This article comes from the research report of Tianfeng Securities "in-depth split!" Explain in detail the mechanism and impact of fuel surcharge. "the author delivers Jiang Ming for Tianfeng Securities Research Institute."
Fuel surcharge is a surcharge levied by airlines on passengers according to changes in fuel costs, independent of ticket prices, in order to partially cover incremental fuel costs and alleviate cost pressure.
China's fuel surcharge policy has undergone changes. at present, the international fuel surcharge is determined independently by each airline and can be reported to the Civil Aviation Administration for the record, while the domestic fuel surcharge strictly follows the formula of the highest standard of fuel surcharge announced by the National Development and Reform Commission and independently determines the specific charging standard under the highest standard. Due to the considerable flexibility in the formulation of airlines' international route surcharges, we only analyze the domestic line surcharge policy and the coverage ratio of the overall incremental aviation fuel cost in this report.
According to the latest maximum standard formula of domestic fuel addition announced by the National Development and Reform Commission on March 24th, the maximum standard of fuel addition for routes below 800km (including) is 0.00002541 × (domestic comprehensive procurement cost of aviation kerosene-5000) × 800800 km and above 0.00002541 × (domestic comprehensive procurement cost of aviation kerosene-5000) × 1500. The minimum collection standard is 10 yuan, and less than 10 yuan is rounded.
Oil prices have been low for the past three years, and domestic fuel surcharges have been suspended since February 2015, and the NDRC has not updated the parameters of the highest standard formula for domestic fuel surcharges. We assume that the formula remains unchanged, and it is estimated that the comprehensive procurement cost of domestic aviation kerosene needs to reach 5131 yuan / ton and 5246 yuan / ton respectively, and the maximum fuel surcharge for routes above and below 800km can reach the level of 5 yuan respectively. round to 10 yuan and start levying.
In view of the fact that the comprehensive purchase cost of domestic aviation kerosene is slightly higher than the tax ex-factory price of aviation kerosene, according to the correlation between the taxable ex-factory price of aviation kerosene and Singapore aviation oil and distribution oil prices, it is estimated that the fuel distribution price corresponding to the starting point of fuel surcharge should be slightly less than 72.6 US dollars / barrel. At present, the latest oil production period has not yet ended. As of January 19, 2018, the oil distribution price during the production period is 68.25 US dollars per barrel, which is still below the threshold.
If the fuel surcharge is re-levied, according to our estimates of the proportion of passengers on routes above 800km and below and the actual passenger traffic data of domestic routes in 2017, it is estimated that when oil prices hit the fuel surcharge threshold, the income of Air China (00753), China Southern Airlines (01055), China Eastern Airlines (00670), HNA, Spring and Autumn, and auspicious will increase by 710 million, 920 million, 740 million, 570 million, 120 million and 140 million respectively.
When the oil price continues to rise, each company's domestic fuel surcharge has different coverage capacity to the overall incremental fuel cost. for example, according to the overall fuel coverage ratio, auspicious Airlines has the strongest coverage capacity and Air China has the weakest coverage capacity. on average The domestic fuel surcharges of Air China, China Southern, China Eastern, HNA, Chunqiu and auspicious can cover 43.1%, 49.8%, 53.0%, 69.7%, 70.2% and 80.0% of the total fuel incremental cost, respectively. If ranked by the proportion of domestic fuel cost coverage, Spring and Autumn Airlines has the strongest coverage capacity and China Southern Airlines Company has the weakest coverage capacity. On average, the domestic fuel surcharges of Air China, China Southern Airlines, China Eastern Airlines, HNA, Chunqiu and auspicious can cover 88.1%, 86.3%, 97.2%, 96.7%, 105.8% and 95.0% of the incremental fuel costs of domestic lines, respectively.
We thinkThe fuel surcharge is levied in the form of a fee, which is independent of the fare, and it will be more acceptable to passengers, which will help airlines to hedge incremental fuel costs, and when the oil price just hits the threshold of fuel surcharge, the fuel surcharge is equivalent to an one-off boost to airlines' performance, which will significantly ease the upward pressure on aviation fuel costs.
If oil prices rise further, airlines can impose a fuel surcharge to partially hedge incremental jet fuel costs.Continue to recommend the three major airlines (Amush) and pay attention to the auspicious airlines with high correlation between Shanghai routes.
