Record 11.4 Million passengers during 2018 Chinese New Year bodes well for Chinese airlines

Air China (753:HK) Fair value: HK$12.50
Air China (753:HK) Rating: Outperform

China Eastern Airlines (670:HK) Fair value: HK$7.30
China Eastern Airlines (670:HK) Rating: Outperform

China Southern Airlines (1055:HK) Fair value: HK$11.00
China Southern Airlines (1055:HK) Rating: Outperform

22 Feb 2018, China – The entire Chinese airlines sector carried a record 11.4 Million passengers during the 7-day Chinese New Year holiday season, registering a record 16% growth compared to 12% in 2017, 8% in 2016 and 7% in 2015. For outbound Chinese tourists, the percentage of independent travelers continue to increase with a 48% share for the 2018 Chinese New Year period. We remain bullish on the Chinese airline stocks.

Chart: Chinese Airline Sector – % Growth in passengers carried during Chinese New Year period (2015 to 2018)

Chart: Chinese Airline Sector – % Growth in passengers carried during Chinese New Year period (2015 to 2018)

 

Chart: Outbound Chinese tourists on independent travel versus package tours during Chinese New Year period (2018)

Chart: Outbound Chinese tourists on independent travel versus package tours during Chinese New Year period (2018)

 

IMPROVED FLIGHT SCHEDULES AND STRONG CONSUMER SPENDING IS BOOSTING AIR TRAFFIC GROWTH DESPITE CONSISTENT AIRFARES AND INCREASED HIGH SPEED RAIL COMPETITION

2017 was already a strong year for the Chinese airlines with fairly consistent airfares so the 2018 Chinese New Year’s record 16% growth bodes well for continued air traffic growth and potential yield increases especially for the domestic passenger market in China.

Despite increased competition from China’s growing high-speed rail network, we believe that improved flight schedules and strong consumer spending will continue to boost 2018 passenger traffic for the Chinese airlines with average passenger load factor staying above 80.7%.   

Chart: Number of passengers carried by the Chinese airlines sector during Chinese New Year period (2015 to 2018)

Chart: Number of passengers carried by the Chinese airlines sector during Chinese New Year period (2015 to 2018)

Related Reports:

Robust China outbound travel to exceed Chinese airlines capacity growth for next 5 years


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China Eastern Airlines Initiation Research Report 2017: Rapid improvement but aggressive expansion risk abounds

China Southern Airlines Initiation Research Report 2017 – Strong domestic drivers tempered by funding needs

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