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Receding Omicron fears “well-position” China's “Big Three” carriers for recovery: analyst
December 10th 2021
Hong Kong’s HSBC has reiterated its confidence China’s big three airlines will benefit from a resurgence in travel confidence, despite the emergence of the Omicron variant of COVID-19. Read More » Initial reactions to the emerging variant slashed share prices at the Chinese carriers by up to 11%, but they rebounded this week after U.S. pandemic czar, Dr Anthony Fauci, pronounced Omicron might not be as serious as first assumed. “Taking cues from previous outbreaks, we believe pent-up demand in China’s domestic market remains solid despite ongoing waves of COVID-19 cases,’’ HSBC analyst, Parash Jain, said in a note. “We have observed that when COVID-19 cases subside, demand and air capacity pick up rapidly. We see no near-term turnaround in China's strict zero-case policy, but we have learnt local governments have become more agile in tracking, isolating and handling sporadic local cases, insulating the broader economy from the impact of a small-scale regional lockdown.” It was hard to pinpoint an exact inflection point for the COVID-19 pandemic, but the HSBC remains convinced the major Chinese carriers are “well-positioned and capitalised for the post-pandemic world”, Jain said. “Not only do they have a resilient local market to generate positive cash flows, but [they] also should benefit from weaker global peers following a series of airline restructurings, bankruptcies, downsizing and aircraft delivery delays,’’ he said. “Therefore, we see the domestic market continuing to provide a cushion to earnings and valuations of the “Big Three”, while any accelerated reopening of global travel may lead to substantial upsides. We continue to expect international travel to recover to 50% of its pre-pandemic scale in 2023.”
