Air China announced 2023Q1 results: achieved revenue of 25.068 billion yuan, an increase of 94.06% over the previous year; Guimu lost 2,926 billion yuan, a sharp decrease from the same period last year.
Benefiting from significant recovery in the industry, the company's losses narrowed sharply in the first quarter. With 2023Q1, the company achieved operating income of 25.068 billion yuan, an increase of 94.06% over the previous year; Guimu lost 2,926 billion yuan, a sharp decrease from the same period last year. Judging from operating data, Q1 company ASK/RPK increased 73.8%/95.8%, respectively; the passenger occupancy rate was 71.0%, an increase of 8.0 percentage points over the previous year. As of the end of March 2023, the fleet of Shandong Airlines Co., Ltd. was merged into the group's fleet statistics. The group operated a total of 896 aircraft, including 341 of its own aircraft, 248 of which were financed and leased, and 307 were operated and leased.
The bottom line in performance has passed. Focus on strong domestic demand and the pace of resumption of international flights. The second half of this year's Spring Festival travel season began, and demand from domestic business travelers resumed strong. At the same time, with the further liberalization of the policy side, international flights began to increase markedly. On April 26, China National Airlines carried out 14,147 passenger flights, recovering to 101.8% in 2019. The number of domestic flights within China was 13,199, which recovered to 117.5% in 2019, and international+ regional flights returned to 35% in 2019. As the May Day holiday approaches, the booking data showed impressive results. Tickets for some popular routes were sold out early, and ticket prices for many flights rose to full price. Looking ahead to this spring and summer, we expect that the domestic aviation market will continue to recover with strong support from commercial travelers and stimulated by a series of holidays such as May Day, Dragon Boat Festival, and summer. The flexibility in domestic ticket prices will drive airline profits to recover quickly.
Maintain a “Highly Recommended” investment rating. We believe that in 2023-24, the company will significantly benefit from: 1) The company's share of international capacity was higher than that of its peers before the pandemic, and is expected to fully benefit from the resumption of international flights. 2) The company's four-sided diamond-shaped airport hub, mainly at Capital Airport, covers the region with the most developed economy and the highest population density in China. The market share of Air China at Capital Airport has increased to 70%, and its advantages have been consolidated. The company's card space is a core hub with high quality cards, and has taken control of the main customer base in the Beijing two-cabin market. 3) The quality of earnings is high, and it is expected that the post-pandemic era will fully benefit from the increase in domestic ticket prices. The company's net profit from 2023-25 is estimated to be 36/168/20.3 billion yuan respectively, maintaining the company's “highly recommended” rating.
Risk warning: The spread of the epidemic has exceeded expectations; macroeconomic downturn risks; oil prices have risen sharply; and the renminbi has depreciated.