Image source @ Visual China
Text | Zhitong Finance
In early 2020, as the "black swan" of the new crown epidemic flew out, the world's airlines suffered the worst blow ever.
Domestic: In 2020, The three major "shoulder handle" aviation stocks of Air China (00753), China Southern Airlines (01055) and China Eastern Airlines (00670) lost an average of more than 10 billion yuan per year, and the stock price fell by more than 15%; Foreign: "huge loss, help, bankruptcy" has become the endorsement of global airlines in 2020, and it is reported that as of October 2020, 43 commercial airlines around the world have gone bankrupt.
Fast forward to the end of 2021, with the gradual recovery of the domestic economy, the continuous improvement of the national vaccination rate, and the stimulation of a series of phenomenon-level products such as "flying with your heart" and "flying happily", whether domestic aviation stocks have come out of the dark moments of 2020, and how investment opportunities are, it is also obvious that the outside world wants to explore the point.
From the perspective of the recovery process, since the beginning of 2021, the domestic aviation sector has mainly revealed two different recovery states, as follows:
Passenger traffic in the first quarter was 102 million passengers, an increase of 37.5% year-on-year, compared with 63.4% in the same period in 2019; In the second quarter, the industry's passenger traffic was 143 million, an increase of 96% year-on-year, recovering to 89% of the same period in 2019, and the degree of recovery was significantly increased by 25.6 percentage points over the first quarter, of which the number of passengers on domestic routes exceeded the same period in 2019.
Compared with the growth status of Q1 and Q2, the passenger traffic volume of Q3 and Q4 has declined: passenger traffic in the third quarter fell by 25% month-on-month to 108 million, down 20% year-on-year, and recovered to 61% in the same period in 2019. In the fourth quarter, the industry recovered in October, up 7.6% month-on-month, equivalent to 68.2% in the same period in 2019, and down 44.6% in November, equivalent to 40.6% in the same period in 2019.
The reason for the above contrast is mainly because with the effective control of the epidemic and the increase in residents' willingness to travel, the travel demand has rebounded rapidly since March, and then superimposed on the catalytic effect of the Qingming and May Day holidays, Q2 will "return to blood" rapidly, and the passenger traffic will exceed the same period in 19 years.
The Q3, Q4 passenger traffic decline, mainly affected by the domestic local scattered epidemic, it is reported that since June the epidemic has been repeated, the local confirmed cases have increased significantly, and then superimposed Henan flood and typhoon weather and other factors, the aviation industry has been affected to a certain extent.
In contrast, the recovery of international routes is not as fortunate as domestic routes.
According to the Zhitong Finance APP, since the epidemic, international routes have been affected by the "Five Ones" policy and have always been operating at a low level. In terms of passenger traffic, the cumulative number of international passengers from January to September 2021 was only 2.1% of the same period in 2019, and the number of regional passengers was only 5.3%, while domestic passengers recovered to 81.3%.
Under the comparison of the two, there is an important performance worth mentioning - that is, the recovery degree of domestic routes is much better than that of international routes, which is inseparable from China's strong internal circulation force.
According to Huachuang Securities, due to the sharp decline in international + regional flights, airlines will allocate international shipping capacity to China, and the market will be worried that especially the wide-body aircraft that flew long-distance international routes in the past were put into the domestic market, resulting in a relative surplus of domestic capacity. However, combined with the performance of the relevant data, this is not the case.
From the perspective of flight volume, in the relatively non-sporadic months of the epidemic, the overall daily average flight volume of the three major airlines from March to May this year was basically flat or even positive compared with 19 years, of which the number of flights in April increased by 7% compared with 19 years. It reflects that under the condition of easing the epidemic and better demand, the overall transportation capacity can be fully arranged.
From the perspective of aircraft utilization rate, observing the utilization rate level since the beginning of this year, the average recovery from March to May has been more than 8 hours, of which April has recovered to 8.6 hours, which is 92% of the same period in 19 years (9.3 hours), a difference of 0.7 hours. On the other hand, considering that the average utilization rate of wide-body aircraft in the past was about 12 hours, the utilization rate of domestic flying narrow-body aircraft in the actual normal period is expected to be only slightly higher than 9 hours, and it can be seen that relying only on domestic demand, the current utilization level can be restored to near normal levels.
In addition, in terms of passenger traffic, from March to May this year, the industry-wide passenger traffic recovered to more than 90% in the same period of 2019, of which it recovered to 96% in April, of which domestic passengers achieved a growth of 10.7%, reflecting strong domestic demand resilience. At the same time, the corresponding load factor recovered to nearly 80%, only slightly 3-4 percentage points lower than the same period in 2019, which shows that the overall supply and demand recovery is good.
Based on the above, although international + regional flights have dropped sharply, and airlines have allocated international capacity to China, there has been no obvious overcapacity under the strong internal circulation force.
Although with the effective control of the epidemic, the willingness of residents to travel has gradually increased, but the so-called "he saves is better than self-help", in order to stimulate a sharp rise in demand, domestic airlines have made a lot of efforts.
One of the most typical actions is to continue to upgrade and update phenomenon-level products such as "fly freely" and "happy to fly".
In 2020, under the heavy blow of the epidemic, many airlines have opened innovative "self-help", that is, launched phenomenal products such as "fly freely" and "fly happily", and tasted some sweetness from them. Since the beginning of 2021, many airlines have also updated products such as "Fly Freely" and "Fly Happily". For example, as of now, China Southern Airlines' "Happy Fly" has been updated to version 3.0.