I. the policy of charging fuel surcharge follows
Fuel surcharge, as its name implies, is a surcharge levied by airlines according to changes in fuel costs. to explore the collection and impact of fuel surcharge, we first need to briefly review the past oil price trend.
From 1990 to 2000, the international oil price fluctuated around 20 US dollars per barrel for a long time. At the end of 2000, the oil price approached 40 US dollars per barrel, and then fluctuated above 20 US dollars per barrel. Oil prices rose gradually from 2004 until they reached an all-time high in mid-2008 and then fell to a bottom of $40 a barrel in 2009. After hitting the bottom, oil prices fluctuated upward again, breaking through $100 / barrel again in 2011 and fluctuating high for three years. Oil prices plummeted again in June 2014, hitting a low below $30 / barrel, and then shock rose. It is now close to $70 per barrel.
1. What is the cost of aviation fuel for airlines?
Fuel cost accounts for the highest proportion in the cost composition of airlines, and the proportion of fuel costs of all airlines tends to be the same. taking 2016, when oil prices are at a decade-low level, for example, the average aviation fuel costs of the three major airlines still account for about 25%. It can be seen that sharp fluctuations in international oil prices will have a significant impact on the fuel costs of airlines.
For airlines, they use aviation kerosene as power fuel, and the main purchasers are aviation kerosene suppliers such as China Aviation Oil. the unit procurement cost of aviation oil on domestic lines is slightly higher than the ex-factory price of aviation kerosene announced by the National Development and Reform Commission every month. refueling on international flights does not include tax, but the actual cost borne by the Aviation Department after "operation to increase" is not much different from that of domestic flights.
In view of the fact that the domestic aviation oil procurement cost of airlines is closely related to the ex-factory price of aviation kerosene, it is necessary to sort out the determination mechanism of the ex-factory price of aviation kerosene. According to China's historical aviation kerosene pricing mechanism, the National Development and Reform Commission adjusts the ex-factory price of aviation kerosene according to the fluctuation of international oil prices and announces to the public. On July 7, 2011, the National Development and Reform Commission issued a notice on promoting the market-oriented reform of aviation kerosene prices. it is clear that the ex-factory price of aviation kerosene will gradually implement market pricing. in principle, the ex-factory price of aviation kerosene does not exceed the CIF import customs value in the Singapore market.
The CIF customs value of Singapore aviation oil import is composed of the average FOB price in the Singapore market plus maritime freight premium, tariff, value-added tax, port fee and other factors during the pricing period, which is from the 25th of last month to the 24th of this month; the marine insurance fee is determined at US $2 per barrel; the port fee is determined at 50 yuan per ton; the exchange rate is the average of the RMB benchmark exchange rate announced by the people's Bank of China during the pricing period; the ton-to-barrel ratio is 1RV 7.9. The discount is determined annually through consultation by both supply and demand taking into account factors such as market supply and demand, freight, transaction volume and oil price trend in the international market. The ex-factory price is adjusted once a month on the 1st. From March 2015, the NDRC decided not to publish the CIF customs value of aviation kerosene import every month, but to calculate and confirm the CIF import price of aviation kerosene by Petrochina Company Limited, China Petroleum & Chemical Corp, CNOOC and CNOOC according to the above-mentioned principles.
two。 The policy of fuel surcharge follows
1) fuel price increase policy of direct upward adjustment of air ticket prices
At present, China's international fuel surcharge is independently determined by each aviation department, which can be reported to the Civil Aviation Administration for record implementation, while the domestic fuel surcharge standard is obviously administrative.
The collection of fuel surcharge in China can be traced back to the beginning of the 21st century. since November 5, 2000, domestic routes have implemented a fuel price increase policy, allowing airlines to raise their fares by up to 15% and no more than 150 yuan one-way. At the same time, a linkage mechanism between ticket prices and oil prices has been established, allowing airlines to change up to 3% when domestic aviation fuel prices change by 10%. The Civil Aviation Administration issued the Civil Aviation domestic Air Transport Price Reform Plan on March 17, 2004, which stipulates that domestic airline prices are allowed to rise by 25% above the benchmark price, while abolishing the fuel price increase policy.
