[ET Net News Agency, 4 December 2018] Deutsche Bank lowered its target price for China
Southern Airlines (CSA)(01055) to HK$6.03 from HK$7.5 and maintained its "hold" rating.
The research house said CSA's 9-month core net profit growth was the lowest among the
big three Chinese airlines with passenger traffic slowing down on international routes,
and DB attributed this to increasing competition from other airlines on the Southeast
Asia/Australia/New Zealand routes. Together with higher fuel costs and a weakened RMB
outlook, these mitigate the positives stemming from domestic ticket price liberalization.
In addition, despite recently signing a memorandum of understanding (MOU) with CSA's
strategic shareholder American Airlines on further cooperation on code-sharing, frequent
fliers and airport lounges (from January 2019), the announcement of its exit from the
SkyTeam airline alliance (from 1 January 2019) brought up uncertainty on how CSA's Beijing
transit/code-share flight operation would fare after moving to the new Beijing airport.
This is because the new airport will be mostly occupied with SkyTeam member airlines,
while American Airlines is likely to stay in the existing airport. (KL)