China Eastern Airlines Corporation Limited(600115) (600115)
Key investment points
Event: on December 30, 2021 China Eastern Airlines Corporation Limited(600115) announced that from January 1, 2022, the official direct channel sales of China Eastern Airlines and the actual carrier flights of Shanghai Airlines will change the original step-by-step completion mode of "ticket purchase before seat selection and check-in", so as to realize the one-time completion of "ticket purchase is seat selection and check-in". According to the notice on issues related to further deepening the price reform of civil aviation routes in China and other documents, the full price ticket of Beijing Shanghai line has been raised to 1960 yuan recently.
Direct user pain points, aviation service product benchmarking and popularization logic lead industry reform. The "one-step" plan of China Eastern Airlines is another important innovation of product and service awareness of civil aviation. For a long time, due to high front-end costs and cumbersome processes, aviation and ground travel modes are at a competitive disadvantage in the field of medium and short distance. Reducing unnecessary chains and making aviation products closer to modern life is an important way to optimize the long-term competitiveness of civil aviation. Some airlines in the industry have made positive attempts in the integration of seat selection and ticket purchase, and achieved certain results. The "one-step" is technically feasible and will not increase the marginal cost. On the contrary, seat selection itself can be sold as a product to increase auxiliary income and increase profits. According to Li Xiaojin, director of the Institute of Aviation Economics of Civil Aviation University of China, the project will save passengers at least 30 minutes. The time value of each air passenger is about 200 yuan / hour, which can save 100 yuan. China Eastern Airlines can save passengers at least more than 5 billion.
The market-oriented reform of air fares has been deepened, and the single machine profit center and the performance flexibility of airlines have been improved. At present, the market-oriented reform of air fare is in the second stage: under the guidance of the implementation opinions of Civil Aviation Administration of China on promoting the reform of civil aviation transportation price and charging mechanism in 2015, more than 40% of the routes with independent pricing have been opened up so far. The profit elasticity of popular and price insensitive business routes such as Beijing Shanghai line is higher after the price increase. In 2018, China Eastern Airlines Beijing Shanghai line made a profit of 1.25 billion yuan, corresponding to the full fare of 1360 yuan. If the seating rate is the same as that in 18 years, the full fare is 1960 yuan, the increase of the full fare will increase the average fare by 10%, and the full annual profit of Beijing Shanghai line can reach 1.5 billion yuan (+ 20%).
Profit forecast and investment suggestions: during the 14th Five Year Plan period, the growth rate of aircraft fleet in the aviation industry is expected to be less than 6%, and 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 liberalized at the end of the year 22, the daily utilization rate of aircraft will be effectively improved and the turnover efficiency will be greatly improved. At that time, the profitability of the aviation company will have great room for improvement. China Eastern Airlines Corporation Limited(600115) leads the industry in civil aviation product innovation. We believe that the industry can see the business inflection point in 22 years, and we are optimistic about the improvement of the company's performance flexibility after price increase. Due to the repeated epidemic after the disappearance of the Summer Olympics, we lowered our performance forecast. It is expected that the net profit attributable to the parent company will be - 121 / 140 / 56 billion yuan from 2021 to 2023, maintaining the "hold" rating.
Risk tips: oil price fluctuation risk, macroeconomic risk and safe operation risk.