2) fuel surcharge was officially introduced in 2005
In 2005, international oil prices rose rapidly and airlines' operating costs increased obviously. in order to properly alleviate the pressure of cost increase of airlines, the National Development and Reform Commission and the Civil Aviation Administration issued a notice on issues related to the collection of fuel surcharges on domestic routes on July 25, 2005. It was decided to resume the collection of fuel surcharge for passengers on domestic routes from August 1, 2005, at a rate of 20 yuan per passenger for the section below 800 km. 40 yuan per passenger for more than 800 kilometers (inclusive).
Since then, with the rise of international oil prices, the NDRC has repeatedly raised the fuel surcharge standards. When the oil price was high in 2008, the fuel surcharge for domestic routes below 800 kilometers had been raised to 80 yuan per person, and 150 yuan per person for routes above 800 kilometers (including). Oil prices fell sharply after the outbreak of the economic crisis, and on January 14, 2009, the National Development and Reform Commission and the Civil Aviation Administration decided to suspend the collection of fuel surcharges for passengers on domestic routes from January 15, 2009.
3) resume levying surcharge in 2009 and establish a linkage mechanism with oil prices
Oil prices rebounded rapidly after bottoming out in 2009. on November 11 of the same year, the National Development and Reform Commission and the Civil Aviation Administration issued a notice on the establishment of a linkage mechanism between fuel addition and aviation kerosene prices on civil aviation domestic routes. It was decided to formally establish a linkage mechanism between fuel surcharge and domestic aviation kerosene comprehensive procurement cost from November 14, 2009.
After the linkage mechanism of civil aviation domestic fuel surcharge and aviation kerosene price was established in 2009, the recovery standard of fuel surcharge fluctuated with the oil price. The Development and Reform Commission and the Civil Aviation Administration no longer announced the specific standard of fuel surcharge as before the introduction of the policy. Whether the surcharge is levied or not, the amount of surcharge is decided independently by airlines within the upper limit, only adjusting the recovery rate of fuel surcharge unit year by year. The rate was revised to 0.00002818 on March 30th, and further revised to 0.00002691 on March 24th, 2011.
On October 14, 2011, the National Development and Reform Commission and the Civil Aviation Administration adjusted the fuel surcharge policy. when the cumulative change in the comprehensive procurement cost of domestic aviation kerosene exceeds 250 yuan per ton, the highest standard of fuel surcharge can be adjusted in accordance with the relevant provisions of the linkage mechanism, and when the adjustment of comprehensive procurement cost affects the increase of the highest standard of fuel surcharge, the airline decides to increase the fuel surcharge. Shall be issued 5 days after the implementation of the comprehensive procurement cost adjustment (including the 5th day) When it is reduced, the fuel surcharge shall still be reduced or stopped within 5 days of the comprehensive procurement cost adjustment.
When the fuel additional standards for special passenger groups such as children, revolutionary disabled soldiers, and people's police who are disabled on duty are reduced by half according to regulations, the Mantissa of less than 10 yuan is rounded from the current "rounding" to 10 yuan instead of rounding off the Mantissa. The specific adjustment of fuel additional standard time shall be based on the actual ticket purchase date of passengers.
On March 23, 2012, the National Development and Reform Commission further reduced the fuel surcharge rate to 0.002541 yuan. On March 24, 2015, the National Development and Reform Commission decided to revise the aviation kerosene base price based on the additional basis for passenger fuel on civil aviation domestic routes. The revised formula is changed from 4140 yuan per ton to 5000 yuan per ton.
Maximum fuel additional standard for routes below 800 km (inclusive)
0.00002541 × (domestic comprehensive procurement cost of aviation kerosene-5000) × 800
The highest standard of additional fuel for routes above 800 km
0.00002541 × (domestic comprehensive procurement cost of aviation kerosene-5000) × 1500
With the further decline in oil prices in early 2015, the ex-factory price of airlines did not fall sharply, the basic price standard of aviation kerosene on which the superimposed fuel surcharge was charged was raised, and the fuel surcharge was suspended, which has not yet been resumed.
II. What is the impact of the levy of fuel surcharge
1. When will the levy start? The oil price is more than $70.
If the fuel surcharge recovery rate and aviation kerosene base price announced by the National Development and Reform Commission in 2015 remain unchanged, the re-levying of fuel surcharge needs to meet the following two requirements: first, the comprehensive purchase cost of aviation kerosene by airlines once again breaks through 5000 yuan per barrel; second, the highest standard of fuel surcharge calculated by the charging formula is more than 5 yuan. According to estimates, the comprehensive procurement cost of aviation kerosene corresponding to the above two conditions for routes below 800km and above should exceed 5246 yuan / ton and 5131 yuan / ton respectively.
