Text |Ancient Moon.
Edit |Yang Xuran.
According to the official data provided by HNA, HNA Aviation Group will achieve revenue of 122.6 billion yuan in 2023, an increase of 110% over the same period in 2022. Immediately afterwards, HNA disclosed its revenue in January, achieving operating income of more than 110 billion yuan, an increase of 20% year-on-year in the same period in 2023, and overall profitability.
HNA Holdings, the main body of its listed company, also turned losses into profits. According to its 2023 annual performance forecast, the net profit attributable to shareholders of listed companies for the whole year is 3-4500 million yuan.
This report card did not come easily. Prior to this, after 8 months of bankruptcy reorganization, HNA Aviation Group officially changed hands on December 8, 2021 - Fangda Group, a private enterprise group with steel and carbon as its main business. Since Fangda has no experience in the aviation field and its main business is a resource-based traditional business, its restructuring has not been favored by the outside world before.
Now, the popularity of travel during the Spring Festival has once again ignited hope for the aviation industry. However, airlines have always been unable to avoid the impact of exchange rate fluctuations, and their asset-heavy operation model and certain cyclicality also determine a very weak ability to resist risks. Overall, the business model of the aviation industry is not good.
Judging from the historical experience of developed countries, only low-cost airlines can maintain good profitability with high cost squeezes and a larger passenger base, and the success of Spring Airlines now confirms that this rule is also feasible in the Chinese market.
Perhaps this is the important reason behind Fang Wei's courage to invest a huge amount of money to reorganize the "hot potato" of HNA.
01 See the light
At the cadre and staff meeting of HNA for the first time, Fang Wei, chairman of the board of directors of Fangda Group, once put forward the goal of "making money in 2022" to HNA. But at that time, everyone underestimated the persistence of the epidemic, and HNA Aviation finally lost more than 20 billion yuan that year.
In 2023, the aviation industry has finally ushered in a turnaround. According to the 2023 global civil aviation passenger service data released by the International Air Transport Association,In 2023, the total number of global air passengers increased by 36% year-on-year9%, further approaching pre-pandemic levels. Among them, international passenger traffic increased by 41% year-on-year6%, close to 90% of pre-pandemic levels, and domestic passenger traffic increased by 30% year-on-year4%, which is already above the pre-pandemic level.
Domestic air passenger traffic has exceeded pre-pandemic levels.
From huge losses to profits, HNA has played an important role in controlling the cost side.
Due to the slower recovery of international routes after the epidemic, if widebody aircraft are converted to domestic flights, they will generate higher fuel consumption than narrow-body aircraft, and it is difficult to ensure passenger load factor, resulting in excess capacity and idle resources.
After the epidemic, HNA optimized its fleet structure and reduced the size of its wide-body aircraftIntroduce new models that are more suitable for the short- and medium-range market to reduce overall operating costs.
For example, last year, Hainan Airlines leased three Airbus A330 aircraft to Hong Kong Airlines, terminated the lease of two idle A350 aircraft ahead of schedule, and signed a purchase agreement with COMAC in Shanghai for 100 aircraft, including a firm order for 60 C919 aircraft and an intent order for 40 ARJ21 aircraft, which will be delivered this year.
The size of the wide-body aircraft disclosed by HNA Holdings also confirms this. Before 2019, HNA Holdings expanded its widebody aircraft from 14 to 80 aircraft, but since 2020, HNA has not expanded the scale of widebody aircraft, but has decreased from 2019 to 78 aircraft.
In order to better reduce costs, Fangda Group has also introduced the daily cost management mechanism commonly used in the steel and carbon industries into HNA's management system, requiring that each day's revenue and costs be accounted for, so that it can respond to market changes in a faster time. According to Fang Wei: In the steel sector, there are more than 100,000 varieties purchased alone, but it can still achieve daily cost testing, why can't the aviation industry do it?
Extreme cost control has achieved sufficient results. According to the special rectification work of "running and dripping" repeatedly disclosed on the WeChat platform of HNA Aviation Group, a total of more than 8,100 cost reduction and efficiency creation problems have been found in the past two years, and a total of more than 7.4 billion yuan has been achieved in cost reduction and efficiency. ”
In addition, HNA is also more flexible in the use of personnel.
