Jingu Financial News | A recent research report by Bank of America Securities pointed out that Chinese airlines are expected to return to profitability in the third quarter of 2024, with trends slightly better than the bank's expectations, mainly benefiting from increased forex revenue and decreased fuel costs during the seasonal peak. Unit costs decreased by 4% year-on-year, outperforming the bank's expectations; unit revenue decreased by 6% year-on-year, in line with expectations.

The bank predicts that Chinese airlines will average net losses in the fourth quarter of 2024 due to a slowdown in seasonal demand. It is expected that unit revenue in the fourth quarter will decrease by 7% year-on-year, while unit costs are expected to decrease by 10% year-on-year due to lower fuel prices and increased capacity. In addition, the bank forecasts that Chinese airlines will return to net income in 2025, with unit revenue remaining at a low level.

Based on the performance in the third quarter, the bank has raised the profit assumptions for four airlines from 2024 to 2026 by an average of 0.8 billion yuan, with the average target price increasing by 9%. The bank holds a negative attitude towards the three major airlines, downgrading China Southern Airlines (01055) to 'underperform the market', while maintaining 'underperform the market' ratings for Air China Limited (00753) and China Eastern Airlines Corporation (00670). The bank expects a small recovery in profits by 2025, with limited pricing power in the domestic market and additional pricing pressure in the international market. The bank has a buy rating for Spring Airlines (601021), citing its low-cost structure benefiting from its business model, enabling it to better capture price-sensitive demand in the domestic and short-haul route networks.