HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Beijing Capital International Airport (BCIA) / Equity Bottom-Up

Beijing Capital International Airport (BCIA)

<ul>
<li>Share price of <a href="https://www.smartkarma.com/entities/beijing-capital-international-airport-bcia" target="_blank" data-smartkarma-citation="entities:10626:1" rel="noopener">Beijing Capital International Airport (BCIA) (694 HK)</a> underperformed that for <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China Ltd (753 HK)</a> by wide margin in this year, which we believe is not justified.</li>
<li>Removal of lockdowns in various districts in Beijing and the revival of international passengers will be the major driver for BCIA to close the valuation gap.</li>
<li>The gradual relaxation of inbound international passengers at Beijing and the potential for a full border opening in early next years are the catalysts for BCIA's performance.</li>
</ul>


Share price of Beijing Capital International Airport (BCIA) (694 HK) underperformed that for Air China Ltd (753 HK) by wide margin in this year, which we believe is not justified.
Removal of lockdowns in various districts in Beijing and the revival of international passengers will be the major driver for BCIA to close the valuation gap.
The gradual relaxation of inbound international passengers at Beijing and the potential for a full border opening in early next years are the catalysts for BCIA's performance.


Beijing Capital Intl Airport (694 HK): Preparing to Take Off

<ul>
<li>Sequential passenger traffic improvement makes us believe that the worst was over for <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China (753 HK)</a>. We expect it continues the YTD outperformance vs. <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China Ltd (753 HK)</a>. </li>
<li>With the pandemic under control and government's focus on the economy, the release of pent-up demand will be a major driver. We have also seen relaxation in pandemic control measures.</li>
<li>Increase in flight destinations and loosening of travel restrictions and quarantine requirements in Hong Kong should benefit <a href="https://www.smartkarma.com/entities/cathay-pacific-airways-ltd" target="_blank" data-smartkarma-citation="entities:243:1" rel="noopener">Cathay Pacific Airways (293 HK)</a> which now anticipates lower losses YoY in 1H22.</li>
</ul>


Sequential passenger traffic improvement makes us believe that the worst was over for Air China (753 HK). We expect it continues the YTD outperformance vs. Air China Ltd (753 HK). 
With the pandemic under control and government's focus on the economy, the release of pent-up demand will be a major driver. We have also seen relaxation in pandemic control measures.
Increase in flight destinations and loosening of travel restrictions and quarantine requirements in Hong Kong should benefit Cathay Pacific Airways (293 HK) which now anticipates lower losses YoY in 1H22.


Air China (753 HK): Positioned to Ride on the Coming Upturn

Articles from Caixin Global, Caixin Global

Caixin Global

Articles from Caixin Global

Caixin is a media group dedicated to providing financial and business news through periodicals, online content, mobile apps, conferences, books and TV/video programs. Caixin aims to blaze a trail that helps traditional media prosper in the new media age through integrated multimedia platforms.

News from Caixin

<ul>
<li>National flag carrier Air China Ltd. (601111.SH) is planning to take control of Shandong Airlines as part of a bailout of the debt-ridden regional airline, it said this week.</li>
<li>The state-owned giant is stepping in as its smaller peer suffers along with the rest of the country’s civil aviation industry, with companies racking up huge losses due to the Covid-19 pandemic.</li>
<li>Air China is already the second-largest shareholder of Shandong Airlines Group Co. Ltd. with a 49.4% stake</li>
</ul>


National flag carrier Air China Ltd. (601111.SH) is planning to take control of Shandong Airlines as part of a bailout of the debt-ridden regional airline, it said this week.
The state-owned giant is stepping in as its smaller peer suffers along with the rest of the country’s civil aviation industry, with companies racking up huge losses due to the Covid-19 pandemic.
Air China is already the second-largest shareholder of Shandong Airlines Group Co. Ltd. with a 49.4% stake


Air China to Take Over Embattled Regional Airline

Cross Asset Strategy

<ul><li>In Depth: Millions of China’s migrant workers find themselves shunned in old age</li><li>China’s manufacturing activity shrinks for third month amid Covid controls, Caixin PMI shows</li><li>China expands tax cuts to autos with bigger engines</li></ul>

In Depth: Millions of China’s migrant workers find themselves shunned in old ageChina’s manufacturing activity shrinks for third month amid Covid controls, Caixin PMI showsChina expands tax cuts to autos with bigger engines

CX Daily: Millions of China’s Migrant Workers Find Themselves Shunned in Old Age

<ul>
<li>
<a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China Ltd (H) (753 HK)</a> has weaker passenger traffic in Mar and 1Q22 when compared with <a href="https://www.smartkarma.com/entities/china-southern-airlines-co-ltd" target="_blank" data-smartkarma-citation="entities:1078:1" rel="noopener">China Southern Airlines (1055 HK)</a>, and this is mostly due to the Olympics.</li>
<li>We expect one-off factors to remove starting Apr and traffic gap against CSA will narrow going forward. Its associate <a href="https://www.smartkarma.com/entities/cathay-pacific-airways-ltd" target="_blank" data-smartkarma-citation="entities:243:1" rel="noopener">Cathay Pacific (293 HK)</a> has also seen good pick-up in Mar. </li>
<li>Air China outperformed CSA by 8pp YTD. There are signs of quarantine requirement relaxation for incoming passengers, and we anticipate gradual international traffic recovery to bode well for Air China.</li>
</ul>



Air China Ltd (H) (753 HK) has weaker passenger traffic in Mar and 1Q22 when compared with China Southern Airlines (1055 HK), and this is mostly due to the Olympics.
We expect one-off factors to remove starting Apr and traffic gap against CSA will narrow going forward. Its associate Cathay Pacific (293 HK) has also seen good pick-up in Mar. 
Air China outperformed CSA by 8pp YTD. There are signs of quarantine requirement relaxation for incoming passengers, and we anticipate gradual international traffic recovery to bode well for Air China.


