What is the reason for the bad review of Spring Airlines?

The company's strategy has been slightly adjusted, and its performance can be expected to bottom out: Spring Airlines has been affected by multiple unfavorable factors since the third quarter of 216, and its performance has been under great pressure, and it bottomed out in the second quarter of 217. Due to the prosperity of the domestic aviation market in 217, the company began to adjust its business strategy, carry out lean revenue management, and improve its revenue level at the expense of passenger load factor. Although the domestic passenger load factor decreased by 2.91pts year-on-year in August 217, with the recovery of international routes, the introduction of transportation capacity returned to normal, the year-on-year increase of oil prices narrowed, the cost pressure eased, and the negative factors gradually exhausted. Excellent cost control and operational capability will be re-demonstrated, and the turning point of the company's performance will come, superimposed with the impact of the low base in the third quarter of 216. The net profit of Spring Airlines' homecoming in the third quarter of 217 is expected to reach 3%.

cost control is close to the extreme, and the unit efficiency can still be improved: Spring Airlines pursues a low-cost strategy, and the low-cost culture goes deep into the company's operation and management, with remarkable results. In the first half of 217, the company's unit seat kilometer cost (CASK) was .29 yuan, which decreased by 28.6%, 27.4% and 27.3% respectively compared with Air China, China Southern Airlines and China Eastern Airlines. The company's cost control ability is also leading in the world, and CASK in Southwest America is only reduced by less than 15% compared with the three major airlines in the United States. However, there is still room for improvement in the utilization rate of aircraft in Spring Airlines. The company is also actively adjusting the route network layout to make it more compact and avoid unnecessary aircraft idleness, in the hope of improving aircraft utilization efficiency and further sharing unit costs.

lean management has achieved remarkable results, and there is still room for improving the income level: there is limited room for improving the aviation cost in Spring and Autumn, and lean management has become a new idea for the company to increase its performance. Try to achieve a higher level of income by raising prices in the stock market with higher passenger load factor. Compared with the three major airlines, the discount range of RASK is generally greater than CASK, indicating that the company has room to implement the price increase strategy. In addition, compared with the three major airlines, Spring Airlines generally has a gap of about 3% in RASK, while Southwest Airlines has a discount of only about 1% compared with the three major airlines in the United States, and although the passenger load factor advantage is absent, the discount rate of CASK is obviously greater than RASK, thus obtaining higher gross profit. It shows that after the low-cost airlines occupy a certain market share, the passenger load factor is not the only key indicator, and the price increase of Spring Airlines in the mature stock market will effectively improve the income level.

Spring Airlines is the leader of low-cost aviation in China, and its short-term performance has bottomed out, and the inflection point has already appeared. Long-term benefit from policy liberalization will give full play to the advantages of low-cost operation mode. We predict that the company's EPS in 217-219 will be 1.44 yuan /1.76 yuan /2.16 yuan respectively, and the corresponding PE will be 24 times /2 times /16 times respectively, maintaining the "buy" rating.