Flying with Chinese airlines gets more expensive soon

Chinese airlines brace for nearly 70% rise in international routes’ landing charges.

According to China local media’s report, NDRC and CAAC have issued a notice to airlines regarding an adjustment on landing charges for international routes operated by Chinese airlines, effective 1 April 2013.

Nomura notes that the landing charges for Chinese airlines’ international routes are currently 40% off the normal rates.

If the discount is removed at once, international routes’ landing charges for the Chinese airlines may increase by 67%, by Nomura's estimates.

Here's more from Nomura:

This is likely to be expected by the market and we have flagged in our recent research report, Year of earnings recovery, dated 29 January 2013, that one of possible negative catalysts in the Chinese airline sector is increased landing charges for international routes. Management of Beijing Airport (694 HK, Buy) said that the company has yet to receive notice from the government, but if the news reported by the media is true (i.e. to be implemented on 1 April 2013),
we estimate Air China (753 HK; Buy) will likely see the largest hit given its largest exposure to international routes, followed by China Eastern
Airlines (CEA) (670 HK; Neutral) and China Southern Airlines (CSA) (1055 HK; Buy).

Based on our estimation:
• Air China may see costs increased by CNY533mn in 2013F and net profit decreased by CNY416mn (9% of our 2013F net profit estimates) • CEA may see costs increased by CNY523mn or a net profit reduction of CNY445mn (12% of our 2013F net profit estimates)
• CSA may see costs increased by CNY494mn or a net profit deduction by CNY390mn (9% of our 2013F net profit estimates)
• According to management of Beijing Airport, revenue may see an increase of CNY100-200mn; hence we estimate it is likely to see high-
single-digit net profit increase in 2013F

• Note that our calculations are based on the full year and, hence assuming the rate adjustment takes place in April 2013, the impact on
2013F should be less

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