Air China (753 HK): Weaker 1Q22 Due to Exceptional Factors

China

China Southern Airlines Company Limited provides commercial airline services throughout China, Southeast Asia and other parts of the world.  The Company also provides other airline related services including aircraft maintenance and air catering.

China Eastern Airlines Corporation Limited, together with its subsidiaries, operates in the civil aviation industry. It offers passenger, cargo, mail delivery, ground, cargo handling, and other extended transportation services.

Air China Limited provides passenger, cargo, and airline-related services in China.  The Company is primarily based in Beijing and a major hub for domestic and international air transportation.  Air China's airline-related services include aircraft maintenance, repair, overhaul service, ground services, and in-flight catering services.

Hainan Airlines Co., Ltd. provides passenger and freight air transportation. The Company also provides charter flight services. 

Spring Airlines Co., Ltd. offers air transportation services. The Company provides domestic air transportation, international air transportation, cargo transportation, and other services. Spring Airlines also offers ticket home delivery, insurance transaction, and other services.

Juneyao Airlines Co. Ltd. supplies air transportation services. The Company provides domestic and international routes for passengers and cargoes. Juneyao Airlines also offers ticket home delivery and electronic ticketing services.

China Express Airlines Co., Ltd. provides air transportation services. The Company offers passenger and freight air transportation, aviation equipment maintenance and aircraft leasing, ticket and hotel booking, consulting, and other services. China Express Airlines serves customers worldwide.

China Express Airlines Co Ltd (002928 CH)

COSCO SHIPPING Holdings Co., Ltd offers marine freight transportation services.  The Company offers container shipping, dry bulk shipping, logistics services, freight forwarding, and terminal and container leasing services internationally.  COSCO SHIPPING Holdings Co., Ltd operates container ships and terminals, and manufactures shipping containers.

S.F. Holding Co., Ltd operates as a holding company. The Company, through its subsidiaries, provides logistics, order tracking, supply chain management, and warehousing services. S.F. Holding operates worldwide.

Daqin Railway Co., Ltd. mainly provides coal transportation service in Northern China. It also operates passenger transportation business.

Singapore Airlines Limited provides air transportation, engineering, pilot training, air charter, and tour wholesaling services. The Company's airline operation covers Asia, Europe, the Americas, South West Pacific, and Africa.

ANA Holdings Inc provides a variety of air transportation-related services. The Company offers scheduled & unscheduled air passenger services and air courier services. ANA sells aircraft parts and provides travel arrangement & reservation services as well.

United Airlines Holdings Inc is an airline holding company.  The Company owns and operates airlines that transports persons, property and mail throughout the United States and abroad.

Southwest Airlines Co. is a domestic airline that provides primarily short-haul, high-frequency, point-to-point service.  The Company offers flights throughout the United States.

International Consolidated Airlines Group S.A. provides transportation services. The Company offers international and domestic air passenger and cargo transportation services. International Consolidated Airlines Group serves customers worldwide.

International Consolidated Airlines Group (IAG LN)

International Consolidated Airlines Group

LATAM Airlines Group S.A. is an airline that provides both domestic and international flight services.  The Company provides passenger and cargo services to destinations in Chile, South America, the Caribbean, Europe, North America, and the Pacific.  LATAM Airlines operates passenger aircraft and cargo freighters.

InterGlobe Aviation Limited provides passenger airlines services. The Company offers ground management, air transportation, terminal maintenance, and other services. InterGlobe Aviation conducts its business globally.

Turk Hava Yollari Anonim Ortakligi (THY), also known as Turkish Airlines, provides passenger and cargo air transportation services. The Company serves all domestic destinations as well as the Middle East, North America, Europe, Asia, North Africa and South Africa.

Cathay Pacific Airways Limited operates scheduled airline services. The Company also provides related services, including airline catering, aircraft handling, and engineering.

Qantas Airways Limited provides transportation of passengers through two airlines including Qantas (full service carrier) and Jetstar (low cost carrier), operating international, domestic and regional services. The Company also includes Qantas Frequent Flyer and Qantas Freight which generates diverse revenue streams and adds value for customers and investors.

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Air China Ltd (A) (601111 CH)

Beijing Capital Intl Airport (694 HK): Preparing to Take Off

BCIA's underperformance against Air China in this year provides room for it to catch up, especially given the recovery of domestic traffic, revival...

Osbert Tang, CFA

Air China (753 HK): Positioned to Ride on the Coming Upturn

Air China starts to feel the bottoming-out of passenger traffic in May. The pandemic has now under control and with more relaxation in quarantine...

Osbert Tang, CFA

Air China to Take Over Embattled Regional Airline

National flag carrier Air China Ltd. (601111.SH) is planning to take control of Shandong Airlines as part of a bailout of the debt-ridden regional...

Caixin Global

CX Daily: Millions of China’s Migrant Workers Find Themselves Shunned in Old Age

In Depth: Millions of China’s migrant workers find themselves shunned in old age. China’s manufacturing activity shrinks for third month amid Covid...

Caixin Global

Air China (753 HK): Weaker 1Q22 Due to Exceptional Factors

Air China will see the negative factors affecting its 1Q22 traffic fade in the next few months. More relaxations of quarantine requirements for...

Osbert Tang, CFA

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