[ET Net News Agency, 2 November 2018] HSBC Global Research lowered its target price for
Air China (AC)(00753) to HK$5.6 from HK$5.7, and maintained its "reduce" rating.
The research house said higher fuel prices and FX losses offset improvement in passenger
yield. HSBC estimated RMB depreciation led to FX losses of RMB1.9bn versus a gain of
RMB0.9bn in 3Q 2017.
For 4Q, AC guided flat y-y growth for domestic ticket prices and indicated weakness in
international routes. In 2019, AC guided overall ASK growth of 9% y-y. It expects load
factors on US routes to decline due to trade tensions as business travellers and students
may be impacted.
HSBC cut its 2018-20 profit estimates by 8-41%, mainly on higher FX losses and higher
fuel cost assumptions. HSBC forecast a loss in 4Q 2018, a seasonally weak quarter and on
flattish domestic yields as guided by the company. (KL)