However, it is worth noting that compared with last year' need to fight for fast purchases, these products have not set off much splash this year: according to the data released by China Eastern Airlines on December 31, 2020, about 10% of the 2020 version of The Free Fly users have purchased the 2021 version of the Free Fly, while 90% of the users will no longer continue to buy products.
At the same time, some "free fly" products even ended with "troubled flying": it is reported that since March 2021, there have been a number of customer complaint incidents on the black cat complaint platform, the theme of which is mostly the airline's private reduction of free flying rights, which is manifested in reducing the number of flight seats, difficult to redeem, and often being automatically changed to flights.
Interestingly, in addition to receiving a lot of complaints, it is reflected in the performance, and the airlines are "not so happy".
In the third quarter of 2021, due to the repeated epidemic and the rise in oil prices, the losses of the three major airlines expanded, and only the spring and autumn achieved profitability.
Specifically, by Q3 2021, the three major airlines will have a combined loss of 7.9 billion yuan, compared with a loss of 520 million yuan in the same period of 2020. Among them, Air China lost 3.54 billion yuan and 2020 Q3 lost 670 million yuan; China Southern Airlines lost 1.43 billion yuan and made a profit of 710 million yuan in Q3 2020; China Eastern lost 2.95 billion yuan and 560 million yuan in Q3 2020.
The three private airlines lost a total of 150 million yuan, and only Spring Airlines achieved profitability. According to relevant financial data, the net profit attributable to Spring and Autumn, Auspicious and Huaxia in Q3 2021 was 1.5, -1.5 and -140 million yuan respectively, compared with a profit of 2.6, 200 million yuan and 160 million yuan in the same period last year.
What is curious is why the "free to fly" and "happy fly" products actively launched by major airlines have not significantly helped the company's profitability?
The answer is that the main purpose of products such as "fly free" and "happy fly" is to supplement cash flow, but it is equivalent to a drop in the bucket for filling the loss of the "black hole".
It is understood that the essence of "flying freely" is a prepaid card, the most important role is to help airlines obtain cash flow, and the additional effect is to improve passenger stickiness. However, with the sharp decline in sales this year - during this year's Singles' Day, the cumulative sales of the "Fly Free" products of the eight airlines exceeded 100,000 copies, and the overall sales scale was much less than in 2020, and the improvement effect was not very large. In addition, according to industry sources, because "free to fly" passengers account for only about 1% of the number of passengers in the industry, the contribution of such products is equivalent to "a cup of water" compared to the black hole of airlines' epidemic losses.
In summary, it is not difficult to see that due to the repeated outbreak of scattered points and the rise in crude oil prices, the 2021 year of aviation stocks may not be as "happy" as imagined. However, from a medium- and long-term perspective, with the advancement of vaccine-enhanced injection and oral characteristic drug research and development, the demand for residents to take flights has resumed growth, and the long-term positive trend of the aviation industry has remained unchanged.
According to the Civil Aviation Administration's "Action Plan for the Construction of a Civil Aviation Power in the New Era", by 2035, the number of per capita air travel in China will exceed 1 per year, which shows that China's civil aviation passenger traffic still has a large room for improvement, the airport industry is still in a stage of rapid development, and the long-term development trend will remain unchanged.
In this context, domestic brokerage institutions have also given the prediction of "determining the recovery trend in the next 2 years", as follows:
Among them, Guojin Securities pointed out that at present, China's aviation market is still at the bottom of the cycle, and aviation may be able to reshape the prosperity cycle in the next 1-2 years. With the continuous rebound of suppressed demand, the liberalization of international routes, and the slowdown in aircraft supply, the overall supply and demand structure of the aviation industry is expected to improve, and aviation may be able to reshape the boom cycle in the next 1-2 years.
In this context, the agency has long been optimistic about the development of China's aviation industry, and said that China's low-cost aviation market has great potential, with the advancement of aviation marketization reform, such as Spring Airlines and other private airlines will continue to show outstanding profit resilience, so it is recommended to pay attention to private airlines such as Spring Airlines and Juneyao Airlines; At the same time, it is also said that we can pay attention to the three major airlines at the bottom of the valuation, it is reported that due to the impact of the epidemic, the PB valuation of the three major airlines is at the bottom, with the gradual recovery of the future aviation industry, the supply and demand structure improves, the performance and valuation level of the three major airlines are expected to recover.
Guotai Junan also said that airlines have a dual recovery logic, and the recovery trend in the next two years is determined. First, if the international liberalization, the domestic and international markets will once again achieve a balance between supply and demand, and the profitability of airlines will be restored. Considering the significant slowdown in the growth rate of capacity in the 14th Five-Year Plan and the marketization of fares, profitability is expected to be better than before the epidemic; Second, if there is a large domestic cycle, it is expected that airlines are expected to take the lead in recovering certain profitability, which will exceed market expectations. In the long run, the epidemic has not changed the long-term growth momentum of aviation demand, and the airspace bottleneck will exist for a long time, and the long-term supply and demand of China's aviation industry will be good. However, considering that short-term performance is under pressure and international opening is slow, it is recommended to pay attention to the reverse timing.
In addition, Southwest Securities pointed out that during the "14th Five-Year Plan" period, the growth rate of the aviation industry fleet was less than 6%, and it is expected that there is room for upward improvement in the relationship between supply and demand in 22 years; In the same period, if the international line is released at the end of 22 years, it can effectively improve the daily utilization rate of aircraft and greatly improve the turnover efficiency, and the profitability of the airline will have a large room for improvement. Based on this, the agency recommends focusing on private airlines that have expanded significantly during the epidemic and are expected to convert fleet size and time resources into performance when travel demand returns to normal through refined operations, and at the same time optimistic about the high performance flexibility of the three major airlines in the recovery cycle.