Commentary on Suspending Fuel Oil Surcharge Collection of Domestic Airlines Transportation --- Not S

Commentary on Suspending Fuel Oil Surcharge Collection of Domestic Airlines Transportation --- Not S
Jan 15, 2009 03:07
CHINASTOCK Points: Join Date: Dec 28, 2008 Status: offline	1. It was beyond market expectation to suspend fuel oil surcharge collection of domestic airlines transportation this time. 2. Purely from suspending fuel oil surcharge collection, if calculated by estimated domestic passenger traffic in 2008, we predict yearly income of Air China (601111), China Southern Airlines (600029) and China Eastern Airlines (600115) to decline by Rmb1.07bn, Rmb1.87bn and Rmb1.1bn; if directional-add-issuance taken into consideration, yearly EPS of companies above will fall by Rmb0.065, Rmb0.17 and Rmb0.11. By contrast, China Southern Airlines (600029) with most business weighting domestically is more seriously impacted. 3. We hold that airline companies will cut the discount rate of ticket price to partially counteract negative effects from suspending fuel oil surcharge collection and possible factors such as travel demand stimulus of some airlines and further decline of aviation fuel’s retail price, which will restrict related negative effects. 4. Aviation sector in 2009 will see “supply over demand” and is most likely to loss, thus we maintain “Neutral” rating; investors are advised to pay attention to transaction opportunities from industrial consolidation, such as China Eastern Airlines (600115) and Shanghai Airlines (600591).

Jan 15, 2009 03:07

CHINASTOCK
Points:
Join Date: Dec 28, 2008
Status: offline

1. It was beyond market expectation to suspend fuel oil surcharge collection of domestic airlines transportation this time.

2. Purely from suspending fuel oil surcharge collection, if calculated by estimated domestic passenger traffic in 2008, we predict yearly income of Air China (601111), China Southern Airlines (600029) and China Eastern Airlines (600115) to decline by Rmb1.07bn, Rmb1.87bn and Rmb1.1bn; if directional-add-issuance taken into consideration, yearly EPS of companies above will fall by Rmb0.065, Rmb0.17 and Rmb0.11. By contrast, China Southern Airlines (600029) with most business weighting domestically is more seriously impacted.

3. We hold that airline companies will cut the discount rate of ticket price to partially counteract negative effects from suspending fuel oil surcharge collection and possible factors such as travel demand stimulus of some airlines and further decline of aviation fuel’s retail price, which will restrict related negative effects.

4. Aviation sector in 2009 will see “supply over demand” and is most likely to loss, thus we maintain “Neutral” rating; investors are advised to pay attention to transaction opportunities from industrial consolidation, such as China Eastern Airlines (600115) and Shanghai Airlines (600591).

Apr 21, 2009 22:54

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