Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Bottom-Up

<ul>
<li>August air activity largely matched July's improved pace of growth (versus weak Q2)</li>
<li>The improvement in domestic activity has been more dramatic than in outbound </li>
<li>Effectively, high fuel costs appear to be keeping travelers closer to home here in Q3</li>
</ul>


August air activity largely matched July's improved pace of growth (versus weak Q2)
The improvement in domestic activity has been more dramatic than in outbound 
Effectively, high fuel costs appear to be keeping travelers closer to home here in Q3


Monthly Chinese Tourism Tracker | August Traffic Resilient, Especially Domestic Air Activity

<ul>
<li>Chinese domestic and outbound air travel activity rebounded sharply in July - why?</li>
<li>If we're right about the reasons for July's recovery in traffic, bounce likely to be short-lived</li>
<li>We expect platform Trip.com to confirm a weak outlook when it reports Q226 results</li>
</ul>


Chinese domestic and outbound air travel activity rebounded sharply in July - why?
If we're right about the reasons for July's recovery in traffic, bounce likely to be short-lived
We expect platform Trip.com to confirm a weak outlook when it reports Q226 results


Monthly Chinese Tourism Tracker | Air Travel Growth Rebounded in July | Why? And Is It Sustainable?

HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>Various statistics suggested that China's tourism and hospitality industry has staged a significant recovery during the 2024 CNY holidays, with traffic surging high double-digit.</li>
<li>While consumers are more cautious about retail product spending, they are willing to spend more on traveling. Such a trend will continue to bode well for the sector.</li>
<li>We like OTAs including <a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel (780 HK)</a> and <a href="https://www.smartkarma.com/entities/trip-com-group-ltd-23a341d0-4f63-4175-a8c5-ee990906cacd" target="_blank" data-smartkarma-citation="entities:36424:1" rel="noopener">Trip.com (9961 HK)</a> despite their YTD surge in share prices. Meanwhile, <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China Ltd (H) (753 HK)</a> stays as the top pick.</li>
</ul>


Various statistics suggested that China's tourism and hospitality industry has staged a significant recovery during the 2024 CNY holidays, with traffic surging high double-digit.
While consumers are more cautious about retail product spending, they are willing to spend more on traveling. Such a trend will continue to bode well for the sector.
We like OTAs including Tongcheng Travel (780 HK) and Trip.com (9961 HK) despite their YTD surge in share prices. Meanwhile, Air China Ltd (H) (753 HK) stays as the top pick.


China Tourism and Hospitality Industry: Roundup of a Solid CNY

Equity Long-Short

Mo Aziz

<ul>
<li>Jet fuel price has declined in the past two months and is 20% lower than the September peak. Positive for airlines but we have yet to see any earnings upgrade   </li>
<li>All the Chines state carriers (Air China, China Eastern and China Southern) and Taiwan's EVA Airways are unhedged, benefiting the most from this lower fuel price trend </li>
<li>Worst off due to fuel hedge cover at higher than current market prices are Qantas Airways (75% hedged), Air New Zealand (54% hedged) and Japan Airlines (40% hedged)  </li>
</ul>


Jet fuel price has declined in the past two months and is 20% lower than the September peak. Positive for airlines but we have yet to see any earnings upgrade   
All the Chines state carriers (Air China, China Eastern and China Southern) and Taiwan's EVA Airways are unhedged, benefiting the most from this lower fuel price trend 
Worst off due to fuel hedge cover at higher than current market prices are Qantas Airways (75% hedged), Air New Zealand (54% hedged) and Japan Airlines (40% hedged)  


Lower Fuel Price, Which Asia Pacific Airline Benefits and Suffers the Most?

<ul>
<li>The Chinese airlines are best placed to ride on lower US interest rates and the induced weakening of USD given heavy USD debt, which amounts to 17.7% of the total.</li>
<li>A 1% drop in USD interest rates will save Rmb1.2bn, and this is more than the total profit they have generated in 9M23. FY24 will be a big swing year.</li>
<li>This is an overlooked sector as their share prices have dropped by an average of 21.8% YTD. However, profits turned around and revenue surged tremendously in the period. </li>
</ul>


The Chinese airlines are best placed to ride on lower US interest rates and the induced weakening of USD given heavy USD debt, which amounts to 17.7% of the total.
A 1% drop in USD interest rates will save Rmb1.2bn, and this is more than the total profit they have generated in 9M23. FY24 will be a big swing year.
This is an overlooked sector as their share prices have dropped by an average of 21.8% YTD. However, profits turned around and revenue surged tremendously in the period. 


Chinese Airlines: Well Placed for a Reversal

China

Air China Limited provides passenger, cargo, and airline-related services in China.  The Company is primarily based in Beijing and a major hub for domestic and international air transportation.  Air China's airline-related services include aircraft maintenance, repair, overhaul service, ground services, and in-flight catering services.

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Air China Ltd (A) (601111 CH)

Monthly Chinese Tourism Tracker | August Traffic Resilient, Especially Domestic Air Activity

August air traffic figures show a decent Y/Y recovery that mirrors what we saw in July, especially for domestic travel. We believe demand could...

Tracking Traffic

Monthly Chinese Tourism Tracker | Air Travel Growth Rebounded in July | Why? And Is It Sustainable?

After weak growth in Q226, Chinese domestic and outbound air travel activity suddenly rebounded in July. But is the improvement sustainable? We...

Tracking Traffic

China Tourism and Hospitality Industry: Roundup of a Solid CNY

China's tourism industry sees a strong recovery during the 2024 CNY holidays, with a high double-digit traffic surge. OTAs like Tongcheng and...

Osbert Tang, CFA

Lower Fuel Price, Which Asia Pacific Airline Benefits and Suffers the Most?

Jet fuel prices have been declining and this is good for airlines. The impact varies according to average flight length and fuel hedge exposure....

Mo Aziz

Chinese Airlines: Well Placed for a Reversal

Chinese airlines stand to benefit from lower US interest rates and a weaker USD due to their heavy USD debt. Despite a drop in share prices,...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Monthly Chinese Tourism Tracker | August Traffic Resilient, Especially Domestic Air Activity

August air traffic figures show a decent Y/Y recovery that mirrors what we saw in July, especially for domestic travel. We believe demand could...

Tracking Traffic

Monthly Chinese Tourism Tracker | Air Travel Growth Rebounded in July | Why? And Is It Sustainable?

After weak growth in Q226, Chinese domestic and outbound air travel activity suddenly rebounded in July. But is the improvement sustainable? We...

Tracking Traffic

China Tourism and Hospitality Industry: Roundup of a Solid CNY

​China's tourism industry sees a strong recovery during the 2024 CNY holidays, with a high double-digit traffic surge. OTAs like Tongcheng and...

Osbert Tang, CFA

Lower Fuel Price, Which Asia Pacific Airline Benefits and Suffers the Most?

​Jet fuel prices have been declining and this is good for airlines. The impact varies according to average flight length and fuel hedge exposure....

Mo Aziz

Chinese Airlines: Well Placed for a Reversal

​Chinese airlines stand to benefit from lower US interest rates and a weaker USD due to their heavy USD debt. Despite a drop in share prices,...

Osbert Tang, CFA

China's tourism industry sees a strong recovery during the 2024 CNY holidays, with a high double-digit traffic surge. OTAs like Tongcheng and...

Jet fuel prices have been declining and this is good for airlines. The impact varies according to average flight length and fuel hedge exposure....

Chinese airlines stand to benefit from lower US interest rates and a weaker USD due to their heavy USD debt. Despite a drop in share prices,...