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Industry Report Excerpt
January 15, 2009
1. It was beyond market expectation to suspend fuel oil surcharge collection of domestic airlinestransportation this time.2. Purely from suspending fuel oil surcharge collection, if calculated by estimated domestic passenger trafficin 2008, we predict yearly income of Air China (601111), China Southern Airlines (600029) and ChinaEastern Airlines (600115) to decline by Rmb1.07bn, Rmb1.87bn and Rmb1.1bn; if directional-add-issuancetaken into consideration, yearly EPS of companies above will fall by Rmb0.065, Rmb0.17 and Rmb0.11. Bycontrast, China Southern Airlines (600029) with most business weighting domestically is more seriouslyimpacted.3. We hold that airline companies will cut the discount rate of ticket price to partially counteract negativeeffects from suspending fuel oil surcharge collection and possible factors such as travel demand stimulus ofsome airlines and further decline of
aviation fuel’
s retail price, which will restrict related negative effects.4. Aviation sector in 2009 will see
“
supply over demand
”
and is most likely to loss, thus we maintain
“
Neutral
”
 rating; investors are advised to pay attention to transaction opportunities from industrial consolidation, suchas China Eastern Airlines (600115) and Shanghai Airlines (600591).
By Zhang Xun 
Commentary on Suspending Fuel OilSurcharge Collection of Domestic AirlinesTransportation --- Not Simply Unfavorable
 
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