China southerly Airlines, China eastern Airlines and also Air China released their 2020 yearly performance results, reporting a linked loss the CNY 37.1 billion.

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Of the three, China southern Airlines endured the least adverse impact from the coronavirus pandemic critical year.

Orienting in various directions, the three carriers are all demonstrating recurring recovery.

Being at the initial phase of your recovery strategies implementation, these three carriers are rated neutral in ~ the moment.

By April 2021, China's three significant airlines, China southern Airlines (ZNH: NYSE), China Eastern airlines (CEA: NYSE), and also Air China (0753: HK), released their 2020 yearly statements, reporting a total loss that CNY 37.1 billion, or over CNY 100 million a day.

But compared with other countries and regions globally, China's aviation market seems to be recovering somewhat faster. So far, much more than 40 airlines an international have unable to do bankrupt or been restructured since the epidemic started in at an early stage 2020. According to the international Air move Association (IATA), native the perspective of industry segments, the worldwide average revenue passenger kilometers (RPK) of the key geographic locations all dropped much more than 60%. The passenger load aspect (PLF) in Africa, north America and also the Middle east was much less than 60% while the passenger-carrying rate in the Asia Pacific and Europe was around 65%.

China's trio of airlines had superior critical ratios, contrasted to the global averages in 2020.


Last year, China accounted for 19.9% of the global domestic passenger move market, ranking first, complied with by the United claims (16.6%). The 2 countries' top positions an outcome from the enormous demand for domestic transportation. China's efficient COVID-19 control has played a an excellent role in the recovery. Native this allude of view, China's airline seem to have raising investment value. This article will discuss the present and future outlook that China's three significant airlines.

Financial highlights

Among the three, China southerly Airlines completed the largest revenue in 2020, if China east Airlines proficient the most severe revenue decline. In detail, the previous generated CNY 92.6 billion, under 40% year-on-year, wait China's figure hit CNY 69.5 billion, down 49% year-on-year, and China eastern Airlines got to revenue of just CNY 58.6 billion, under 51.5% year-on-year. Due to the large losses, the freight organization has come to be crucial. Specifics the cargo service addedCNY 16.5 billion, CNY 8.6 billion and also CNY 4.9 exchange rate (up 71.5%, 49.21%, 27.94% year-over-year) to revenues of China southern Airlines, waiting China and also China Eastern airlines respectively. By contrast, the passenger revenue the the 3 companies has actually been serious affected. The revenue added by passenger businesses decreased 49.07%, 55.46%, and also 55.25% for China southern Airlines, China east Airlines and Air China, respectively.


Air China experienced the biggest loss in terms of net profit, while China Southern had the biggest decline. Special, China southern Airlines, China east Airlines and Air China knowledgeable net losses of CNY 14.4 billion, CNY 11.8 billion and also CNY 10.8 billion, plumping 324.8%, 470.4% and also 509%, respectively.

The network cash circulation from China southern Airlines' operating activities decreased by 76.26% year-on-year, while the of China eastern Airline and also Air China decreased 95.8% and also 96.3% compared with 2019. Just from the finance perspective, the restore of China southerly Airlines seems much more apparent than the various other two companies.

Strategy analysis


China southern Airlines' strategy to the new macro difficulties made it the most financially successful amongst the trio. In march 2020, in relationship to the limited international passenger flights, this airline seized the industry opportunity and created the layout the 'passenger-to-cargo' flights. Top top April 3, the agency launched a passenger aircraft cargo special flight business, implementing the first 'no chair flight' through cabin modification. The company then transported 17.6 tons of cargo native Guangzhou come Kuala Lumpur, Malaysia. Other than for company modifications, ~ above July 28, China southerly Airlines introduced the 'Fly in ~ Will' residential tourism package. From august 12, 2020, passenger can obtain economy course tickets through its app for any type of time or flight, top top both weekends and weekdays. Compared with China east Airlines' comparable plan, its commodities are an ext diverse and also have thus become increasingly popular. Moreover, China southerly Airlines opened the trip simulator suffer in the live broadcast room to entice customers and optimize the marketing strategy.

On the other hand, China eastern is the first company to adopt unconventional remedial measures. On June 18, it released the fix up 'Fly at Will' Ticket parcel in China. Consumers only need to spend CNY 3,322 to travel economy class with very couple of restrictions ~ above weekends. The arrangement seemed to come to be popular, as much more than 65,000 tickets were purchased throughout the first weekend. As a result, the agency attained CNY 300 million in cash flow. Also, in august 2020, China eastern Airlines and also China Railway team realized full system docking, which method through the application of either party, passengers can buy one-stop an unified transport tickets because that China east Airlines and high-speed rail trains. This efficiently stimulated customers' take trip interests. Regardless of innovations, China Eastern airlines also actively adjusted aircraft and also engine advent progress and postponed invest plans to alleviate expenses. However, China eastern Airlines' 2020 restore was relatively weak. Based upon the analysis of measures taken by China eastern Airlines, we believe that the company's efforts focus ~ above medium and long-term periods. We intend that the impact of these procedures will be reflect in its company performance in 2021.

Likewise, waiting China was the latest of the three major airlines come take vital measures. In October, air China launched three plans to wake up its business. The main product is the youth legal rights card, which have the right to be construed as air China's version of the 'Fly at Will' plan. However, it has period restrictions, only supporting people under 25. The 2nd is the 'Double CityPass' product launched for customers who regularly travel between the two cities. With such a plan, customers can travel between selected urban for countless times with a solved fee. The 3rd is referred to as 'Curiosity Calendar,' which offers passengers v the opportunity to obtain the ticket booking attach lower than Air China's sector price. Perhaps as result of the late-launch restore plans, wait China's performance in 2020 was not ideal and it needs to put an ext effort into product design in 2021.

What's next

For the 2021 plan, China southerly Airlines quiet emphasizes reduce costs and also increasing efficiency. The firm plans to minimize the unit operation and also service costs by strictly controlling expenses from necessities, including aviation fuel and also maintenance fees. The agency also plans to build an aviation-food-related innovation business and expand duty-free goods' sales channels essential to alleviate costs. Also, we think that duty-free products sales and also aviation food may come to be the vital to that is recovery.

China Eastern focuses on functional adjustment the capacity and speed up product innovation. The agency plans to strengthen the hub strategy and realize the 4 airport groups' link in Beijing Tianjin Hebei, Yangtze flow Delta, Guangdong, Hong Kong, Macao, Chongqing, and Chengdu. It likewise wants to increase group customers, speed up product innovation, and also accelerate the beginning of customized and universal products. We think that these procedures are more in line through China eastern Airlines' development strategy in 2020, and also therefore we hold a solid confident attitude.

Compared v China southern Airlines and China eastern Airlines, waiting China's setup is no detailed, which provokes concerns about its recovery and development. According to wait China, the focus of its job-related in 2021 will certainly be enhancing efficiency and the quality of products and also services. One more measure is to build a market-oriented strategy and also promote the integration of core flight resources. Because that Air China, the advance of regional aviation might be a breakthrough method. Local airlines have actually the benefits of having a short up-front cost and high flexibility, which will certainly greatly advantage the economic breakthrough and travel industry.

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The 3 airlines' P/B ratios are all reduced than the industry and also stock market average levels. However, your EV/sales ratios have actually all reached historic highs. Based upon these data, though the suppliers are taking measures to recover, it isn't a great time to long their stocks, especially for short- and mid-term investors. Nevertheless, we can credit this companies' initiatives towards recovery, which might affect their ratings in late 2021.