**: Visual China.
On the evening of February 28, China Express Airlines (002928SZ) issued three announcements in a row to supplement and update the previous ** assets and related party transaction information, in this announcement, the company introduced the pricing policy and pricing basis of the related party transaction in more detail, and disclosed the target company's asset evaluation report. From the perspective of the final transaction plan, the income method is still used to evaluate the value of assets, and the core information such as transaction ** has not changed.
According to the plan, the company intends to hold 100% of the equity of Huaxia Aviation Education Technology Industry *** (hereinafter referred to as "Huaxia Education") to Huaxia Yunyi International Education Technology Co., Ltd. (hereinafter referred to as "Huaxia Yunyi"). Since Huaxia Yunyi was controlled by Hu Xiaojun, the actual controller, the transaction also constituted a connected transaction.
As a leading regional airline, China Express Airlines was the only listed airline to achieve profitability in 2020 with its unique advantages, but the situation reversed in the next two years, and China Express Airlines, like most airlines, fell into the red. In the past four years, China Airlines has twice quickly recouped funds through the first aircraft and leaseback, and the sale of assets "returned" 600 million yuan, so far the company has cashed out more than 1.3 billion yuan through the total assets.
*Behind the assets, compared with other private airlines that have already turned around in 2023, the regional airline market that China Express Airlines focuses on has recovered slower than the mainline airline market, which is not as high as the same period in 2019, which also means that it has been dragged down by high debt for a longer time and is currently facing considerable financial pressure.
In addition, because China Express Airlines' business model and revenue are important**i.e., subsidies, are linked to local financial resources, this also makes its recovery process special.
China Express Airlines is the only large-scale independent regional airline in China, and unlike the demand for mainline airlines, which is concentrated in a few central cities, the demand for regional airlines mainly comes from small and medium-sized cities and tourist cities. According to the 2023 semi-annual report, the regional routes covered by China Express Airlines' route network account for 38% of the country's regional destinations.
Huaxia Education, the target company of this time, was established in January 2015 and is mainly engaged in the training of civil aviation maintenance personnel, flight dispatchers, and civil aircraft pilots. Judging from the financial data, Huaxia Education has been operating steadily in recent years and is a relatively high-quality asset of Huaxia Airlines, with net profits of 27.12 million yuan and 39.4 million yuan in 2022 and 2023 respectively.
According to the income method, the value of all the equity of Huaxia Education shareholders is 60.4 billion yuan, with a value-added rate of 3275%, equity transfer** final 60.4 billion yuan. Regarding the background of the transaction, China Express Airlines said in the announcement that it is to further focus on the main business of domestic and international air passenger and cargo transportation, and optimize the industrial structure and resource allocation. However, with this income, China Express Airlines may be able to turn around its losses in 2024.
This is not the first time that China Express Airlines has sold assets to cash out in recent years, and it has noticed that in 2020 and 2021, with the cooperation with the local ** aviation industry, China Express Airlines has opened up an asset-light expansion method of sale and leaseback, and has made 3 aircraft each to companies under Quzhou SASAC and Wuhu SASAC, with a total price of about 76.4 billion yuan. Coupled with the sale of assets, China Express Airlines has cashed out a total of 136.8 billion yuan.
Behind such cash-out is the huge financial pressure faced by China Express Airlines, which in the third quarter of 2023 shows that China Express Airlines' current liabilities are 61900 million yuan, monetary funds 24500 million yuan, just enough to cover short-term borrowing, the asset-liability ratio is as high as 82%.
In addition to selling assets, China Express Airlines also frequently uses the raised funds to replenish its working capital.
In December 2022, China Express Airlines raised 2.4 billion yuan, of which 7300 million yuan was used to replenish liquidity, and in addition to replenishing the flow, in the same month, China Express Airlines decided to use 166.7 billion yuan of idle raised funds temporarily replenished liquidity. However, only two days after the return was completed on September 5, 2023, on September 7, 2023, China Express Airlines announced that it planned to use no more than 14$8.3 billion to temporarily replenish liquidity.
At the beginning of the epidemic, with the unique advantages of domestic routes, more solo routes, and the unique advantages of "capacity purchase", as well as subsidies, Huaxia Airlines was less disrupted by the epidemic, and the recovery speed was unbeatable, and in 2020, the domestic civil aviation industry suffered a huge loss of more than 90 billion yuan, and it became the only profitable aviation company, with a net profit attributable to the parent company of 61.3 billion yuan.
However, in the following two years, Huaxia Airlines also fell into losses, with losses of 9,870 in 2021 and 2022 respectively90,000 yuan, 19700 million yuan. According to the company's recently released performance forecast, in 2023, China Express Airlines is expected to lose 9300 million yuan to 1.2 billion yuan.
According to the 2023 performance forecasts released by 7 A-share listed airlines, China Express Airlines is the only private airline that has not yet achieved a turnaround. This situation is not unrelated to the poor recovery of the regional airline market in which it is focused.
According to the "2023 Civil Aviation Data Summary Report" released by Flight Steward, there will be 182 regional airports operating in China in 2023, a net increase of 19 over 2019, and the number of passenger takeoffs and landings will increase by 3 compared with 20198%。If we exclude new and suspended airports, there are 157 regional airports in operation in both years, and their passenger movements have decreased by 2 compared with 20196% (flight recovery rate 97.)4%), which is not the same as in 2019.
The aforementioned report further points out that in 2023, regional airports will be severely differentiated and the level of recovery will vary greatly, with more than half (541%, 85 seats) have not recovered to 2019 levels, and 29 of them have a recovery rate of less than 5%. According to the report, compared with trunk airports, regional airports have weak stability, a single route network, and are more dependent on subsidies, while the impact of high-speed rail is more obvious.
*: Flight Steward's "2023 Civil Aviation Data Summary Report".
It is understood that due to the operating characteristics of regional airlines, China Express Airlines has signed capacity purchase agreements with local **, regional airports and other institutions when operating regional routes to purchase the passenger capacity of flights, and specify the total capacity price in the contract.
In this model, if the actual revenue from ticket sales is less than the total amount of capacity purchased by the institutional customer in the current period, the institutional customer needs to pay the difference to China Express Airlines, and vice versa, China Express Airlines needs to pay the excess to the institutional customer. In short, it is the best to cover the bottom line, self-financing, and China Express Airlines only has the first capacity. It is reported that this kind of institutional customer capacity purchase business accounts for about 3% of the main business income of China Express Airlines.
Since this model is directly linked to the local economic development status, this also determines the particularity of the recovery progress of China Express Airlines' business in this sector to a certain extent. In addition, over the years, the subsidy has been a major support for the profits of Huaxia Airlines, and the company has noticed that the income has also shown a downward trend in the past two years. From 2018 to 2022 and in the first half of 2023, the amount of ** subsidy included in the profit and loss of China Express Airlines for the current period is 21.3 billion yuan, 55.3 billion yuan, 63.8 billion yuan, 59.7 billion yuan, 35.5 billion yuan, 14 billion yuan.
In the secondary market, since 2023, the share price of China Express Airlines has been disappointed, constantly refreshing new lows during the year, and also hitting a low level since its listing in 2018. As of today**, China Express Airlines shares are trading at 57 yuan, which has fallen 6% from the high in 2021. (This article was first published in Titanium**app, written by Zhang Sun Mingshuo).