How encouraged are you by the news of reopening an absolutely facility for the
sector, right. And what we have been talking about CAC
or what drives this share price is the new slow and we have plenty of those.
And that is pretty much now is fueling the feeling the recovery.
We have seen a lot of a lot of us start to stop.
With respect to China's domestic travel recovery, and that's how pretty much
share prices of the big three Chinese airlines have hovered.
But probably this is the first sign now that we are probably an inch closer to
the international recovery. And that's pretty much from 5 percent of
the capacity of 2019 level today. It's only one way street from here.
So do they make money next year? The big three?
Absolutely. But it's a series of 10.
And so in our latest note, when we upgraded it, pretty much the entire
sector. We are now forecasting them to be mildly
positive. But the biggest story comes in 2024
where we are modeling that they will have the record profit in pretty much
their history. But it gives us a sense of what we're
looking at the with the capacity available as it comes on in terms of
load factors and also yields here as well.
Yeah. So, I mean, if you see the markets where
we have seen the full recovery or nearly full recovery, the law tractors are
pretty much went back to 2019 level. And this is pretty much what you will
see initially the capacity will come up and then probably load factors will
really catch that up. And that is something we have seen with
CAC also. And that is good news.
But we're going to see capacity there as well.
I mean, that's a bringing that back on. So bringing that back on high.
Captain S.A. It was different ballgame because they
did not have a domestic market. So for them actually the large part of
their fleet was bogged in Alice's spring or in one of the desert when it comes to
the big three Chinese airlines. And they pretty much tried to bring
those interests and capacity back into the domestic market.
And that's one of the reason that if you look at around the world, that air
ticket prices are materially higher than 2019.
But when you look at China's domestic air tickets, I mean, up even into the
third quarter of 2022, it's about 15 percent lower than that of 2019, Cathay
Pacific. How optimistic are you that, you know,
this this company can actually come back to those pretty Covid levels?
I mean, if you look at the market cap, it is still ahead of that already.
If the share price, because the estimates say what we are modeling now
is that CAC is already making money in the second half of 2022, they will be
profitable in 2023. It does that for capital.
One of the single largest driver in a post, Covid was how strong the air cargo
market has been and with now air cargo market rolling over from the captors.
Passenger recovery could only be I mean, some of the shine in terms of the
recovery will be taken off the cargo slowdown.
I'm wondering, since news began to trickle throughout this reopening, it
goes into the Cathay story. The started the Christmas pointing out
that. What data are you looking at?
To give you a sense of our people traveling again domestically, have you
seen anything? I mean, so when you look at the domestic
I mean, to be honest, the last two and a half years of data is sufficient enough
to tell us, because every time China managed to contain the cases we have
seen, there were months when the domestic travel was over 100 percent of
2019 level. So that gives you the confidence that
there is a genuine pent up demand. It is just that whether the system
allows you to travel or not. And I think that is pretty much it gives
you the confidence that as soon as those you get allowed to travel, you will see
enough. I mean, have we seen a pickup recently?
I mean, certainly in terms of number of searches, I mean, whether the search for
the Chinese upcoming Chinese New Year, whether it's a search for even the
holiday season. If you look at, I think one of the
travel, one of the travel site has said that the air ticket prices has gone up
by about 30 percent and it's now higher than the golden week holiday.
Oh, okay. I want to just with the shipping, if I
may. How is that a recovery?
Emma, I was looking at L.A. port data and we were looking at
Shanghai data as well. Just seeing the contrast.
I mean, the no queues anymore in L.A., we got to zero in terms of Shanghai, in
terms of what did what is that all telling you about was coming back?
You know, I'm not just running just a container as I look at dry bulk, which
is a different kettle of fish altogether.
Absolutely. And I mean, they all all the three
subsectors had the different drivers, but maybe faster if you can talk about
the container and there are enough data which tells us that bit.
With the experience of last two years, most of the retailers front loaded their
orders for this holiday season. So if the latest data that we have seen
was superior, look here. This is the Shanghai good flatlining in
terms of growth. Absolutely.
So what I'm trying to say is that if you look at the October's data, the global
trade is down 3 percent versus October 2019.
So not only that, we have unwinding all the additional dining table and chair.
But the actual trade is even lower than. Nineteen so lost four years of flattened
growth that tells you about how weak the consumer demand has has turned out.
Partly because of the front loading, but partly because now the inflation has
started. We're waiting to see freight rates drop
then. What signs are you looking for for the
end of this sort of freight route? Yeah.
So, I mean, essentially, once you start to lose money at the cash flow level,
it. If history is any guide that brings some
sort of discipline. And now when you look at the free trade
and what we have been seeing in all our freight weekly also is that this trend
probably we will most of the routes will be losing money come New Year, and that
pretty much will allow them to adopt some of the slow, steaming, adopt the
blank ceiling and pull a lever to try to find a floor.
But bear in mind that with the upcoming capacity, we will not see some sort of
reshape recovery. Once it hit the bottom, it probably will
bounce out on the bottom. Does that include tanker to and know
that the RTX are separated? Yeah, yeah, absolutely.
And to be honest, like for an outsiders, we saw the never seen rates in container
and then we have seen the dry bulk rates hitting ten, eleven years high.
And now we are seeing tanker and for tanker, particularly the Russia Ukraine
war was the catalyst and that has pretty much created a longer ton mile demand
initially for the product and then now for the crude.
Very quickly, just dealing with shipping, you know, separating these all
at the moment, you know who your picks, which is the best company's position
right now on dry bulk loads of logistics, which we haven't discussed
yet. So I wouldn't say.
So the idea is that the market is very, very efficient.
So the two ideas that we like in this space, one is called ISE RTS 1 3 0 8 K,
it's a container shipping company. So it's very difficult to be putting the
pounding the table on it. But what is very important for investors
to realize is that if there is a one stock which is tied up with China
consumption recovery, then it's SIPC Central Asia play.
And at the same time, because it generates half of its revenue from yen
and yuan, probably a strengthening of that also gives the tail into this.
And your favorite Chinese airline, I guess.
Which way? Yeah.
So a rising tide lifts all boats, right? An airline?
Yeah. Yeah, absolutely.
And so we have a bias of all three. But if you look at the relative
performance lately, then it would be Air China and China Eastern followed by
China's. And do I.
It's eight years or eight shares then at chess just for this volition.
All right. So their board issues are far more
liquid.