Founder & Managing Director, AIR Control Tower, AIR Control Tower

Neil Glynn

Founder & Managing Director, AIR Control Tower

AIR Control Tower

AIR Control Tower is an independent research and analysis platform. Its mission is to provide impactful insight and analysis across the global airline industry at a company and market level via detailed financial models to aid decision making for key stake holders at a time when risks have seldom, if ever, been higher and the global sector grapples with the imperative of funding de-carbonisation. Unique analysis forecasting global carrier-level earnings/cash flows, and restructuring/de-leveraging prospects, is designed to dynamically assess the health of the industry, predict surprises and identify potential requirements for third party support.

Insights on the global airline industry

Equity Bottom-Up

<ul>
<li>Reuters reported on the Friday that the European Commission is to accept concessions of four European route divestitures and the sale of Asiana's cargo business.</li>
<li>The EC had set a preliminary decision deadline of 14 February.</li>
<li>US and Japanese approvals are still required, while it remains to be seen who might acquire Asiana Cargo.</li>
</ul>


Reuters reported on the Friday that the European Commission is to accept concessions of four European route divestitures and the sale of Asiana's cargo business.
The EC had set a preliminary decision deadline of 14 February.
US and Japanese approvals are still required, while it remains to be seen who might acquire Asiana Cargo.


Korean Air: European Approval for Asiana Merger Reportedly Imminent

<ul>
<li>We forecast EBITDAR of KRW3.35trn for Korean Air in 2023 (KRW3.8trn previously) with EBITDAR/ATK up 50% on 2019/32% on 2018. We remain at KRW2.9trn in 2024 (EBITDAR/ATK +28% vs 2019).</li>
<li>Unwinding cargo yields may fully eliminate earnings gains but cost management safeguards future prospects despite Asiana merger uncertainty.</li>
<li>Cost inflation management inflected negatively in 3Q as labour costs rose – control crucial as market conditions normalize and low cost competitors expand.</li>
</ul>


We forecast EBITDAR of KRW3.35trn for Korean Air in 2023 (KRW3.8trn previously) with EBITDAR/ATK up 50% on 2019/32% on 2018. We remain at KRW2.9trn in 2024 (EBITDAR/ATK +28% vs 2019).
Unwinding cargo yields may fully eliminate earnings gains but cost management safeguards future prospects despite Asiana merger uncertainty.
Cost inflation management inflected negatively in 3Q as labour costs rose – control crucial as market conditions normalize and low cost competitors expand.


Korean Air: Earnings Remain Elevated but Premium May Continue to Unwind as Cargo Yields Re-Set

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Amorepacific Corporation / Equity Bottom-Up

<ul>
<li>In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 1Q 2024. </li>
<li>We highlight 38 pair trades that involve Korean holdcos and opcos.</li>
<li>Of the 38 pair trades, 26 of them involved holdcos outperforming opcos in the past six months and 12 of them involved opcos outperforming holdcos in the same period.</li>
</ul>


In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 1Q 2024. 
We highlight 38 pair trades that involve Korean holdcos and opcos.
Of the 38 pair trades, 26 of them involved holdcos outperforming opcos in the past six months and 12 of them involved opcos outperforming holdcos in the same period.


Korean Holdcos Vs Opcos Gap Trading Opportunities in 1Q 2024

Global Mobility/Transport, Equity Long-Short

Mohshin Aziz

Thematic (Sector/Industry)

<ul>
<li>FT article uncovers other contributors to surging air freight rates—Chinese online brands Temu and Shein are flooding Western nations with fast fashion and inexpensive e-commerce goods  </li>
<li>The biggest beneficiaries are Chinese carriers with significant air cargo exposure, and Cathay Pacific. This presents a potential catalyst for an earnings beat and a boost to the share price.</li>
<li>Carriers from Taiwan and South Korea will benefit from supply tightness to the U.S.. Logistics providers are unlikely to benefit much due to tight margins and volatile high freight rates </li>
</ul>