Since the discount ratio and other relevant parameters are not directly given, it means that the NDRC has not published a clear formula for calculating the ex-factory price of aviation kerosene. We only make a linear analysis based on the correlation between the domestic ex-factory price of aviation kerosene and the average FOB price of Singapore aviation oil during the pricing period × the average exchange rate of RMB × barrel-ton ratio during the pricing period, and roughly draw the following calculation formula:
The ex-factory price of domestic aviation kerosene = 1.151 × (the average price of Singapore aviation oil during the price period × the median price of US dollar to RMB × the ratio of barrels to tons during the period) + 240.78 R ²= 0.9994.
According to the FOB price and exchange rate of Singapore aviation oil, the ex-factory price of domestic aviation kerosene can be roughly fitted. Taking the mid-price of US dollar to RMB 6.4169 on January 19, 2018 as a parameter, it is estimated that when the ex-factory price of aviation kerosene reaches 5246 yuan / ton and 5131 yuan / ton, the corresponding Singapore aviation oil FOB price should be about 85.78 US dollars / barrel and 83.81 US dollars / barrel respectively. Singapore aviation oil price is also closely related to international oil price. according to the historical correlation between Singapore aviation oil price and Singapore aviation oil FOB price, the ex-factory price of aviation kerosene is 5246 yuan / ton and 5131 yuan / ton.
In fact, the comprehensive purchasing cost of airlines should be slightly higher than the ex-factory price of aviation kerosene, and the corresponding oil distribution price should be slightly less than 72.6 US dollars / barrel when the comprehensive purchasing cost of aviation kerosene reaches the threshold. The latest oil production period has not yet ended. As of January 19, 2018, the oil distribution price during the production period is 68.25 US dollars per barrel, which is still some distance from the starting point.
two。 Explain in detail the impact of surcharge on the aviation department
The purpose of the fuel surcharge is to hedge incremental fuel costs and alleviate the cost pressure. We mentioned earlier that the international fuel surcharge can only be levied by airlines for the record with the Civil Aviation Administration, so it is really affected by the policy. Domestic routes are the ones with rigid charges. The amount of domestic fuel surcharge levied by each aviation department is directly related to the passenger traffic volume and flight distance of domestic lines. below, we further analyze in detail the impact of fuel surcharge on each aviation department.
In terms of the total amount, the 2016 National Civil Aviation Flight Operation efficiency report mentioned that the proportion of flights with distances less than 800 km is about 30%. Considering that the flights with low distances are mainly operated by narrow-body aircraft and regional aircraft, the average passenger capacity should be significantly lower than that of long-route flights, so we believe that the proportion of passengers on flights below 800 km should be significantly lower than 30%.
In the first 11 months of 2017, civil aviation domestic lines (excluding Hong Kong, Macao and Taiwan) had a passenger turnover of 629.67 billion and 444.85 million passengers, with an average distance of about 1415.5 km. As the business of listed companies is concentrated in the trunk market, there are fewer regional flights, and the proportion of long routes should be higher than the average. According to the operation data released by listed airlines, except that the average flight distance of China Eastern Airlines is less than 1300 kilometers, the average flight distance of other aviation departments is more than 1400 kilometers, of which the Spring and Autumn and auspicious flight distances are about 1600 kilometers. We assume that 85%, 85%, 80%, 85%, 95% and 95% of passengers on the domestic lines of Air China, China Southern Airlines, China Eastern Airlines, HNA, Spring and Autumn and auspicious have a distance of more than 800 kilometers, respectively.
The impact of fuel surcharge can be further subdivided into airlines' comprehensive aviation fuel procurement costs just hit the threshold and aviation fuel comprehensive procurement costs further higher to the next point of increase. When the fuel surcharge reaches the threshold for the first time, airlines have the ability to impose a fuel surcharge on airlines above 800km, while routes below 800km are still unable to levy the levy because they have not reached the threshold.
