Equity Long-Short

Mo Aziz

Thematic (Sector/Industry)

<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?

Founder & Managing Director, AIR Control Tower, AIR Control Tower

Neil Glynn

Founder & Managing Director, AIR Control Tower

AIR Control Tower

AIR Control Tower is an independent research and analysis platform. Its mission is to provide impactful insight and analysis across the global airline industry at a company and market level via detailed financial models to aid decision making for key stake holders at a time when risks have seldom, if ever, been higher and the global sector grapples with the imperative of funding de-carbonisation. Unique analysis forecasting global carrier-level earnings/cash flows, and restructuring/de-leveraging prospects, is designed to dynamically assess the health of the industry, predict surprises and identify potential requirements for third party support.

Insights on the global airline industry

Equity Bottom-Up

Virgin Australia Holdings / Equity Bottom-Up

<ul>
<li>FY23 performance positions VA at the top table relative to global LCC financial performance</li>
<li>Global analysis of #2 positions behind a strong market leaders suggests an efficient VA should be well positioned to sustainably outperform the global airline industry's average financial performance</li>
<li>Forecasting mean reversion for operating performance but aircraft financing savings should sustain superior profitability and cash flow generation than pre-COVID.</li>
</ul>


FY23 performance positions VA at the top table relative to global LCC financial performance
Global analysis of #2 positions behind a strong market leaders suggests an efficient VA should be well positioned to sustainably outperform the global airline industry's average financial performance
Forecasting mean reversion for operating performance but aircraft financing savings should sustain superior profitability and cash flow generation than pre-COVID.


Virgin Australia - Outperforming Most LCCs Globally; Positioned for New Era of Cash Flow Generation

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

<ul>
<li>Of the seven US metrics we track, six showed a weaker pace of Y/Y change vs July data</li>
<li>Five of the seven border crossing metrics showed Y/Y declines in August (vs only two in July)</li>
<li>As a proxy for US leisure and travel activity, the August numbers paint a bleak picture</li>
</ul>


Of the seven US metrics we track, six showed a weaker pace of Y/Y change vs July data
Five of the seven border crossing metrics showed Y/Y declines in August (vs only two in July)
As a proxy for US leisure and travel activity, the August numbers paint a bleak picture


August US Customs & Border Protection Data Confirm Softening Travel Trend in Most Segments, Regions

Derivatives and Quantitative Strategist

Gaudenz Schneider

<ul>
<li>
Context: The <a href="https://www.smartkarma.com/entities/brambles-ltd" target="_blank" data-smartkarma-citation="entities:693:1" rel="noopener">Brambles (BXB AU)</a>  vs.  <a href="https://www.smartkarma.com/entities/qantas-airways-ltd" target="_blank" data-smartkarma-citation="entities:677:1" rel="noopener">Qantas Airways (QAN AU)</a> price ratio has deviated more than two standard deviations from its one-year average, presenting a potential relative value opportunity.</li>
<li>
 Highlight: Going long <a href="https://www.smartkarma.com/entities/qantas-airways-ltd" target="_blank" data-smartkarma-citation="entities:677:1" rel="noopener">Qantas Airways (QAN AU)</a> and short <a href="https://www.smartkarma.com/entities/brambles-ltd" target="_blank" data-smartkarma-citation="entities:693:1" rel="noopener">Brambles Ltd (BXB AU)</a> targets a 7% return.</li>
<li>
Why Read: Essential for quantitative traders seeking mean-reversion opportunities, with detailed execution framework, risk management protocols, and historical simulation showing the statistical basis for this relative value play.</li>
</ul>



Context: The Brambles (BXB AU)  vs.  Qantas Airways (QAN AU) price ratio has deviated more than two standard deviations from its one-year average, presenting a potential relative value opportunity.

 Highlight: Going long Qantas Airways (QAN AU) and short Brambles Ltd (BXB AU) targets a 7% return.

Why Read: Essential for quantitative traders seeking mean-reversion opportunities, with detailed execution framework, risk management protocols, and historical simulation showing the statistical basis for this relative value play.


