麦格理-美股-航空行业-美国航空业：2019年秋季会议指南-2019.9.3-37页.pdf

Please refer to page 35 for important disclosures and analyst certification,or on our website September 2019 United States EQUITIES U.S.Aviation Coverage Source:Company data,Macquarie Capital(USA),September 2019;prices as of close on 8/30/19 Analysts Macquarie Capital(USA)Inc.Susan Donofrio +1 212 231 6535 Aubrey Tianello +1 212 231 1201 U.S.Aviation Fall 2019 Conference Guide:Top Questions Wed Ask Management Key points The Fall aviation conference season will give mgmt.an opportunity to highlight revenue and cost initiatives although we dont expect many 8K updates We will be most focused on how management is thinking forward to 2020,in terms of supply flexibility and a possible economic downturn We are still cool on most airlines due to MAX uncertainty and tougher rev comps but still see upside in lessors.DAL and AER our highest quality picks Event The Fall 2019 aviation and aircraft leasing conference season is about to kick off.Impact We expect the Fall aviation and a/c leasing conference season to give management an opportunity to not only relay updates on the ongoing impact of the 737 MAX groundings,but also enable them to highlight how much better positioned the industry is overall financially to withstand any potential softness in the economy versus before.Changes include healthier balance sheets,a more consolidated industry,scarce airport real estate(gates)in the US at most of the busiest airports,and fare segmentation(with less of a differentiation between the highs of business fares and the lows of leisure pricing)to name a few.We dont expect much as far as new 8K guidance unless it is materially out of range as managements have gotten out of this practice in early September,saving guidance for early to mid-October.Our current 3Q19 expectation is at the mid to high end of RASM ranges,CASM ex in line,and potential EPS upside due to lower fuel for 3Q19.We will revisit these expectations in the coming weeks.Within this guide we have included our top questions wed focus on with mgmt.teams from each Company,as well as a brief primer on each Company including management bios,fleet profiles,valuation history,and our financial forecasts.Outlook While we are quite bullish on the longer-term prospects of the airline industry,our concern about the possibility of nine months of constrained supply due to the MAX groundings re-entering the industry in a more concentrated three to six months,concerns over the economy,and trade headlines is enough to keep us firmly planted on the sidelines for most airline stocks,although the pullback in the group and current valuations keep us circling and looking for the right opportunity to jump back in(we just arent there yet as we dont see a catalyst).Our only OPs are Delta(sharpness of focus in developing revenue drivers along with good cost control and strong balance sheet),United(consistency in results and a management that is in lock-step as far as focus on meeting EPS targets),and Allegiant(3/4 of routes have no competition).On the a/c leasing side,strong demand coupled with a fleet replacement cycle causes us to remain bullish on AER,AL,and AYR,in order of preference.TickerRatingP riceTargetAALN$26.31$34.00AEROP$53.62$73.00ALOP$41.54$58.00ALGTOP$1 41.99$1 75.00ALKN$59.72$63.00AYROP$21.85$25.00DALOP$57.86$69.00HAN$24.41$29.00JBLUN$1 7.32$20.00LUVN$52.32$52.00SAVEN$37.54$47.00UALOP$84.31$1 1 5.00Macquarie Research U.S.Aviation 3 September 2019 2 American Airlines Group(AAL)Neutral$34 Our Investment Thesis We had downgraded AAL from Outperform to Neutral post 2Q earnings and are still sidelined on the stock.We think there is likely to be an overhang on Americans stock,given the ongoing mechanics union slowdown and lagging operational and customer performance metrics such as on-time performance,mishandled bags,and customer complaints that persist.We also think that we need more clarity on what percentage of Americans domestic performance(its strongest performing entity,representing 60%of mainline capacity)can be explained by Southwest not being able to be as aggressive due to constraints on capacity from their own MAX groundings.Guidance given during last years conferences?:American gave updated CASM-ex guidance.Fig 1 YTD Indexed Stock Performance vs.S&P 500 and XAL Source:FactSet,Macquarie Capital(USA),September 2019 Key Issues We Are Asking Management About What is the timing as far as getting back to the negotiating table with your pilots?When do you think that we are likely to start seeing more definitive operational improvements?How much of a drag has this been on costs?