Aviation companies are busy with "Internet+" scheduled growth, which stocks will benefit

Aviation companies are busy with “Internet +” private placements. Which stocks will benefit?

The Japanese editor was attracted by such a headline: "China Southern Airlines has relaxed the age requirement for recruiting flight attendants to 30 years old for young mothers to sign up." Click on the article to take a look. It turns out that on July 30, China Southern Airlines in Wuhan Summer flight attendant recruitment was held and the age was relaxed to 30 years old, attracting many young mothers to apply. The editor thinks that China Southern Airlines is so loving. The relaxed age will definitely help many mothers realize their dreams of becoming stewardesses. Although I am not yet old enough to be a hot mom, I am really happy for such a policy.

From the change in China Southern Airlines’ air recruitment policy to the release of Air China’s pre-addition plan, the editor has to say that this July, my country’s aviation industry will become great!

On July 29, Air China (601111, previous closing price of 15.31 yuan) released a plan for a non-public issuance of shares.

The plan shows that Air China plans to non-publicly issue no more than 994 million shares to no more than 10 investors at a price of no less than 12.12 yuan per share, raising total funds of no more than 12 billion yuan. Among them, based on the lower limit of the issuance price of 12.07 yuan per share, AVIC Group plans to subscribe for 82.85 million shares, with a total amount of 1 billion yuan.

Air China also said that in addition to "regular actions" to purchase aircraft, Air China will also invest 800 million yuan in upgrading direct sales e-commerce and 150 million yuan in in-flight wifi. The pace of “Internet +” among traditional airlines has already been taken forward. Not only Air China, Spring and Autumn Airlines, Juneyao and many other airlines have launched fixed-term growth plans for Internet transformation this year. Industry insiders believe that 2015 is the first year of commercialization of in-flight Internet. Internet aviation can enrich airline business models and bring more diversified services and experiences to passengers.

With the continuous emergence of local airlines, increasingly fierce industry competition is forcing airlines to accelerate reform and transformation. "Internet +" is only one of the means. China Eastern Airlines’ recent announcement to introduce foreign strategic investor Delta Air Lines is an example of reform. Industry insiders believe that the aviation industry's investment logic of "improving supply and demand, reducing oil prices, and accelerating reform" remains unchanged this year and next. Corresponding to the historical PE of the aviation sector in 2007 and 2010, which were as high as 80 times and 40 times, the valuation of the aviation sector is Room for further improvement.

Exploring “air-ground interconnection”

According to Air China’s scheduled increase plan, the in-flight WiFi (Phase I) project will mainly include WiFi modification and software platform development and construction. The total planned investment amount of the project is 158 million yuan, and it is planned to use 150 million yuan of funds raised this time. The project construction period is 36 months. Air China plans to implement in-flight WIFI service on all long-range wide-body aircraft in the next three years. As of June 2015, the company has 90 long-range wide-body aircraft, and has completed the modification of 20 aircraft.

During the Zhuhai Air Show last November, Air China, as a core unit, took the lead in forming China's first "Inflight Internet Industry Alliance", paving the way for this private increase of "Internet+". The alliance aims to improve in-flight network technology and application levels through in-depth cross-border cooperation and provide richer and more diversified cabin entertainment content. Sina, JD.com, Youku Tudou, Tencent QQ, Neusoft Group, etc. are all members of the alliance.

Fan Cheng, Secretary of the Party Committee of Air China, who served as chairman of the first alliance conference, pointed out when the alliance was established that the civil aviation industry will enter a new era of in-flight network development, and air travel life will undergo major changes. Air China will collaborate with upstream and downstream industrial equipment manufacturers, system suppliers, network operators, as well as Internet companies, new media, and content providers to open a new era of in-flight Internet with independent intellectual property rights and integration of ground and air.

A reporter from China Securities News learned from Air China that Air China’s exploration of “air-ground interconnection” began in 2010. In 2011, Air China's first in-flight wireless LAN flight made its maiden flight, taking the first step in in-flight networking; in 2013, Air China became the first domestic flight to provide in-flight Internet flight services through satellite communications; in 2014, Air China flights implemented ground-to-air base stations mode (ATG) broadband wireless communication and Internet access, becoming the first airline to simultaneously implement the application of ground base station broadband interconnection technology and satellite communication technology.

In the future, Air China's in-flight network will be further open and integrated, such as cooperating with China UnionPay to develop the world's first in-flight wireless network payment solution, cooperating with Frequent Traveler *** to develop an airline hotel points business, and collaborating with Red Apple Technology*** It also expands O2O2O (air-to-online-to-offline) business for destination consumption.

"Internet +" fixed-term increase

Standing at the forefront of the Internet, traditional airlines have already taken steps towards "Internet +". Since this year, airlines such as Juneyao and Spring Airlines have also launched fixed-increase plans for Internet transformation.

