The Zhitong Finance App learned that Guoxin Securities (Hong Kong) released a research report saying that since the end of 2023, the main types of Hong Kong airlines have continued to decline, and the stock prices are currently in a very low position. The bank believes that the overall operation of the civil aviation industry has returned to a normal growth path, and that the supply and demand status of the industry is expected to gradually move towards a tight balance in 2024, and the profitability of airlines is expected to increase across the board. The current low level of the secondary market is a good layout opportunity. Maintain an industry rating that outperforms the market. In terms of specific products, it is recommended to focus on Air China (00753), which has a relatively large increase in capacity and high performance flexibility, and China Southern Airlines (01055), which has the largest and most efficient business scale.

Guoxin Securities (Hong Kong) views are as follows:

In January-March, passenger turnover of civil aviation continued to increase positively compared to 2019

According to data from the Civil Aviation Administration of China, in March 2024, passenger turnover of civil aviation recorded 5.9% compared to the same period in 2019. Among them, passenger turnover for domestic routes increased by 15.7% compared to 2019, and passenger turnover for international routes recorded a growth rate of -21.4% compared to 2019. In January and February 2024, passenger turnover of civil aviation recorded 5.2% and 14.8%, respectively, compared to the same period in 2019. At this point, passenger turnover of civil aviation has achieved positive growth for three consecutive months compared to 2019, and the overall operation of the industry has returned to a normal growth trajectory.

In the first quarter of 2024, passenger turnover of civil aviation increased by 8.6% compared to the same period in 2019. Passenger turnover on domestic routes in China increased by 20.2% compared to 2019, and passenger turnover on international routes recorded a growth rate of -23.2% compared to 2019. In terms of airlines, in March 2024, the passenger turnover of Air China, China Southern Airlines, and China Eastern Airlines recorded 17.4%, 2.7%, and 6% respectively compared to the same period in 2019, for a total growth rate of 8.4%.

International routes resumed at an accelerated pace in the first quarter

According to data from the Civil Aviation Administration of China, from January to March 2024, passenger turnover on international routes recorded -29.3%, -18.5%, and -21.4%, respectively, compared to the same period in 2019. The rate of recovery of international routes was significantly faster than in the fourth quarter of 2023. International routes resumed at an accelerated pace in the first quarter. The bank believes that there are the following main reasons: 1) residents' demand for business, travel, and family visits continued to recover; 2) demand for overseas travel was concentrated released around the Spring Festival; 3) the number of flights between China and the US continued to increase.

Airlines' profitability is expected to increase across the board in 2024

Based on the following reasons, the bank believes that the profitability of airlines is expected to increase across the board in 2024:1) continued economic improvement is expected to drive a steady increase in overall air travel demand; 2) continued recovery of international routes will help the continued release of overseas travel demand; 3) the civil aviation industry's fleet growth rate is expected to remain low, supply and demand will gradually become more balanced, and passenger occupancy rates are expected to continue to rise.

Risk warning: The recovery of international routes fell short of expectations; macroeconomic improvements fell short of expectations; oil prices rose sharply.