(Extra crew time,customer re-accommodation,etc)?What can we expect to see on the cost side from your“One Airline Initiative”on costs?What is the timing?Where are you as far as grounded MAX aircraft and how are you faring as far as substitute lift?How many are grounded and what was your delivery schedule?Are you able to simply delay MD-80 retirements since the MAXs were going to be used for replacement?Should we see a rebound in relative RASM strength due to new gates at DFW(started in April)and CHL(late 2019/early 2020)?What is the timing of new gates?For CHL,where do you think you will see the connecting traffic flow come from?With the majority of your fleet renewal behind you,can you talk about forward CapEx expectations/de-leveraging and FCF goals?Given the MAX issues as well as mechanics youve had to slow down your Oasis(seat density)program.What is the current thinking on timing to complete?Whats the benefit?60708090100110120130AALXALS&P 500Macquarie Research U.S.Aviation 3 September 2019 3 Fig 2 AAL Forecast Source:FactSet,Macquarie Capital(USA),September 2019 Valuation Our$34 target price is based on an 80%weighting to our 7.0 x P/E multiple,which we had pulled down to account for the uncertainty connected with their ongoing dispute with their mechanics union and a 20%weighting to our 5.0 x EV/EBITDAR multiple(was 6.0 x)applied to our 2019 forecasts.This P/E multiple is in line with the 5-year average of American.Fig 3 AAL NTM P/E Ratio:Last 5 Years Source:FactSet,Macquarie Capital(USA),September 2019 3Q19EFY19ERASM(unit revenue)+2.0%+2.0%CASM-ex fuel(unit cost)+5.0%+3.9%ASMs(capacity)+1.4%+1.4%Pre-tax margin6.4%6.6%Pre-tax margin YoY chg.+0.5%+0.3%Macquarie EPS$1.34$5.23Consensus EPS$1.34$4.943.0 x4.0 x5.0 x6.0 x7.0 x8.0 x9.0 x10.0 x11.0 x12.0 xAug-14Oct-14Dec-14Feb-15Apr-15Jun-15Aug-15Oct-15Dec-15Feb-16Apr-16Jun-16Aug-16Oct-16Dec-16Feb-17Apr-17Jun-17Aug-17Oct-17Dec-17Feb-18Apr-18Jun-18Aug-18Oct-18Dec-18Feb-19Apr-19Jun-19AAL NTM P/E5yr.AVGMacquarie Research U.S.Aviation 3 September 2019 4 Fig 4 AAL Fleet Profile Source:Company filings,Macquarie Research,September 2019 Fig 5 AAL Labor(as of YE18)Source:Company filings,Macquarie Research,September 2019 Management Bios Chairman&Chief Executive Officer:Doug Parker has served as Chairman and CEO of American Airlines since 2013 following the airlines merger with US Airways.Parkers industry experience spans over 30 years,with more than 15 years in the CEO role.Parker had served as US Airways CEO since 2005 when it merged with America West where Parker had held the CEO position since 2001.President:Robert Isom was named President of American in 2016,taking over after Scott Kirby departed for the same position at United.Before the role change,Isom had held the position of Chief Operating Officer since joining the airline in 2013 through the US Airways merger.Chief Financial Officer:Derek Kerr has served as CFO of the airline since 2013 and,like much of the leadership team,also traces his lineage back to America West and then US Airways before joining American through mergers.Kerr became CFO of America West in 2002 and held the position at US Airways and AAL.AAL Fleet(as of 12/31/18)TotalAirbus A319126Airbus A32048Airbus A321219Airbus A33024Boeing 737-800304Boeing 737 MAX 820Boeing 75734Boeing 76724Boeing 77767Boeing 78740Embraer E19020MDC MD8030Total956Employee GroupEmployees UnionAmendable DateFlight Attendants24,800APFA2019Fleet Service16,800TWU-IAM2018Pilots13,600APA2020Macquarie Research U.S.Aviation 3 September 2019 5 Alaska Air Group(ALK)Neutral$63 Our Investment Thesis We had downgraded Alaska Air from Outperform to Neutral post 2Q earnings.While we continue to think that the Company has successfully navigated through the most challenging hurdles of the Virgin America integration and think its strong balance sheet and promising revenue growth opportunities continue to exist,we expect upcoming softness in pricing on the West Coast and Hawaii as Southwest is quite focused on making both areas a Southwest stronghold.Guidance given during last years conferences?:No,instead was updated on Sept.17th with traffic results(not at a conference).Fig 6 YTD Indexed Stock Performance vs.S&P 500 and XAL Source:FactSet,Macquarie Capital(USA),September 2019 Key Issues We Are Asking Management About What aspects of the Virgin acquisition