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China Stock Listed Civil Aviation Companies Report, 2006-2007

Published: Aug/2007

 Hard Copy  USD $ 1,400
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Report Code: FY064 Enterprisewide  USD $ 2,250
 

In Q1 2007, China civil aviation industry accumulatively realized total transportation turnover 7.92 billion ton-kilometers, passenger transport volume 61.69 billion passenger-kilometers, and cargo & mail transport volume 2.42 billion ton-kilometers, up by 19.5%, 15.9% and 13.3% respectively year-on-year. According to statistics by route, international routes witnessed excellent performance, whose total transportation turnover, passengers carried and cargo & mail carried increased by 28.4%, 23.9% and 25.1% respectively. Differently, Hong Kong & Macao routes suffered a loss, whose total transportation turnover, passengers carried and cargo & mail carried increased by -0.2%, 3.8% and -11.9% respectively. While for domestic routes, it kept a steady growth, whose total transportation turnover, passengers carried and cargo & mail carried increased by 15.4%, 15.1% and 9.4% respectively.

Monthly Seat Occupied Rate and Transport Capacity Occupied Rate of China Civil Aviation Industry since 2005


Due to rapid growth of demand and fallback in prices of aviation oil, in 2007Q1, growth of revenues in China Civil Aviation industry exceeded that of cost, so the whole industry has turned from loss-making to profit-making. In detail, in 2007Q1 the whole industry realized prime operating revenues RMB 57.45 billion, up by 19.6% year-on-year, costs and expenses RMB 56.92 billion, up by 16.6% year-on-year and profits RMB 53 million. Of these, aviation companies realized prime operating revenues RMB 40.51 billion, up by 19.9%, costs and expenses RMB 41.27 billion, up by 16.5%. Aviation companies suffered a loss of RMB 82 million, down by RMB 1.28 billion compared to the previous year.

In fact, according to monthly data since 2006, international routes have always kept accelerating growth trend. There are two major causes for it. Firstly, affected by RMB appreciation and 2008 Beijing Olympic Games, demands of inbound and outbound tourism have a rapid growth, coinciding with international experience. Secondly, both economic recovery of global major economies and regain of consumers' confidence will bring growth of global aviation demands.

 

Monthly Growth Rate of China Civil Aviation Transportation Volume since 2006


 
Source: Department of Planning & Development, General Administration of Civil Aviation of China

On 3rd July 2007, RMB to USD exchange rate firstly broke through 1:7.6 to close at 1:7.5951. Before RMB exchange rate forming mechanism reform in 2005, RMB 8.2765 amounted to USD 1. Currently RMB has appreciated by RMB 0.6814 and RMB to USD appreciation rate has accumulated to be 8.23%. Since major aviation companies averagely hold a large sum of net foreign currency liabilities, sustained RMB appreciation will bring reductions in foreign currency liabilities valuated by RMB as well as a large sum of exchange net incomes. In accordance with 2006 fiscal reports of aviation companies, China Southern Airlines Company Limited is the aviation company most affected by RMB appreciation. For per 1% RMB appreciation, its EPS will increase by RMB 0.083. Followings are China Eastern Airlines Corporation Limited and Shanghai Airlines Co., Ltd. since Air China Limited holds the lowest ratio of foreign currency liabilities and largest equities, it is least sensitive to RMB appreciation and only an effect of RMB 0.016 is brought on its EPS by per 1% RMB appreciation.

In the second half of 2007, RMB appreciation is also possible. It will be one important factor for promoting profit improvement and stock price growth of aviation companies.

 

Effects of 1% RMB appreciation on EPS of Major Aviation Companies


Source: 2006 Fiscal Reports of Aviation Companies; An'xin Securities
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