Qantas (QAN AU) Vs. Brambles (BXB AU): Airlines Vs Logistics Pair Trade Signals 7% Opportunity

<ul>
<li>
Context: The <a href="https://www.smartkarma.com/entities/brambles-ltd" target="_blank" data-smartkarma-citation="entities:693:1" rel="noopener">Brambles (BXB AU)</a> vs. <a href="https://www.smartkarma.com/entities/qantas-airways-ltd" target="_blank" data-smartkarma-citation="entities:677:1" rel="noopener">Qantas Airways (QAN AU)</a> price ratio has deviated more than two standard deviations from its one-year average, presenting a potential relative value opportunity.</li>
<li>
Highlights: Going long Qantas Airways (QAN AU) and short Brambles (BXB AU) targets a 5% return.</li>
<li>
Why Read: Essential for quantitative traders seeking mean-reversion opportunities, with detailed execution framework, risk management protocols, and historical simulation showing the statistical basis for this relative value play.</li>
</ul>



Context: The Brambles (BXB AU) vs. Qantas Airways (QAN AU) price ratio has deviated more than two standard deviations from its one-year average, presenting a potential relative value opportunity.

Highlights: Going long Qantas Airways (QAN AU) and short Brambles (BXB AU) targets a 5% return.

Why Read: Essential for quantitative traders seeking mean-reversion opportunities, with detailed execution framework, risk management protocols, and historical simulation showing the statistical basis for this relative value play.


Qantas (QAN AU) Vs. Brambles (BXB AU): 9% Earnings Drop Creates Stat Arb Opportunity

Australia

Qantas Airways Limited provides transportation of passengers through two airlines including Qantas (full service carrier) and Jetstar (low cost carrier), operating international, domestic and regional services. The Company also includes Qantas Frequent Flyer and Qantas Freight which generates diverse revenue streams and adds value for customers and investors.

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Qantas Airways (QAN AU)

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

Virgin Australia - Outperforming Most LCCs Globally; Positioned for New Era of Cash Flow Generation

Privately held Virgin Australia is preparing to IPO and our coverage launch is likely to be the only substantive research report, including short...

Neil Glynn

August US Customs & Border Protection Data Confirm Softening Travel Trend in Most Segments, Regions

By almost every measure, August's US border crossing data look even weaker than the mediocre numbers from July. Clearly, US travel and leisure...

Tracking Traffic

Qantas (QAN AU) Vs. Brambles (BXB AU): Airlines Vs Logistics Pair Trade Signals 7% Opportunity

Pair trade targeting a 7% return as the airlines–logistics spread diverges, highlighting a cross-sector mean-reversion opportunity driven by a...

Gaudenz Schneider

Qantas (QAN AU) Vs. Brambles (BXB AU): 9% Earnings Drop Creates Stat Arb Opportunity

Targets a 5% mean-reversion move after Qantas’ post-earnings drop pushed the price ratio beyond a two-standard-deviation. Ideal for quant traders...

Gaudenz Schneider

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52-week Range

Market Cap (USDm)

P/E

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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

Virgin Australia - Outperforming Most LCCs Globally; Positioned for New Era of Cash Flow Generation

Privately held Virgin Australia is preparing to IPO and our coverage launch is likely to be the only substantive research report, including short...

Neil Glynn

August US Customs & Border Protection Data Confirm Softening Travel Trend in Most Segments, Regions

By almost every measure, August's US border crossing data look even weaker than the mediocre numbers from July. Clearly, US travel and leisure...

Tracking Traffic

Qantas (QAN AU) Vs. Brambles (BXB AU): Airlines Vs Logistics Pair Trade Signals 7% Opportunity

Pair trade targeting a 7% return as the airlines–logistics spread diverges, highlighting a cross-sector mean-reversion opportunity driven by a...

Gaudenz Schneider

Qantas (QAN AU) Vs. Brambles (BXB AU): 9% Earnings Drop Creates Stat Arb Opportunity

Targets a 5% mean-reversion move after Qantas’ post-earnings drop pushed the price ratio beyond a two-standard-deviation. Ideal for quant traders...

Gaudenz Schneider

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