Background: Aviation large cycle core logic
Air transport enterprises have the characteristics of high income and low profit margin. Their profits are very sensitive to the changes of ticket prices and seating rate, which is essentially determined by the relationship between supply and demand. The strong aviation cycle in history is mainly driven by supply and demand. During the 14th Five Year Plan period, the growth rate of China’s aviation supply has significantly decreased. After the epidemic, if there is an outbreak on the demand side or an obvious mismatch between supply and demand, it will be transmitted from the macro “short supply” to the micro “price rise”, and a new round of supply and demand cycle is brewing.
Logical deduction on the supply side: the supply cannot increase rapidly temporarily, and the growth rate in the 14th five year plan is deterministic; Industry or usher in deep integration
The number of aircraft is the core constraint of air transport capacity. The three major airlines account for 60%, which can greatly affect the situation of the whole industry.
Review of the 13th five year plan: in 201618, the CAGR of the fleet was 11.15%. In 201920, due to the continuous influence of abnormal factors, the growth rate of the fleet decreased to 4.9% and 2.2% respectively.
“The 14th five year plan” “Outlook: it is difficult for aviation supply to increase rapidly, and the growth rate of aviation supply is uncertain during the 14th Five Year Plan period; under the influence of the epidemic, small and medium-sized airlines are struggling, and the industry may usher in major integration. 1) stage 1: when the pace of demand recovery is not clear, the three major airlines take the initiative to reduce capital expenditure and reduce fleet introduction plans in the face of cash flow difficulties. 2) stage 2: the demand is gradually clear, and the three major airlines have increased their subjective willingness to increase aircraft introduction, However, limited by the index approval and upstream delivery capacity, it is difficult to increase the supply temporarily and rapidly.
International routes may usher in strategic development opportunities: changes in the aviation market pattern in Thailand, Japan and South Korea, and China Airlines may achieve incremental moments
After the epidemic, major airlines in Thailand, Japan and South Korea, which rely on international passenger flow, have been greatly affected, the market pattern has been further optimized, the fleet size has been reduced, and it may be difficult to match the demand immediately after the epidemic is repaired. Air China is expected to make a certain increment in international routes and usher in strategic development opportunities.
Future highlights of key stocks
In the 14th five year plan, the supply will definitely slow down. If the suppressed demand breaks out after the epidemic is repaired, the mismatch between supply and demand is expected to drive the aviation strong cycle. 1) Air China Limited(601111) : the international transportation capacity accounts for the highest proportion, and the route network is of high quality. We believe that the company has a high probability of price increase in the business cycle. 2) China Southern Airlines Company Limited(600029) : the proportion of international transport capacity is high, the fleet size is the largest, and the performance elasticity of the company is the largest under the same price increase. 3) Spring Airlines Co.Ltd(601021) : the business income of tourism charter flights and seats accounts for more than 20%, which is expected to take the lead in benefiting from the recovery of leisure tourism demand; Based on the low-cost advantage, China’s low-level cities are still expected to make profits. With the reshuffle of Southeast Asian airlines, the company’s market share in Southeast Asian routes is expected to increase. We believe that the performance will be fulfilled after the epidemic is repaired; 4) Juneyao Airlines Co.Ltd(603885) : benefiting from the overall expected improvement of the aviation sector, the medium and long-term growth is high. 5) China Eastern Airlines Corporation Limited(600115) : China’s “golden line” Beijing Shanghai line has been operated in Beijing for two times, which will reflect high profit elasticity during the outbreak of Chinese demand.
Risk tips
1. The recovery of the epidemic situation is less than expected;
2. The entry-exit policy is not as expected;
3. Demand recovery is less than expected;
4. The oil price has risen sharply;
5. Exchange rate risk.
