China Express(SZ:002928) Mei Ri Jing Ji Xin Wen·2025-11-12 15:01Core Viewpoint - Huaxia Airlines adopts a unique strategy by focusing on connecting remote small cities rather than pursuing popular routes or joining airline alliances, positioning itself as the only independent regional airline in the A-share market [1][2]. Group 1: Business Strategy - The company has a clear strategy to focus on regional aviation, targeting areas with limited transportation options, which has led to a significant increase in first-time flyers, with 70% of passengers being new to air travel [1][8]. - Huaxia Airlines has experienced a turnaround, with a 102.17% year-on-year increase in net profit attributable to shareholders in the first three quarters of the year, and its stock price reaching a two-year high [1][2]. - The CEO acknowledges past temptations to shift focus but believes overcoming challenges has strengthened the company's position in the market [1][5]. Group 2: Market Dynamics - The demand for air travel is evolving, with increasing needs from smaller cities, leading to more connections between small cities rather than just between major hubs [4]. - Government policies, such as subsidies for regional airlines, are driving the growth of the regional aviation sector, encouraging airlines to provide solutions for remote areas [4][11]. - The competitive landscape is shifting, with Huaxia Airlines opting not to engage in saturated markets but instead focusing on underserved regions, which presents a unique opportunity [4][5]. Group 3: Operational Challenges - The cost of acquiring customers in the regional market is high due to the need for extensive marketing efforts to reach potential first-time flyers [8][11]. - Operational costs are elevated due to the requirement of a captain and two co-pilots for each flight, leading to higher per-passenger costs [8]. - The sustainability of government subsidies is crucial for the viability of regional airlines, as they help initiate and stabilize operations in less accessible areas [11]. Group 4: Future Outlook - The company is transitioning from merely connecting regions to creating a more integrated travel experience, reflecting a shift in strategy towards enhancing the overall travel ecosystem [19][20]. - Huaxia Airlines aims to leverage its unique position to innovate and build partnerships that enhance operational efficiency and profitability [20].