Jinwu Financial News | Bank of America Securities recently reported that China Airlines resumed profits in the third quarter of 2024. The trend was slightly better than that forecast, mainly due to increased foreign exchange earnings and lower fuel costs during seasonal peaks. Unit costs fell 4% year over year, better than the forecast; unit revenue fell 6% year over year, in line with expectations.
The bank expects China Airlines to record an average net loss in the fourth quarter of 2024 due to a slowdown in seasonal demand. Unit revenue for the fourth quarter is expected to drop 7% year on year, and unit costs are expected to drop 10% year on year due to falling fuel prices and increased capacity. Furthermore, the bank expects China Airlines to return to net profit in 2025, and unit revenue will remain low.
Based on the third-quarter results, the bank raised the profit assumptions of the four airlines for 2024-2026 by an average of 0.8 billion yuan, and increased the target price by an average of 9%. The bank has a negative attitude towards the three major airlines, downgraded China Southern Airlines (01055) to “outperforming the big market” and maintaining the “outperforming the big market” ratings of Air China (00753) and China Eastern Airlines (00670). The bank expects a small profit recovery by 2025, making it difficult to improve the domestic market's pricing capacity, and the international market is still facing additional pricing pressure. The bank gave Spring Airlines (601021) a purchase rating, indicating that its low cost structure benefits from its business model, enabling it to better capture price-sensitive demand in domestic and short-haul route networks.
| Airline | Target price | ratings |
| Air China | HK$2.9 /RMB 4.7 → HK$3.2 /RMB 5 | Outperform the market |
| China Eastern Airlines | HK$1.35/RMB 2.4 → HKD1.45/RMB 2.5 | Outperform the market |
| China Southern Airlines | HK$3/RMB 5.7 → HKD/RMB 3.2/RMB 6 | Downgraded to outperforming the market |
| Spring Airlines | RMB 58 → RMB 65 | buy |
