 0.64 percent to 8,010 won and 23,450 won, respectively. 

Korean Air (Yonhap)

Though it performed poorly throughout the day, South Korea’s No. 1 flagship carrier Korean Air eventually ended flat at 33,450 won per share.

The plunge across the aviation sector came after most carriers saw a brief rise in their share prices earlier this week upon news of a deal between Seoul and Beijing to increase air traffic between them.

The two have agreed to increase the frequency of weekly flights. Frequency of passenger flights will be increased from the previous 548 to 608, while air cargo shipments will rise to 54 from 44, according to a joint announcement Friday.

“The news of air traffic buoyed the stocks at first, but with South Korea’s Ministry of Land, Infrastructure and Transport yet to release any follow-up details, it now depends on how each airline will get the better side of the bargain,” Bang Min-jin, an analyst at Yujin Investment & Securities, said in a Wednesday note.

“Volatility in share prices is expected until announcements on which carriers will get the better deal are made,” she added.

Analysts also noted the latest Boeing 737 Max 8 incident coupled with an expected surge in oil prices will drag stocks further down.

Korean Air and T’way are local airlines that had contracted with Boeing to purchase six and four Boeing 737 Max 8 jets this year, respectively. Following the incident however, they canceled their plans to add the aircrafts to their portfolios to prioritize passenger safety.

South Korea-based carriers were to bring in a total of 114 Boeing 737 Max 8 models by 2027.

“T’way initially planned to add six new jets to its portfolio this year, but now they can only add two. This is likely to negatively affect the market consensus on its sale projection,” said Lee Jong-hyun of Meritz Securities.

Last week’s tragic Ethiopian Airlines crash came merely six months after a similar incident involving an identical Lion Air model in Indonesia.

By Jung Min-kyung (mkjung@heraldcorp.com)



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