Zhi Tong Cai Jing·2025-05-06 02:38Core Viewpoint - Goldman Sachs released a report on May 5, analyzing the supply-demand imbalance and turning points in the Asian passenger and cargo transportation sectors, indicating that the three major Chinese airlines will underperform in Q1 2025, but the supply shortage logic remains unchanged, with Labor Day holiday ticket prices potentially exceeding expectations [1] Summary by Sections Airline Performance - The three major Chinese airlines reported Q1 2025 results: Air China (601111) recorded a net loss of 2 billion yuan, Eastern Airlines 995 million yuan, Southern Airlines 747 million yuan, and Spring Airlines (601021) a net profit of 677 million yuan. In comparison, Q1 2024 results were net losses of 1.7 billion yuan, 803 million yuan, and net profits of 756 million yuan and 810 million yuan respectively. Market expectations were for at least flat growth, but only Spring Airlines met expectations, while Southern Airlines underperformed due to a 683 million yuan loss from an investment in Sichuan Airlines [2] - The underperformance of the three major airlines is primarily linked to a 6% and 12% year-on-year decline in domestic and international ticket prices in March 2025, partially offset by improved aircraft utilization leading to lower unit costs [2] Future Outlook - Goldman Sachs has lowered its passenger yield forecast, assuming airlines will offer higher discounts to attract passengers amid low oil prices, but maintains its expectations for passenger yield excluding fuel costs. Additionally, anticipated tariff increases may raise maintenance costs, and overseas airport landing fees will be adjusted according to guidance [2][5] - Spring Airlines has reduced its fleet introduction plan for 2025/2026, citing increased aircraft and parts procurement costs due to tariff hikes, which will slow industry fleet expansion. Despite ongoing delivery delays, Goldman Sachs believes the supply shortage logic remains unchanged, with net demand expected to be 4%, 2%, and 1% for 2025-2027 [3][8] Labor Day Holiday Expectations - The Civil Aviation Administration of China (CAAC) predicts an 8% year-on-year increase in passenger volume during the Labor Day holiday, reaching 119% of 2019 levels, exceeding Goldman Sachs' full-year growth forecast of 7%. Domestic and international passenger volume is expected to grow by 6% and 26% year-on-year, respectively [7] Cost and Revenue Analysis - In Q1 2025, domestic ticket prices are expected to decline by 6% year-on-year, while international ticket prices are projected to drop by 12%. However, domestic ticket prices are anticipated to turn positive starting April 2025, driven by a low base effect. Unit costs have decreased, with Eastern and Southern Airlines showing a 3% decline in cost per available ton-kilometer, while Air China saw a 1% decrease [5][11] - Southern Airlines reported a 683 million yuan loss from investments in Sichuan Airlines, while Air China recorded 710 million yuan in investment income, primarily from its investment in Cathay Pacific [6] Supply and Demand Adjustments - Due to the underperformance in Q1, Goldman Sachs has slightly lowered its domestic passenger volume growth assumption for 2025 from 5% to 4%, while maintaining a 22% growth forecast for international passenger volume. Consequently, the expected growth in air travel demand for 2025-2027 is projected at 6%, 5%, and 5% [11][15] Airline Valuation and Ratings - Southern Airlines has a 12-month target price of 4.1 HKD for its Hong Kong stock and 5.5 CNY for its A-shares, based on a projected price-to-book ratio of 1.9 times for 2025. The stock is rated "Neutral" for A-shares and "Buy" for Hong Kong shares [16] - Eastern Airlines has a target price of 3.3 HKD for its Hong Kong stock and 4.6 CNY for its A-shares, rated "Buy" for both [20] - Air China has a target price of 8.6 CNY for its A-shares and 6.5 HKD for its Hong Kong stock, rated "Buy" for both [22] - Spring Airlines is rated "Buy" with a target price of 60.5 CNY based on a projected price-to-book ratio of 3.1 times for 2025 [24]