[ET Net News Agency, 10 January 2020] Goldman Sachs reiterated its positive stance on
the Chinese airlines. It believes that macro factors and industry newsflow have shown
incremental improvement since December 2019.
Following Boeing's announcement of its production suspension, the research house
forecast the first deliveries of the MAX to be in July 2020. The three major Chinese
airlines collectively have 191 Boeing 737 MAX aircraft in their delivery plans for 2019
and 2020, the timing of which remains uncertain. This represents around 7% of 2019 ASK for
the three airlines.
In addition, the companies already own 55 MAXs, representing around 2% of 2019 capacity,
which will also likely be delayed in returning to service. Goldman believes that this will
likely contribute to supply tightness in China.
Goldman thinks that the combination of tight supply and a recovering economy should set
the stage for better ticket pricing, earnings and therefore stock performance. It revised
its target prices for the trio as follows:
Name Rating Target Price
---------------------------------------------------------------
Air China (00753) Buy HK$10.1 from HK$10.20
China Eastern Airlines (00670) Buy HK$6.2
China Southern Airlines (01055) Buy HK$6.9 from HK$6.8
(KL)