China Eastern Airlines reveals 2023 annual report
China Eastern Airlines disclosed its 2023 annual report. The annual revenue for the year was 113.74 billion yuan, up 145.6% year on year, and realized net profit to mother of 8.17 billion yuan, a year-on-year decrease of 29.19 billion yuan.
Both traffic volume and passenger occupancy rates recovered significantly, and revenue increased markedly year-on-year. In 2023, the civil aviation industry gradually broke out of its trough and returned to normal operation, and the revenue of major airlines all achieved significant growth. The company's business volume recovered significantly in 2023, compounded by the low base of the Shanghai market in 2022. The company's business data achieved significant year-on-year growth. ASK245 billion, up 154.6% year on year, RPK1823 billion, up 197.4% year on year, and the occupancy rate recovered to 74.4%, up 10.72 pct year on year.
In terms of freight rates, demand in the domestic market recovered, and the company's freight rates increased markedly year-on-year, while the international and regional markets declined significantly year-on-year due to the recovery of capacity investment combined with a high base. The company's overall passenger kilometer revenue in 2023 was 0.574 yuan, a slight increase of 0.4% over the previous year. In terms of revenue, by business, due to the recovery in civil aviation passenger flow, the company's passenger revenue was 104.58 billion yuan, an increase of 198.8% year on year; due to falling freight rates, the company's cargo and mail transportation revenue was 3.63 billion yuan, a decrease of 53.2% year on year.
Costs increase significantly as business volume recovers
Due to the recovery in business volume, the company's operating costs in 2023 were 112.46 billion yuan, up 50.8% year on year. Among them, aviation fuel costs reached 41.1 billion yuan due to the combined impact of rising fuel consumption and falling aviation fuel prices, an increase of 84.9%. The cost per unit of ASK aviation fuel was 0.1678 yuan, a decrease of 27.4% year on year. In terms of non-oil costs, due to a sharp recovery in business volume, the company's variable costs increased markedly. The non-oil cost was 71.36 billion yuan, up 36.3% year on year, and the unit ASK non-oil cost was 0.2913 yuan, down 46.5% year on year.
Cost rates were reduced, and losses were drastically reduced throughout the year
In 2023, the company's operations returned to normal, revenue recovered significantly, sales expenses rebounded at the same time, management and R&D expenses were basically stable, and financial expenses were reduced due to reduced exchange losses.
Due to the sharp rise in revenue, all expense ratios declined markedly. The annual sales, management, R&D, and finance expense ratios were 3.79%, 3.09%, 0.24%, and 5.75%, respectively, down 1.10pct, 4.83pct, 0.42pct, and 12.35pct, respectively.
In terms of other reporting items, with the exception of the increase in subsidy revenue due to the increase in business volume, the company's other revenue increased by 1.75 billion yuan to 5.0 billion yuan, and there was little fluctuation in other categories. The company's passenger transport business recovered steadily in 2023, but due to the absence of the Spring Festival travel season in the first quarter, demand declined during the year-end off-season, and losses were drastically reduced throughout the year, but profits have not yet been achieved.
Profit forecasts and investment advice
China's civil aviation industry is expected to recover further in 2024. Major airlines will maintain restraint in introducing capacity, and international flights will further repair and improve the market pattern. It is expected that industry prosperity will continue to rise.
The company's revenue for 2024-2026 is estimated to be 15.36 billion yuan, 158.96 billion yuan, and 163.89 billion yuan respectively, up 32.2%, 5.7%, and 3.1% year-on-year, and net profit to mother of 4.30 billion yuan, 8.48 billion yuan, and 10.41 billion yuan respectively, reversing losses, increasing 97.2%, and 22.8% year-on-year respectively, maintaining the “buy” rating.
Risk warning:
The macroeconomic economy declined, the recovery in demand for civil aviation fell short of expectations, oil prices continued to be high, exchange rates depreciated, and safety incidents.