Fang Wei once proposed in July last year that under the premise of complying with the regulations of the Civil Aviation Administration, when the flights are busy in the peak season, the ground personnel who meet the conditions and meet the standards can also support the crew, and the excellent ones can also be transferred to the cabin crew positions as needed to promote one post and multiple functions.
At the same time, Hainan Airlines has also introduced the "Off-season Revenue Improvement Incentive Program", which aims to stimulate the enthusiasm of sales staff and increase the ticket price in the off-season. One month after the implementation of the policy, 55 of the more than 200 route managers received awards totaling more than 7 million, and the incentive implementation was very strong.
02 It's too hard to make money
Overall, the business volume of major airlines has increased significantly year-on-year after the lockdown has been lifted, but the recovery process is very slow, and some key indicators are still weaker than in 2019, before the epidemic. Moreover, if you compare Hainan Airlines with other airlines in the industry, you will find that Hainan Airlines' recovery is weaker than that of its peers.
In contrast, HNA Holdings, a listed company, has seen a slower recovery than its peers, especially in terms of capacity indicators.
In terms of available seat kilometres (the number of seats available for sale and the distance travelled by the sector), HNA Holdings fell by 22 percent from 47.2 billion in the third quarter of 2019 to 36.8 billion in the third quarter of last year13%。In contrast, China Eastern Airlines and China Southern Airlines only declined. 71%, Air China, Spring Airlines, Juneyao Airlines increased. 83%。
In terms of revenue passenger kilometers (passenger traffic in segments and distance between segments), HNA Holdings fell by 21.1 billion from 40.1 billion in the third quarter of 2019 to 31.4 billion in the third quarter of last year8%。In contrast, Air China, China Eastern Airlines, and China Southern Airlines only declined. 71%, Spring Airlines and Juneyao Airlines**. 86%。
However, thanks to HNA's good cost control,In terms of gross profit per square kilometer, HNA Holdings has recovered the best, an increase of 75 percent in the third quarter of last year compared to the same period in 20198%, Air China, China Eastern Airlines, and China Southern Airlines fell respectively. 22%, Spring Airlines and Juneyao Airlines increased. 65%。
When it comes down to the final profit, HNA Holdings is ultimately expected to be 300 million 4The net profit attributable to the parent company of 500 million yuan is also decent in the industry, stronger than large airlines such as China Eastern Airlines and China Southern Airlines, and weaker than private airlines such as Juneyao Airlines and Spring Airlines.
Why is it that after the epidemic is lifted, the recovery progress of many airlines, including Hainan Airlines, is not as optimistic as everyone thinks, and many data are not even as good as in 2019?
In fact, in the past year, major airlines have been suffering from the recovery process, with exchange rate fluctuations, high oil prices, demand** and a slower-than-expected recovery in fares challenging airlines' bottom line.
Investigate deeplyThe business model of the aviation industry has always been flawed, and it is difficult for companies to make stable profits in the long term. After all, for airlines, it is impossible to avoid the impact of exchange rate fluctuations, and it is very easy to get caught up in endless wars.
In the event of an unexpected situation such as the epidemic, the asset-heavy operation model of airlines will bring a devastating blow to them, such as Air China, Hainan Airlines, China Eastern Airlines and other airlines in the three years of the epidemic The amount of losses far exceeds the profits of the previous ten years.
Even Warren Buffett, the god of stocks, has been entangled with aviation stocks for 30 years and has complained many times.
Source: Aviation Travel Circle.
In 1998, in a speech at the Florida Business School, Warren Buffett admitted that he bought American Airlines because it was cheap and did not think it was good business.
In 2007, Warren Buffett wrote in a Berkshire shareholder letter, "The worst industries are those that are growing rapidly and require large investments to keep growing, but are difficult to make money, such as the aviation industry."
At Berkshire's annual meeting in 2013, Warren Buffett said that over the past 100 years, "a large number of investors have thrown a lot of money into the airline industry and ended up disappointed" and "the airline industry is a deadly trap for investors." ”
In 2020, after the failure of Warren Buffett** nearly 1 million shares of Delta Air Lines, he commented at the shareholders' meeting that the aviation industry is a very challenging and difficult industry. If you buy it now, the risk will be even greater.
