Shares of South Korea’s Jeju Air Co Ltd soared 65 percent on debut on Friday, surpassing Asiana Airlines Inc‘s market capitalisation as investors swooped on the bullish outlook for Northeast Asian budget airlines.
Jeju Air opened at 49,500 won compared with its IPO price of 30,000 won, boosting its market capitalisation to about 1.3 trillion won ($1.14 billion) and leapfrogging South Korea’s second-largest full-service carrier Asiana on 970 billion won.
“Unlike previous airlines, for which outside variables like oil price and exchange rates were the only investment points, Jeju Air is a growing business with improving return on equity,” Meritz Securities analyst Kim Seung-churl said.
Another northeast Asian low-cost carrier has had a stellar debut already this year. China’s Spring Airlines Co Ltd has seen its stock price leap nearly fivefold since its January debut to Thursday’s close, despite the Chinese stock market’s volatility earlier this year.
Indian budget airline IndiGo has also seen its $464 million initial public offering six times oversubscribed as investors lift exposure to Asia‘s rapidly growing market for air travel.
Jeju, which has 26 international routes, four domestic routes and operates more than 140 flights a day, reported a first-half operating profit of 30.7 billion won, or 10.7 percent of sales after two straight years of profit growth.
The company, the first South Korean budget airline to list, plans to expand its fleet from 22 jets as of end-2015 to 30 by 2018, and increase ancillary sales from 7 percent of revenue now to 10 percent by 2020.
Low-cost carriers only take up about 16 percent of all seats per year in Northeast Asian airtravel, compared with 54 percent of Southeast Asia and 28 percent globally, according to data provider Innovata. ($1 = 1,137.2000 won)
(Editing by Stephen Coates)