Aviation resumption under epidemic situation: (1) In 2021, the aviation index fluctuated and rose, and the impact of the epidemic was passivated: in 2021, the aviation index showed a concussion upward trend as a whole, which fluctuated due to the progress of scattered epidemic situations, covid-19 vaccine and specific drugs in various places. Since mid October, scattered epidemic situations have occurred frequently in China, but the aviation share price has been strong, and the recovery expectation after the epidemic is dominant, and the plate has been gradually passivated by the impact of the epidemic. (2) Compared with tourism, hotels and other sectors, aviation operation is still at a low ebb: AVIC's business closed at the bottom of Q1 in 2021, Q2 / Q3 continued to rise, and the repeated Q4 epidemic may lead to the decline of revenue. Comparing aviation with tourism, leisure, hotels, catering and other related industries, aviation revenue suffered the most serious damage; while the revenue of other consumer sectors, such as food, beverage, brand clothing and so on, increased significantly compared with that before the epidemic rise. After the epidemic, the global economy stimulated consumption. As an optional consumption, aviation is still at a low ebb. It is expected to usher in a strong rebound after the epidemic is alleviated.
Compared with American Airlines, the policies were actively superimposed and the fundamentals improved, and the share price of 2020q2-2021h1 ushered in a sharp rise. In 2020q1, the share price of American Airlines plummeted by 70% under the impact of the epidemic. With the stability of panic and the conclusion of the aviation industry rescue agreement, the pessimistic expectations reversed. Then, driven by the economic stimulus, the liberalization of travel policies and the promotion of vaccines, American Airlines began to recover, and the whole company turned around its losses in 2021q2 and realized profits in 2021q3; The three major US airlines rose 224% on average from the low point in 2020 to the high point in 2021. As China's epidemic prevention policy is relatively strict, China adheres to the general policy of dynamic clearing and strictly prevents overseas input, and the aviation index has only increased by 56% from the low point in 2020 to the high point in 2021.
Demand: the reconstruction of China's travel confidence will release the demand elasticity, and international routes will wait for the policy to relax. 1) Chinese routes: in 2021, the demand for Chinese routes was close to 80% of that before the epidemic, and the demand recovery mainly came from rigid business travel and high-frequency tourism. It was observed that the passenger volume and seating rate decreased significantly when the epidemic was repeated in recent two years, while the demand rebounded rapidly when the epidemic was well controlled, and the passenger volume exceeded the same period in 2019. We believe that when the epidemic basically ends, China's airline demand is expected to rebound rapidly, and there is great room for recovery for normalized business and tourism travel. 2) International routes: the epidemic situation in many countries has rebounded, China's international route control policy is still strict, and the international passenger flow is low. It takes time but space to recover. We assume that in 2022 and 2023, the RPK of Chinese routes will recover to 95.31% and 101.66% in 2019, and that of international routes will recover to 19.06% and 66.71% in 2019; The corresponding RPK growth rates in 2022 and 2023 are 29.39% and 23.58% respectively.
Supply: the medium-term low-speed growth of internal transport capacity has high certainty. 1) The growth rate of the fleet introduction plan of the aviation company slows down: according to the current fleet introduction plan, the total fleet growth rates of Air China, China Eastern Airlines, China Southern Airlines, spring and Autumn Airlines and Jixiang airlines in 2022 and 2023 are 4.81% and 1.53% respectively. 2) Boeing and Airbus have a serious backlog of orders. As of October 31, 2021, 5038 and 6850 aircraft have not been delivered respectively, of which 199 aircraft are to be delivered to AVIC, and 737max accounts for more than half. Generally, the aircraft takes at least 2-3 years from order placement to delivery. 3) Most of the aircraft in the fleet of leasing companies are in rental status, with an average rental rate of more than 95%, and the spare capacity that can be provided in time is small. 4) 737max go around does not change the current situation of low growth rate of industry capacity: as of December 2021, China Airlines has 97 737max models, accounting for less than 3% of the number of aircraft in the whole industry. Due to the small proportion of the total, it still takes time for go around and introduction. Considering the increase of aircraft utilization hours and average flight distance in the future, we assume that the ask growth rates in 2022 and 2023 are 24.79% and 20.00% respectively.
After the epidemic, airlines will usher in the reversal of supply and demand + ticket price elasticity, which is expected to enter the growth cycle. The recovery of civil aviation is expected to accelerate, and the aviation industry will usher in a new pattern after the epidemic: 1) the growth rate of aviation demand from 2022 to 2023 is significantly higher than that of supply: under optimistic expectations, the growth rates of demand / supply in 2022 and 2023 are 40.78% / 26.40% and 26.58% / 22.39% respectively; Under neutral expectation, the growth rate of demand / supply in 2022 and 2023 is 29.39% / 24.79% and 23.58% / 20.00% respectively; Under pessimistic expectations, the growth rate of demand / supply in 2022 and 2023 is 13.12% / 13.02% and 24.39% / 20.58% respectively. 2) All airline fares continued to rise, Open the space of price elasticity: at present, the full ticket price of flights in first tier cities is about 45% higher than that in 2018 (the Beijing Shanghai route increased by nearly 60%), but due to the impact of discount, the price increase brought by the marketization of civil aviation fares is not obvious. In the post epidemic era, aviation supply and demand has entered a tight balance, which is expected to continue to see the growth of industry demand and the rise of actual fares, and the industry has entered a long cycle.
Investment suggestion: on the demand side, the worst period of the epidemic is basically over. With the promotion of vaccination and specific drugs, the suppressed travel demand is expected to recover explosively. On the supply side, the introduction of airlines' transport capacity is slow, Boeing and Airbus orders accumulate, and even the 737max go around still does not change the low growth of transport capacity. The low growth of supply in the medium term has high certainty. In addition, the market-oriented reform of civil aviation fares opens up the space for price elasticity. The inflection point of supply and demand certainty is superimposed on the upward fare, and aviation is expected to usher in a growth cycle. Focus on Air China Limited(601111) with high-quality routes (which will significantly benefit from the recovery of official travel); the leader of low-cost aviation Spring Airlines Co.Ltd(601021) ; the China Southern Airlines Company Limited(600029) with high proportion of Chinese routes and high performance flexibility; China Eastern Airlines with obvious geographical advantages; and pay attention to regional airlines China Express Airlines Co.Ltd(002928) .
Risk warning: the epidemic situation in China continues to repeat; Industry demand is lower than expected; The opening of international routes is less than expected; Boeing Airbus capacity recovery exceeded expectations; The calculation assumptions are less than expected.
