iM Securities reiterated its "buy" rating on Korean Air (KRX: 003490) on the 19th, raising its target price from 34,000 won to 40,000 won — implying upside of 38.6% from the previous closing price of 28,850 won.
The brokerage cited two drivers behind the upgrade: a sharper-than-expected decline in oil prices, and improved investor sentiment following the confirmation of a merger date with Asiana Airlines. In line with this, iM Securities lifted its target EV/EBITDA multiple from 5.4x to 5.7x, a 10% premium to global full-service carrier peers.
The near-term outlook, however, is clouded by fuel costs. For the second quarter of fiscal 2026, iM Securities forecasts consolidated revenue of 6.873 trillion won, up 10.7% year on year, but an operating loss of 164.8 billion won — a sharp reversal from profit. The culprit is jet fuel: prices more than doubled from $89 per barrel in February after the Middle East conflict erupted in March, sending fuel costs up 87% year on year.
The picture brightens considerably in the third quarter. On a standalone basis, Korean Air's operating profit is projected at 464.9 billion won, up 23.6% year on year. Jet fuel prices in June fell to 310 cents per gallon — 100 cents below the 410-cent threshold used to calculate fuel surcharges — generating an estimated operating profit tailwind of approximately 180 billion won.
The merger with Asiana Airlines has been set for 16th December. Under the agreed ratio of 1 to 0.2736432, Korean Air will issue approximately 20.337 million new shares. iM Securities estimates the deal will add at least 300–400 billion won to annual operating profit on a conservative basis, driven by higher fares (150–200 billion won), increased transit passenger volumes (80–120 billion won), and cost savings (100 billion won).
The scope for fare convergence is significant. As of the first quarter, Asiana's fares were roughly 22% cheaper than Korean Air's on trans-Pacific routes and about 30% cheaper on routes to Europe. iM Securities expects that gap to narrow sharply once the two carriers are unified.
"With the merger date now confirmed, we can expect meaningful synergies to materialise from 2027," said Bae Se-ho, an analyst at iM Securities. "Visibility on value creation is very high."