FT article uncovers other contributors to surging air freight rates—Chinese online brands Temu and Shein are flooding Western nations with fast fashion and inexpensive e-commerce goods  
The biggest beneficiaries are Chinese carriers with significant air cargo exposure, and Cathay Pacific. This presents a potential catalyst for an earnings beat and a boost to the share price.
Carriers from Taiwan and South Korea will benefit from supply tightness to the U.S.. Logistics providers are unlikely to benefit much due to tight margins and volatile high freight rates 


<ul>
<li>
<a href="https://www.smartkarma.com/entities/fedex-corp" target="_blank" data-smartkarma-citation="entities:14577:1" rel="noopener">FedEx Corp (FDX US)</a> (FedEx) will release its 2QFY24 results on 19 Dec after market close. Closely watched as it is the bellwether for global trade and commerce  </li>
<li>Cost reduction initiatives has delivered, and resurgence in e-commerce activities across Asia Pacific could potentially provide positive earnings surprise    </li>
<li>Target price US$299 (7% UPSIDE) based on 15x CY2024 PE (FedEx's historical mean). Our recommendation is to give FedEx a miss, too little upside for the risk </li>
</ul>



FedEx Corp (FDX US) (FedEx) will release its 2QFY24 results on 19 Dec after market close. Closely watched as it is the bellwether for global trade and commerce  
Cost reduction initiatives has delivered, and resurgence in e-commerce activities across Asia Pacific could potentially provide positive earnings surprise    
Target price US$299 (7% UPSIDE) based on 15x CY2024 PE (FedEx's historical mean). Our recommendation is to give FedEx a miss, too little upside for the risk 


FedEx (FDX US, BUY, TP:$299): 2QFY24 Will Shed Light on E-Commerce Resurgence

South Korea

Korean Air Lines Co., Ltd. operates air transportation services.  The Company's services include passenger and cargo transportation, aircraft maintenance, and air catering.  Korean Air Lines provides domestic and international airline services.

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Korean Air Lines (003490 KS)

Korean Air: European Approval for Asiana Merger Reportedly Imminent

The Korean Air-Asiana merger saga continues but Europe is reportedly set to provide its approval. The US and Japan also need to approve the deal,...

Neil Glynn

Korean Air: Earnings Remain Elevated but Premium May Continue to Unwind as Cargo Yields Re-Set

Detailed earnings recovery and cost inflation management analysis which inform future earnings and cash flow prospects as Korean Air awaits a...

Neil Glynn

Korean Holdcos Vs Opcos Gap Trading Opportunities in 1Q 2024

In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in...

Douglas Kim

There's Something About Air Cargo

Chinese e-commerce platforms are driving up air freight rates, benefiting Chinese carriers and other North Asian carriers. This can be a catalyst...

Mohshin Aziz

FedEx (FDX US, BUY, TP:$299): 2QFY24 Will Shed Light on E-Commerce Resurgence

FedEx's 2QFY24 results will be released on Dec 19. The company's cost reduction efforts have been successful, and a boost in e-commerce in Asia...

Mohshin Aziz

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Korean Air: European Approval for Asiana Merger Reportedly Imminent

The Korean Air-Asiana merger saga continues but Europe is reportedly set to provide its approval. The US and Japan also need to approve the deal,...

Neil Glynn

Korean Air: Earnings Remain Elevated but Premium May Continue to Unwind as Cargo Yields Re-Set

Detailed earnings recovery and cost inflation management analysis which inform future earnings and cash flow prospects as Korean Air awaits a...

Neil Glynn

Korean Holdcos Vs Opcos Gap Trading Opportunities in 1Q 2024

In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in...

Douglas Kim

There's Something About Air Cargo

​Chinese e-commerce platforms are driving up air freight rates, benefiting Chinese carriers and other North Asian carriers. This can be a catalyst...

Mohshin Aziz

FedEx (FDX US, BUY, TP:$299): 2QFY24 Will Shed Light on E-Commerce Resurgence

​FedEx's 2QFY24 results will be released on Dec 19. The company's cost reduction efforts have been successful, and a boost in e-commerce in Asia...

Mohshin Aziz

Chinese e-commerce platforms are driving up air freight rates, benefiting Chinese carriers and other North Asian carriers. This can be a catalyst...

FedEx's 2QFY24 results will be released on Dec 19. The company's cost reduction efforts have been successful, and a boost in e-commerce in Asia...