<Earnings first take!> 2H21 results in line with expectations
What’s new?
- China Eastern Airlines (CEA) announced full-year net loss of RMB12.2bn, in line with its profit warning range of RMB11.0-13.5bn
- Wider net losses in 2H21 primarily driven by lower air passenger traffic amid sporadic lockdowns in China, higher jet fuel prices and lower quantum of FX gains during the period
- Stronger passenger and cargo yields buffered the negative impact of lower passenger/cargo volumes in 2H21
- The airline has plans expand (net additions) its fleet by 34 and 15 aircraft in FY22F and FY23F respectively
- Unclear when the B737-800 will be cleared to fly again; investigations will still need more time
Our views:
- Improvement in passenger yields is encouraging – despite stiff competition in the domestic market (diversion of international capacity into domestic market), CSA’s domestic passenger yield rose above pre-pandemic levels to 106% of 2019’s level in 2H21, up from 95% in 1H21.
- Omicron will weigh on domestic passenger volumes in the near-term – China’s government announced that it will maintain a dynamic zero-COVID strategy, which suggests that lockdowns (albeit shorter in duration) could occur at a higher frequency
- Elevated jet fuel prices will also be a drag on profitability – any improvement in unit costs in FY22 will be constrained by the rapid ascent in jet fuel prices
- Unlikely to realise similar level of FX gains in FY22 – CEA booked FX gains of RMB1.6bn in FY21, down from RMB2.5bn in FY20. The absence of these FX gains in FY22, or potentially FX losses could hinder the airline’s return into the black.
- Grounding of B737-800 aircraft will greatly impact CEA’s passenger capacity – this aircraft model accounts for around 20% of CEA’s total passenger capacity. Unfortunately there is still a lack of visibility on how long the investigations will take and when the grounding will end.
- More to follow after the analyst briefing in the afternoon (31st March)
| P&L Breakdown (In RMB Millions) | ||||||||
| 1H19 | 2H19 | 1H20 | 2H20 | 1H21 | 2H21 | y-o-y change | h-o-h change | |
| Passenger revenue | 53,581 | 56,835 | 20,347 | 28,868 | 28,466 | 25,639 | -11% | -10% |
| Cargo revenue | 1,742 | 2,084 | 2,615 | 2,280 | 3,945 | 4,364 | 91% | 11% |
| Others | 3,536 | 3,208 | 2,197 | 2,420 | 2,299 | 2,414 | 0% | 5% |
| Total revenue | 58,859 | 62,127 | 25,159 | 33,568 | 34,710 | 32,417 | -3% | -7% |
| EBITDA | 15,974 | 16,187 | 2,049 | 6,366 | 5,741 | 3,459 | -46% | -40% |
| Net profit | 1,941 | 1,251 | -8,542 | -3,294 | -5,208 | -7,006 | nm | nm |
| EBITDA margin | 27.1% | 26.1% | 8.1% | 19.0% | 16.5% | 10.7% | ||
| Operational Stats | ||||||||
| Capacity | ||||||||
| ASK (m p-km) | 131,567 | 138,687 | 61,719 | 90,347 | 85,928 | 74,763 | -17% | -13% |
| AFTK (m tonne-km) | 4,430 | 4,703 | 2,921 | 4,025 | 5,127 | 3,950 | -2% | -23% |
| ATK (m tonne-km) | 16,271 | 17,184 | 8,476 | 12,156 | 12,860 | 10,679 | -12% | -17% |
| Traffic | ||||||||
| RPK (m p-km) | 108,682 | 113,097 | 41,206 | 66,067 | 60,837 | 47,967 | -27% | -21% |
| RFTK (m tonne-km) | 1,327 | 1,644 | 933 | 1,267 | 1,796 | 1,597 | 26% | -11% |
| Yields | ||||||||
| Yield per RPK (RMB per p-km) | 0.49 | 0.50 | 0.49 | 0.44 | 0.47 | 0.53 | 22% | 14% |
| Yield per RFTK (RMB per tonne) | 1.31 | 1.27 | 2.80 | 1.80 | 2.20 | 2.73 | 52% | 24% |
| Unit Costs | ||||||||
| Total unit cost per ATK including fuel (RMB per tonne) | 3.51 | 3.55 | 4.24 | 3.48 | 3.36 | 4.07 | 17% | 21% |
| Total unit cost per ATK excluding fuel (RMB per tonne) | 2.49 | 2.53 | 3.50 | 2.86 | 2.60 | 3.06 | 7% | 18% |