Asia Pacific Equity Research 16 July 2020 Asia Airlines Bracing for a long winter, assume coverage of Singapore Airlines and Cathay Pacific at UW The global aviation industry is facing its greatest survival test, with COVID-19 Singapore, Hong Kong visibly impacting airlines' financial performance, casting doubt on the outlook for Infrastructure, Industrials & future travel demand, particularly in the premium service market segment. We Transport assume coverage of Singapore Airlines (SIA) and Cathay Pacific (CX), the two AC leading FSC in the Asia region, with UW ratings in light of: 1) zero exposure to Karen Li, CFA the domestic market, plus high exposure to international transit; and 2) additional (852) 2800-8589 funding needs in a likely long drawn-out recovery scenario, given ongoing cash
[email protected] Bloomberg JPMA KLI <GO> burn and outstanding large-sized aircraft delivery plan committed pre-COVID-19. We set our Jun-21 PT for SIA and CX at S$3.1 and HK$4.8 respectively, with de- Shawn Ng Jun Jie rating to be driven by risk of additional cash calls (note SIA and CX saw BVPS (852) 2800 8570
[email protected] contract by c32% and c39% post the recent capital raising). Jenny Qiu Driver#1: Zero exposure to domestic travel and a potentially slow (852) 2800 8503 resumption of business travel clouds near-term recovery visibility. While
[email protected] there was initial optimism following the flattening of the COVID-19 infection J.P. Morgan Securities (Asia Pacific) Limited curve as countries step up efforts to restart domestic air travel and experiment with ‘travel corridors’ to gradually revive cross-border travel, the recent resurgence in infection cases across the US, Japan, Beijing and Hong Kong SAR, have raised fresh concerns over recurring reinstatement of stringent travel restrictions and social distancing measures unless a vaccine solution is found.