Juneyao Airlines’ private placement plan shows that it plans to use 165 million yuan of the 3.565 billion raised funds to invest in the “Tao Travel” leisure travel platform project. The "Aircraft + Various services form the O2O layout of the leisure tourism industry.

Internet aviation construction projects were also mentioned in the fixed increase plan announced by Spring Airlines in July this year, including Internet aviation construction projects, such as on-board wifi system modification, information management system upgrade and aviation e-commerce platform construction, etc. , ***Used 800 million yuan of raised funds. In April this year, the company also signed cooperation agreements with four companies including Tencent and Tempus International to jointly build Internet aviation.

Shenyin Wanguo believes that “Internet +” can increase the proportion of airlines’ direct sales and reduce sales expenses. In-flight Internet services can effectively improve passenger experience and attract passenger traffic. Airlines can extend the service chain based on air tickets, including but not limited to one-stop services such as hotels, car rentals, travel, visas, etc., and mine big data to enhance value-added services for air tickets, such as providing precise services based on customers’ travel purposes and consumption habits. Push, etc., so as to achieve real customer management.

“According to overseas experience, in-flight Internet services often have different package options, ranging from a few dollars to more than ten dollars. Free services will be provided in the initial stage of domestic trials, mainly to obtain user experience habits and consumer behavior Data to lay the foundation for future development of appropriate business models based on big data mining or cooperation with Internet companies," Shenyin Wanguo analysts pointed out.

Industrial Securities believes that increasing the proportion of additional revenue (the proportion of foreign traditional airlines is more than 10%, while the three major domestic airlines are currently less than 1%), increasing the proportion of Internet direct sales (the Civil Aviation Administration of China requires 2017 The annual direct sales ratio has reached 40% (the current direct sales ratio of the three major airlines is around 20%) and the expectations of state-owned enterprise reform are strong driving forces to promote the aviation Internet strategy.

Competition is forcing reform to accelerate

Following the resumption of the establishment of local airlines in May 2013, according to statistics from a reporter from China Securities Journal, in more than two years, about 11 airlines The company has successively obtained "road regulations" approved by the Civil Aviation Administration of China. This means that the domestic civil aviation industry is no longer dominated by the "four major airlines", and increasingly fierce competition is forcing airlines to innovate in management, services and other aspects.

The most noteworthy thing is China Eastern Airlines’ introduction of combat investment. Seven years after the collapse of "Eastern Love", China Eastern finally achieved its goal of introducing overseas strategic investors. China Eastern Airlines announced on the evening of July 27 that Delta Air Lines plans to subscribe for 466 million newly issued H ordinary shares of the company for HKD 3.489 billion, accounting for 10% of the company’s H share capital after this issuance. 3.55% of the total share capital, with a lock-in period of 36 months.

As one of the three major airlines in the United States, Delta and China Eastern Airlines are both members of the SkyTeam alliance. The introduction of Delta Air Lines as a strategic investor in China Eastern Airlines is a major step for China Eastern Airlines to comprehensively deepen reforms and explore the development of mixed ownership. It will help China Eastern Airlines learn from the former’s business experience in operating international routes, developing transit hubs, and brand operations.

Air China’s scheduled increase plan also shows that the airline’s “big brother” is eager to transform. In addition to the above-mentioned in-flight WiFi project, 800 million yuan of the funds raised this time will be used to upgrade direct sales e-commerce to increase the proportion of direct sales and reduce marketing expenses. Mainly includes: unification of order data and user data on e-commerce platforms including official websites, call centers, mobile APPs and other channels; achieving consistency in user experience across e-commerce channels; realizing user data and order data by upgrading e-commerce platforms The integration will make technical preparations for future passenger big data mining.

While undergoing transformation, benefiting from favorable factors such as low oil prices, strong aviation demand, and a reversal of the supply-demand ratio, the three major airlines are expected to achieve a surge in mid-term performance. According to the mid-term performance forecasts recently released by the three major airlines, Air China expects to achieve a net profit of 3.8-4 billion yuan in the first half of the year, a year-on-year increase of 701%-743%; China Eastern Airlines expects to achieve a net profit of 3.5 billion to 3.7 billion yuan in the first half of the year, a year-on-year increase of 24,900%. 26329%; China Southern Airlines expects to achieve a net profit of 3.4-3.6 billion yuan in the first half of the year, turning a loss into a profit year-on-year.

Industry insiders believe that this year and next, the aviation industry’s investment logic of “improving supply and demand, reducing oil prices, and accelerating reform” will remain unchanged, while the business customers brought by outbound tourism and the “Belt and Road Initiative” will make “ The off-season is not weak, and the peak season is even more prosperous.” On the one hand, it is the improvement of the fundamentals of airline performance; on the other hand, it is the benefits brought by reform catalysts such as mixed ownership reform, "Internet +", and "One Belt and One Road". This corresponds to the aviation sector's historical growth of 80% in 2007 and 2010 respectively. With a PE of 40 times and 40 times, there is room for further improvement in the valuation of the aviation sector.