【出版时间及名称】：2009年11月中国航空行业研究报告
        【作者】：花旗银行
        【文件格式】：pdf
        【页数】：38
        【目录或简介】：

Chinese airline stocks have underperformed the market since August, although
3Q air passengers were meeting expectations by growing 27% from a year ago
and ticket prices were effectively restored to close to 3Q07 level.
Underperformance was likely because: a) the market expected China travel
was entering the winter low season; and b) fuel prices were soaring in 3Q but
the Chinese government did not allow airlines to levy surcharges.
Now we see the PRC airlines regaining momentum and they may outperform
significantly in future, with both of the share price overhangs removed: a) as
Oct-Nov air travel has continued to grow by c.20% despite a high 4Q08 base
due to post-Olympics pent-up demand, and b) NDRC recently announced it
would allow airlines to levy fuel surcharges independently from the previously
government-decided surcharges that have not matched fuel price movements.
We believe a record-high 79% PLF in 2010 will grant full pricing power to the
airlines to offset 80% of fuel costs above c.$80/bbl (or crude $60), at the
maximum of the regulatory upper limit.
The coincidence of a number of benign factors (supply demand, pricing power,
fuel surcharges, M&A, RMB and World Expo) and current mid-cycle valuation
support significant upside in PRC airlines shares, in our view. We forecast
2010E supply/demand to be even more favorable than 2007, pax load factors
to achieve a record high and RMB to appreciate by 4%/3% in 2010/11 vs. 6%
in 2007. Diversion to high-speed railways is marginal by 2012.
Excluding the 2H07 market peak and airlines M&A speculation, the sector was
trading at 1STD in 1H07, and we believe the shares will re-rate to this level
from the current historical mean P/B. We have raised the PRC airlines' target
prices to 0.5 standard deviation above the historical mean, CEA’s TP HK$3.6,
ETR 29%; Air China’s TP HK$7.0, ETR 36%; and CSA’s TP HK$3.9, ETR 42%.
If exports recover, Rmb may renew the appreciation trend by rising 4% in 2010
and 3% in 2011, which could boost sector valuations to above 1 stand
deviation.
We like CEA for its company re-rating, CSA for domestic consumption and RMB
appreciation, and Air China for its blue-chip profitability and strong execution
power. CEA may give the biggest alpha, also evidenced by 1H07. We also
recommend Ctrip (on-line travel agency) and TravelSky (ETD).