Based on the aforementioned assumption, we assume that the number of passengers with a distance of more than 800 km is accounted for by each airline, and assume that each aviation division charges a full fuel surcharge. Without considering the crowding-out effect of surcharge on demand, it is calculated based on the operational data of each aviation division in 2017. At the threshold, the income of Air China, China Southern, China Eastern, HNA, Chunqiu and auspicious increased by 710 million, 920 million, 740 million, 570 million, 120 million and 140 million respectively, which was equivalent to offsetting the increase in oil prices of US $2.20, US $2.40, US $2.50, US $3.20, US $3.30 and US $3.70 respectively.
If the oil price goes up further, as the upper limit of the fuel surcharge remains unchanged, the coverage of the fuel surcharge to the overall fuel cost increment gradually decreases until the adjustment point of the fuel surcharge ceiling is reached next time. We assume that the comprehensive purchase cost of aviation fuel is equal to the ex-factory price of aviation kerosene. Taking the comprehensive purchase cost of aviation kerosene of 5000 yuan / ton as the starting point, we calculate the coverage of the fuel surcharge of each aviation company to the incremental fuel cost when the comprehensive procurement cost increases.
We estimate the fuel costs of each aviation division in 2017 as shown in the following table:
Regardless of the difference in monthly aviation fuel consumption caused by seasonal effects, if the average ex-factory price of aviation kerosene for the whole year of 2017 is 4174 yuan / ton, the estimated aviation fuel consumption of airlines is shown in the table below.
If the comprehensive procurement cost of aviation kerosene is 5000 yuan / ton as the starting point, assuming that each aviation company collects a surcharge according to the formula for calculating the fuel surcharge, then as the oil price gradually goes up, the proportion of incremental fuel costs covered by the fuel surcharge of each aviation company is shown below:
For example, with the comprehensive purchase cost of aviation oil of 5000 yuan / ton (corresponding to the distribution price of about US $70.50 / barrel) as the starting point, with the increase in oil prices, the domestic line fuel surcharges levied by companies can partially cover the overall incremental fuel costs (both domestic and international). In specific locations, the fuel surcharge income of some airlines can exceed the incremental fuel costs, while with the further rise in oil prices. The surcharge coverage capacity of each aviation company varies. On average, according to the current fuel surcharge calculation formula, auspicious Airlines can cover 80% of the incremental fuel cost, 71% of the total fuel incremental cost in Spring and Autumn, and 70% in HNA. China Eastern Airlines can cover 53.5%, China Southern Airlines can cover 50%, and Air China can cover 43.5%.
If only the impact of the fuel surcharge on domestic line costs is considered, and assuming that the unit ATK fuel consumption and aviation fuel prices of international and domestic lines are the same, then the domestic aviation fuel costs of each aviation division in 2017 are shown in the table below:
If the comprehensive procurement cost of aviation kerosene is 5000 yuan / ton as the starting point, assuming that each aviation company collects a surcharge according to the formula for calculating the fuel surcharge, then with the gradual rise in oil prices, the proportion of incremental fuel costs covered by the fuel surcharge of each aviation company covering the domestic line is shown below:
For example, with the comprehensive purchase cost of aviation oil of 5000 yuan / ton (corresponding to the distribution price of about US $70.50 / barrel) as the starting point, with the increase in oil prices, the domestic line fuel surcharge levied by various companies can cover most of the domestic line incremental fuel costs. in a specific location, the fuel surcharge income of some airlines can exceed the incremental fuel cost, on average, according to the current fuel surcharge calculation formula. The Spring and Autumn period can cover 105.8% of the incremental fuel costs of domestic lines, 97.2% for China Eastern Airlines, 96.7% for HNA, 95.0% for auspicious Airlines, 88.1% for Air China and 86.3% for China Southern Airlines.
3. How do we view the fuel surcharge
We believe that the fuel surcharge is levied in the form of a fee, which is independent of the fare, and it will be more acceptable to passengers, which will help airlines to hedge incremental fuel costs, and when the oil price happens to hit the fuel surcharge threshold, the fuel surcharge is equivalent to an one-off boost to airlines' performance, which will significantly ease the upward pressure on aviation fuel costs.
III. Investment suggestions
If oil prices rise further, airlines can impose a fuel surcharge to partially hedge incremental jet fuel costs. Continue to recommend the three major airlines (Amush) and pay attention to the auspicious airlines with high correlation between Shanghai routes.
Risk Tips:Macroeconomic downturn, higher-than-expected rise in oil prices, safety accidents. (editor: Hu Min)