麦格理-全球-航空运输业-全球航空业：辅助性增长增强了盈利的弹性-3-29页.pdf
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Please refer to page 27 for important disclosures and analyst certification, or on our website
www.macquarie.com/research/disclosures.
12 March 2019 Global
EQUITIES
Stocks Covered
Source: Bloomberg, Macquarie Research, March 2019
Inside
Ancillary growth boosts earnings resiliency 2
US Airlines 6
Canadian Airlines 11
European Airlines 14
Chinese Airlines 21
Valuation Comps 22
Appendix 23
Analysts
Macquarie Capital Markets Canada Ltd.
Konark Gupta +1 416 848 3539
konark.gupta@macquarie.com
Daniela Campo +1 416 848 3502
daniela.campo@macquarie.com
Macquarie Capital (USA) Inc.
Susan Donofrio +1 212 231 6535
susan.donofrio@macquarie.com
Aubrey Tianello +1 212 231 1201
aubrey.tianello@macquarie.com
Macquarie Capital (Europe) Limited
Pete Vanns +44 20 3037 2938
pete.vanns@macquarie.com
Macquarie Capital Limited
Eric Zong +852 3922 4749
eric.zong@macquarie.com
Heidi Leung +852 3922 3783
heidi.leung@macquarie.com
Global Airlines
Ancillary growth boosts earnings resiliency
Key points
We take a deep dive into high-margin ancillary fees, which have been growing
and account for 11% of industry revenues.
Investor interest in ancillary fees is high given limited disclosures from the
airlines.
Our Top Picks are Spirit, Air Canada, easyJet and Air China based on ancillary
opportunities and fundamental outlook.
Ancillary Revenues Continue to Grow and account for 11% of Business
We estimate global airline ancillary revenues have grown at ~20% CAGR over the
past decade to reach almost US$93bn in 2018, far outpacing the industry’s total
revenue growth of ~4%. This equates to over US$21 per passenger and 11% of total
airline revenues. The key drivers of this growth have been rising air travel, unbundling
of fares, increasing LCC penetration, and growing ancillary offerings by airlines. We
have seen similar trends for most of the 19 airlines across North America, Europe and
China we have discussed in this report. In our estimation, these 19 airlines generate
US$38bn in ancillary revenues (US$20/pax and 11% of total airline revenues).
Boosting EPS Resiliency and Providing a Natural Hedge Against Fuel
Airlines have consistently generated profits since 2010, which is a contrast to the prior
decade and not just a coincidence. It is quite interesting that airlines were profitable
even when jet fuel was above US$100/bbl earlier this decade. This is a direct result of
airlines’ increasing focus on ancillary fees, which carry significantly higher margins vs
typical airline margins, boosting the much needed resiliency in net earnings. Further,
ancillary fees now equate to over 50% of the fuel bill vs 10% a decade ago, providing
a greater natural hedge against the largest airline cost item. Thus, we think airlines
with higher ancillaries deserve a multiple expansion for greater earnings resiliency.
Potential for Further Growth as Opportunities are Numerous
Industry-wide we expect baggage fees to be the key driver of ancillary fees in 2019
but we also see loyalty programs, credit cards, corporate travel, and pre-boarding or
in-flight offerings as other areas of growth over time. Passenger traffic is expected to
double in the next two decades, growing at 3.5% CAGR. More airlines could add new
ancillary offerings while many airlines will likely continue to evolve their offerings and
increase the fees. This would suggest the ancillary revenue growth could remain high,
perhaps in the high single-digit range if not double-digit over the next decades.
Top Picks and Regional Trends
Based on our in-depth analysis in this report as well as our fundamental outlook, we
like Spirit Airlines, Air Canada, easyJet and Air China as our top picks in our global
airlines coverage. US airlines lead the industry on ancillary revenues in terms of $ per
passenger and percentage of total revenues with Spirit topping the charts. Similarly,
Air Canada and easyJet are amongst the top ancillary earners with strong growth
trends. While we expect continued growth in ancillary revenues for our covered
airlines in North America and Europe, we believe Chinese carriers could have
stronger growth potential in the long term given they have been slower in adopting the
ancillary model, similar to the airlines in Asia, Africa, Middle East and Latin America.
Price
Ticker Mar 11 Target Rating
US Airlines (US$)
AAL 32.05 52.00 OP
ALGT 128.23 149.00 N
ALK 55.42 67.00 OP
DAL 51.12 61.00 OP
HA 25.64 29.00 N
JBLU 16.51 18.00 N
LUV 51.61 57.00 N
SAVE 53.07 79.00 OP
UAL 82.38 109.00 OP
Canadian Airlines (C$)
AC 33.36 45.00 OP
WJA 20.58 19.00 N
European Airlines (€ unless noted)
AF 10.69 11.25 N
LHA 22.47 20.40 N
EZJ £11.62 £15.00 OP
IAG £5.38 £5.10 UP
RY4C 11.90 9.95 UP
Chinese Airlines (HK$)
753.HK 7.92 10.30 OP
670.HK 4.79 5.80 OP
1055.HK 6.05 7.40 OP
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