Falling oil prices easing pressure on cost hikes.

The variable costs of Eva Airways’

passenger business mainly consist of fuel, labor, marketing, and passenger servicing.
Despite rising costs in these areas, oil price falls in 2Q23 have led us to maintain our
jet
fuel cost assumption at US$90 per barrel in 2Q23-4Q23F, with jet fuel cost as a share
of
total costs declining to 32% in 2023F from 35% in 2022.
2023F earnings growth unsustainable into 2024F. As we expect Eva Airways’ 2023F
passenger transport sales and cargo sales to grow a respective 23% and 51% from
2019
levels, we revise up 2023F consolidated sales by 9.9% to NT$185.7bn, up 34.5% YoY.
Considering oil price declines and easing of pressure from cost hikes, we raise 2023F
net
profit to NT$24.9bn, for EPS of NT$4.65. However, high ticket prices won’t be
sustainable into 2024F as passenger transport supply increases. We forecast
passenger
transport sales will contract 4% YoY, and project respective 6.5% and 53% declines in
2024F consolidated sales and earnings, for EPS of NT$2.16.