Air China has emerged as a prime candidate for recovery among mainland carriers, according to recent analyses from prominent financial institutions. Following a series of positive evaluations, the airline is witnessing a notable resurgence in ticket demand, particularly from mainland China to Europe and the United States. Analysts believe the upcoming Lunar New Year could further enhance Air China's stock performance.
In early December, Citi analysts reiterated their "buy" rating on Air China, upgrading the airline from a "neutral" to an "overweight" position. This change reflects growing confidence in Air China's ability to capitalize on the recovering travel market. The airline's valuation is currently close to its five-year pre-pandemic average, yet it remains more than 60% below its all-time high reached in 2018. Such metrics indicate a significant upside potential for investors.
The recent surge in ticket demand is noteworthy, with travel from mainland China to parts of Europe increasing by approximately 50% compared to last year. Inbound travel to mainland China has experienced an even more dramatic rise, tripling in volume, particularly from Japan and the United States. This growth aligns with broader trends observed in U.S. airline stocks, which have outperformed the S&P 500 index since early October.
Goldman Sachs analysts have identified Air China as a "main beneficiary" of the renewed interest in business travel and the resumption of long-haul flights. They forecast a robust increase in domestic air passengers, predicting an 11% growth in 2024 that will surpass pre-pandemic levels, followed by an additional 6% expansion in 2025.
DBS analysts Jason Sum and Paul Yong noted Air China's distinct advantages in the competitive aviation landscape. They stated that Air China "is the only Chinese network carrier serving all six continents across the globe, with a particularly strong presence in the profitable China-to-Europe and China-to-North America routes." This extensive network positions Air China favorably as global travel continues to rebound.
Further enhancing this optimistic outlook, JPM analysts raised their price target for Air China to HKD5.90 based on expectations for significant improvement in earnings over the next two years. They anticipate that the government's economic policies will bolster consumption in the coming year, providing additional support for airlines.
Additionally, recent expansions of visa-free policies by Chinese authorities for travelers from several countries, including parts of Europe and Japan, will likely stimulate inbound tourism. Such developments are expected to drive even more traffic into mainland China and benefit Air China directly.
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