03 Spring is coming?
The living environment of airlines continues to improve. According to data released by the Civil Aviation Authority,During the Spring Festival holiday in 2024, the country's civil aviation will transport a total of 1,799 passengers20,000 passengers, with an average daily transport of 224 passengers90,000 passengers, a record high.
With the continuous expansion of China's "visa-free circle of friends", the travel radius of tourists has expanded, such as the total number of travel orders from visa-free countries in "Singapore, Malaysia and Thailand" during the Spring Festival increased by more than 30% compared with 2019. At present, there are 23 countries that are fully exempt from visas with China, and with the easing of international relations, long-distance long-haul intercontinental routes are expected to gradually resume in the future.
From the point of view of supply and demand,In 2023, the top airlines will make little profits, many of them are still losing money, and debt levels are still at a high level, so it is unlikely that airlines will be too aggressive in increasing capacity reserves. Combined with the fact that Boeing's order order aircraft is facing new manufacturing defects in the 737 MAX and Airbus' in-service aircraft are facing engine overhaul in the A320 family, the actual number of aircraft that can be operated in the aviation industry will not increase too much in the next two years. If people are able to increase demand for travel this year, then air fares in 2024 may usher in a small****, bringing resilience to airlines' performance.
In 2023, airlines are generally in a state of weak recovery.
Positive factors continue to increase, HNA's spring is coming? As an airline in a special situation in the industry, it needs to speed up the processing of historical legacy issues before that.
Of the more than 30 billion yuan of rescue loans received by HNA Group, 28.8 billion yuan was repaid by the main aviation sector, of which 18.8 billion yuan was borne by listed companies and 10 billion yuan was borne by non-listed companies. At present, Fangda Group has fully paid the interest corresponding to 18.8 billion yuan of listed companies4.9 billion yuan, but the 10 billion yuan rescue loan to be paid by non-listed companies corresponds to 1$8.6 billion in interest payments have been delayed.
The reason is that the debt retention agreement has been opposed by some local minority shareholders of non-listed airlines, some of whom believe that all kinds of information will be kept confidential during the bankruptcy reorganization, and that the debt retention will still be high after the reorganization, even higher than before the reorganization, and that the debt retention will exacerbate the company's operating difficulties. If Fangda Group and these shareholders fail to reach an agreement, it will directly affect the improvement of the financing rating of New HNA.
Finally, whether HNA can usher in its own spring depends on the change of business ideas. From Fang Wei's current statement, it can be seen that HNA is still pinning more hopes on industry recovery, cost reduction, and ticket price increase.
If airlines want to win a larger market, they must pay more attention to the development of low-priced, sinking markets. This is especially true today when people pay more attention to cost performance.
In terms of the number of annual flights per capita, 2019 is the peak of the development of China's aviation industry, and the average number of flights per capita per year is only 047 times. During the same period, the United States reached 26 times, 5 times in China5 times. Behind the huge disparity is the mismatch between the income status of the majority of China's residents and the high price of fares.
There are still 1 billion people in China who have never flown – and white-collar workers should not be proud of this, after all, many white-collar workers rely on business trips to achieve their travel, and if there is no business travel, the number of flights per capita will be greatly reduced.
Historically, only low-cost airlines have been able to maintain good profitability with a high cost squeeze.
Take Spring Airlines as an exampleSince last year, by selling the cheapest tickets, it has achieved high passenger load factor, high aircraft utilization, and net profit attributable to shareholders of listed companies of 2.1 billion yuan to 2.4 billion yuan, far exceeding other airlines. At the beginning of this year, Spring Airlines relied on "8 yuan from Shanghai to Osaka", and gained a large wave of traffic.
It can be said thatUnder the governance of Fangda Group, HNA has a strong cost control ability and a management foundation for the transformation to a low-cost airline, which is its advantage. And once this process is achieved, it is equivalent to fulfilling social responsibility: business operations are improved, bosses and shareholders earn profits, employees and their families are supported, and people can reduce the cost of air travel, which is a win-win situation for all parties.
For an airline that once slipped into the abyss of bankruptcy, this is already quite a perfect situation.