Event comments
On February 18, the national development and Reform Commission and other 14 departments issued several policies on promoting the recovery and development of difficult industries in the service industry, which put forward five relief and support policies for the civil aviation industry: 1) suspend the advance payment of value-added tax by air transport enterprises for one year in 2022; 2) Local governments can coordinate the central to local transfer payments and local self owned financial resources to support airlines and airports in epidemic prevention and control; 3) Coordinate resources and increase support for civil aviation infrastructure construction; 4) Negotiate to cancel the sea freight premium (USD 2 / barrel), port fee (RMB 50 / ton) and other expenses included in the price of aviation kerosene; 5) Encourage the banking industry to increase credit support for hub airports, encourage qualified airlines to issue credit bonds, and open a green channel for airlines and airports that have been seriously damaged to register and issue debt financing instruments.
Core view
The epidemic continues to bring profit pressure to the civil aviation industry, and the relief policy will help to alleviate the financial difficulties of the civil aviation industry in a timely manner. Since the beginning of 2020, the overseas epidemic has repeatedly restricted international passenger transport and the demand has remained low; China's passenger transport has shown a recovery trend since the second half of 2020, but there has been a sharp fluctuation due to the multi-point spread of the epidemic in China; The passenger volume and passenger throughput of the civil aviation industry have not yet returned to the pre epidemic level. The overall recovery of downstream demand is relatively slow, superimposed with factors such as the rise of aviation fuel price and more prevention and control expenses, the civil aviation industry is facing greater profit pressure from 2020 to 2021. The performance forecast of the three major state-owned airlines is expected to continue to suffer losses in 2021. The civil aviation industry is a capital intensive, highly leveraged and highly indebted industry. The negative impact of the epidemic on the civil aviation industry has increased the difficulty of enterprise financing and capital turnover. The operating cash flow of the three major state-owned airlines decreased significantly in 2020 and 2021 Q1 ~ Q3 compared with the same period in 2019 before the epidemic. Suspending the advance payment of value-added tax in the air transport industry, coordinating the transfer payment funds and the financial resources of local governments to support the epidemic prevention and control of the civil aviation industry, and expanding the credit debt financing channels of civil aviation enterprises will play a positive role in supplementing the cash flow of the civil aviation industry and helping the civil aviation industry through difficult times.
The bail-out policy is expected to help the civil aviation industry accelerate its recovery when the demand inflection point is approaching. Aviation fuel cost is the main operating cost of the aviation company, accounting for more than 20%, and the total profit of the aviation company is more sensitive to the fluctuation of aviation fuel price. According to the 2019 annual report of the three major state-owned airlines, a 1% increase in aviation fuel prices will bring a decline in profits of about 11% at most. Negotiating to cancel the marine transportation premium (USD 2 / barrel), port fee (RMB 50 / ton) and other expenses included in the aviation kerosene price will help the aviation company repair profits and maintain normal operation. Under the influence of the epidemic, the recovery process of downstream demand is relatively slow, and the infrastructure construction and investment of civil aviation industry lack driving force. The government will coordinate resources and increase support for civil aviation infrastructure construction, which will reduce the cost of obtaining runway, airspace and other core resources in the whole industry and broaden the space for the rise of industry scale. The 14th five year plan of civil aviation defines 2021-2022 as recovery period and savings period, 2023-2025 as growth period and release period, and it is expected that the compound growth rate of civil aviation passenger volume and freight volume in 2020-2025 will be 17.2% and 7% respectively. The rescue policy will help the civil aviation industry tide over the trough cycle. With the gradual improvement of the global epidemic and the orderly relaxation of prevention and control policies, the demand and performance of the industry are expected to accelerate the rebound.
Investment advice
The rescue policy is expected to speed up the fundamental repair of the civil aviation industry; With the improvement of the global epidemic and the gradual relaxation of prevention and control policies, the industry is expected to usher in a rapid rebound cycle. Relevant targets include: Air China Limited(601111) , China Eastern Airlines Corporation Limited(600115) , Juneyao Airlines Co.Ltd(603885) , China Southern Airlines Company Limited(600029) , Spring Airlines Co.Ltd(601021) , etc.
Risk tips
Fluctuations in crude oil prices; Exchange rate fluctuations; Downstream demand is lower than expected; The disturbance of the epidemic has intensified.
