UBS has issued a research report expressing long-term optimism for the aviation sector, while maintaining a HK$3.3 price target and a "Sell" rating on AIR CHINA (00753). The airline reported a 3% year-on-year increase in revenue last year, but recorded a net loss of RMB 1.77 billion. The fourth quarter alone saw a net loss of RMB 3.6 billion.
The report indicates that rising jet fuel surcharges, driven by increased oil prices due to conflict in Iran, may suppress passenger volume on domestic Chinese routes in the short term and reduce outbound travel demand among Chinese tourists. However, this could also attract more international travelers to use Chinese carriers for travel to other parts of Asia.
UBS noted that if oil prices decline and government policy support continues, airlines are expected to sustain year-on-year revenue growth, potentially returning to profitability this year and achieving an increase in earnings compared to the previous year.
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