Starting in 2024, demand growth is gradually recovering, and in the context of tight supply, the preparation cycle reversal opportunities are being prepared; and considering the continued difficulties in aircraft introduction, it is expected that this round of cycle reversal will continue until 2027-2028, expanding the breadth of the cycle.
The Zhitong Finance App learned that starting in 2023, Changjiang Securities released a research report saying that starting in 2023, the overall demand in the civil aviation industry showed a trend of strong private sector and sluggish business. Compared with the business customer base, private aviation has the characteristics of high price sensitivity and low timeliness requirements, and private aviation with more cost-effective prices can meet the needs of industries with strong private demand, which is expected to benefit significantly: In the short term, private airlines attract customers traveling for personal reasons at low prices, cater to new trends in demand, and are expected to benefit significantly; in the medium term, the cost efficiency of commercial aviation is normalized, and operational efficiency is expected to benefit significantly. Industry-leading, lower unit non-oil cost, first profit margin Recovery; In the long run, the sinking market space is vast. The growth characteristics of private airlines are obvious. The bottom is bucking the trend and expanding, and the market rate is leveling up.
The main views of Changjiang Securities are as follows:
Every peak season, volume and prices rise sharply, and travel spending power is more prominent
Overall, the demand attribute of travel is prominent in travel consumption. Volume and price rise sharply during the peak season, and spending power is outstanding. Changjiang Securities said that compared to travel data, the immediate demand attributes of travel consumption are outstanding, and the desire to travel is strong. In the context of insufficient overall travel spending power, the travel market achieved a sharp increase in unit prices in every peak season after 23 years, and travel consumption power took the lead in recovering; among them, the average ticket price of civil aviation during the 2024 Spring Festival increased 28% compared to 2019, and the peak season showed sharp increases in volume and price and outstanding consumption power. On the one hand, the world is improving, and supply is releasing potential travel demand: starting in '23, with the restoration of international traffic and the implementation of the visa-free policy stimulating outbound travel demand, international flights gradually climbed and supply recovered quickly; on the other hand, strong aviation supply barriers released price elasticity during the peak season: starting in 2020, supply growth continued to slow. As international routes continued to recover, domestic supply gradually became limited, driving up prices.
Profit fluctuations have increased due to stronger private reasons and weaker business
Changjiang Securities pointed out that starting in '23, for most of the time, airline profits far exceeded the level of 20 years ago, and profits ushered in a strong boom. However, significant changes in industry demand characteristics were observed from the industry's operating conditions: due to very different private and public business market performance, industry demand fluctuated sharply, and profit fluctuations increased during the off-peak season. Tracing back to the source, the low performance of off-season data is rooted in overall weak business demand. After lack of private demand such as tourism, it is difficult to support supply during the off-season, and aviation's asset-heavy model and high operating leverage amplify the volatility of performance; therefore, airline profits due to a higher share of private demand, more obvious improvement in utilization rate, and more effective cost control are more likely to benefit from the trend of tourism.
On the basis of the tightening of supply rigidity in the medium to long term, wait for the cycle to reverse
The impact on aviation after 20 years is reflected not only in profit margins, but also in the increase in balance ratios. After 20 years, airline capital expenditure slowed drastically, objectively limiting the speed of aircraft introduction. Combined with the 2-3 year window period required for aircraft introduction, a new cycle is already in the preparation stage. Looking ahead, Changjiang Securities believes that there will be major changes in the supply of China's civil aviation industry: overall supply will be significantly tightened, and the annual introduction rate of aircraft will drop drastically from the central level of 10% annualized in the past. The growth rate of aviation demand is highly correlated with the GDP growth rate. From a longer perspective, demand will eventually bottom out and rebound, and the constraining effect of supply in the medium term is even more obvious. Starting in 2024, demand growth is gradually recovering, and in the context of tight supply, the preparation cycle reversal opportunities are being prepared; and considering the continued difficulties in aircraft introduction, it is expected that this round of cycle reversal will continue until 2027-2028, expanding the breadth of the cycle.
Risk warning: macroeconomic fluctuations; sharp rise in oil prices, fluctuations in the RMB exchange rate; capital expenditure risks.