Jeju Air Shares Plunge to Record Low After Deadly Plane Crash

Shares of Jeju Air (KRX:089590) plummeted to a record low on Monday following a deadly plane crash over the weekend, which has raised concerns about the airline's safety and financial stability. Jeju Air's stock price fell by 15.3% in the morning session, reaching an all-time low of ₩10,500 per share. The crash of Jeju Air Flight 7C2216 at Muan International Airport on the morning of the 29th resulted in the deaths of 179 people, making it one of the deadliest air disasters in South Korea's history.

The crash has led to a sell-off in Jeju Air shares, with investors concerned about the potential impact on the airline's passenger confidence and booking trends in the short term. Jeju Air ranked first in the mobile trading system (MTS) app of major securities companies immediately after the accident, indicating that investors were selling Jeju Air stocks en masse. The stock market is expected to polarize, with some airlines benefiting from the shift in passenger preference away from Jeju Air, while others may suffer due to increased competition.

The crash has also raised concerns about the government's efforts to revive the tourism industry, as demand for domestic and foreign travel may shrink due to the political situation and safety concerns. The government announced on the 26th that it would introduce visa policy changes to promote foreign tourism, but expectations seem to be fading due to the impeachment process and the recent accident.

Jeju Air's financial health has been a topic of concern for investors in recent months. The airline has a debt-to-equity ratio of 62.1%, which is relatively high compared to other airlines. Its total debt stands at ₩242.2 billion, while its total shareholder equity is ₩389.7 billion. Jeju Air's interest coverage ratio is 5.8, indicating that the company may struggle to meet its debt obligations if its earnings decline. The crash is likely to have a significant impact on Jeju Air's ability to secure financing and maintain its financial stability in the long term.

The aviation industry's response to safety concerns, particularly in the wake of the Jeju Air crash, will significantly impact the airline's reputation and passenger confidence. The authorities are investigating the specific cause of the accident, and the stock market is paying keen attention to the impact of the accident on the stock prices of related industries, including Jeju Air, and the domestic stock market. If the investigation finds that Jeju Air was negligent, it could severely damage the airline's reputation. However, if the airline cooperates fully and takes responsibility for any mistakes, it can help rebuild trust.

Jeju Air's competitors, particularly other low-cost carriers (LCCs) like T'way Air and Jin Air, may capitalize on the safety concerns and potential loss of market share following the recent accident. They could employ strategies such as enhanced safety marketing, price competition, and route expansion to attract passengers who are now more conscious about safety. To regain its position, Jeju Air could employ strategies such as transparency and communication, investment in safety measures, competitive pricing and services, and route optimization and network expansion to counter these challenges and rebuild passenger confidence.

In conclusion, the deadly plane crash has sent Jeju Air's shares plummeting to a record low, raising concerns about the airline's safety, financial stability, and market position. The aviation industry's response to safety concerns and the actions of Jeju Air's competitors will play a crucial role in determining the airline's ability to recover from this setback. Investors should closely monitor the situation and assess the potential impact on Jeju Air's operations and recovery efforts.