turned out to be larger than anticipated as far as a challenge,and what was a pleasant surprise?You have a long-term 13%-15%pre-tax margin target which compares to a 9%margin in 2018.What are some of the key pieces that walk you from last years margin to where you ultimately want to be?How much of that is Virgin America synergies?Youve indicated that restoring your“fortress”balance sheet is the primary objective around use of cash right now,reducing leverage.However,youre on track to hit your 40%debt-to-cap target next year and already have a pretty low leverage relatively speaking.How could we see your capital allocation policies evolve over the next few years?Youve indicated a goal of having flat to down CASM ex-fuel in both 2019 and 2020.Are you still confident that youre on track for that?And if so,what are the biggest opportunities and challenges that we should be looking at to see if theyre on track.Can you discuss some of your revenue initiatives and why you decided to roll out Basic Economy now?When we think about capacity growth,should we think about it as more connecting the dots throughout your system or do you think we should expect new city growth?What are Alaskas unappreciated ways to improve ROIC.Do you think that differs from other airlines?How are the demand/pricing dynamics on your west coast and transcontinental routes?Has this changed from six months ago?708090100110120130ALKXALS&P 500Macquarie Research U.S.Aviation 3 September 2019 6 Fig 7 ALK Forecast Source:FactSet,Macquarie Capital(USA),September 2019 Valuation Our$63 target price is based on an 80%weighting to our 11.0 x P/E multiple and a 20%weighting to our 5.5x EV/EBITDAR multiple applied to our 2019 estimates.This is in line with the stocks average NTM multiple over the past 5 years.Fig 8 ALK NTM P/E Ratio:Last 5 Years Source:FactSet,Macquarie Capital(USA),September 2019 3Q19EFY19ERASM(unit revenue)+3.4%+2.9%CASM-ex fuel(unit cost)+5.0%+2.2%ASMs(capacity)+3.1%+1.9%Pre-tax margin14.9%10.7%Pre-tax margin YoY chg.+0.8%+1.8%Macquarie EPS$2.12$5.59Consensus EPS$2.18$5.866.0 x7.0 x8.0 x9.0 x10.0 x11.0 x12.0 x13.0 x14.0 xAug-14Oct-14Dec-14Feb-15Apr-15Jun-15Aug-15Oct-15Dec-15Feb-16Apr-16Jun-16Aug-16Oct-16Dec-16Feb-17Apr-17Jun-17Aug-17Oct-17Dec-17Feb-18Apr-18Jun-18Aug-18Oct-18Dec-18Feb-19Apr-19Jun-19ALK NTM P/EAVGMacquarie Research U.S.Aviation 3 September 2019 7 Fig 9 ALK Fleet Profile Source:Company filings,Macquarie Research,September 2019 Fig 10 ALK Labor Groups(as of YE18)Source:Company filings,Macquarie Research,September 2019 Management Bios Chairman&Chief Executive Officer:Brad Tilden was elected as CEO in May 2012,and later named Chairman of the Board in January 2014.Tilden has been with Alaska for over 25 years,joining the airline in 1991 and serving in various leadership positions,including Chief Financial Officer from 2000-2008 and President from 2008-2016.President:Ben Minicucci serves as Alaskas President and Chief Operating Officer,positions he has held since May 2016 and December 2008,respectively.Minicucci was also named CEO of Virgin America and has been tasked with leading the integration effort.Minicucci initially joined Alaska in 2004,and has previous industry experience with Air Canada where he held management positions in engineering and maintenance.Chief Financial Officer:Brandon Pedersen has held the role of CFO since 2010.Pedersen joined Alaska in 2003 as Controller and Staff Vice President of Finance.Prior to Alaska,Pedersen spent several years with KPMG and Arthur Andersen.ALK Fleet(as of 6/30/19)TotalAirbus A319/320/32172Boeing 737-700/800/900166Total238Employee GroupEmployees UnionAmendable DateFlight Attendants5,815AFA17-Dec-2021Clerical,Office,&Passenger Service4,506IAM1-Jan-2019Pilots2,871ALPA1-Apr-2020Macquarie Research U.S.Aviation 3 September 2019 8 Allegiant Travel Company(ALGT)Outperform$175 Our Investment Thesis We reiterate our Outperform rating on ALGT.Allegiant continued to show the strength of its airline business,with an industry-leading 24 percent airline operating margin in 2Q19,a six percentage point increase from the previous year.Much is attributable to whittling down to an all-Airbus fleet and getting rid of its older MD-80s over the past year.Looking ahead,the airline continues to drive the majority of revenues(93%)and we continue to think that the airline is likely to benefit from a lack of competition(defined as non-stop flights between similar markets)in roughly 75%of their markets and a high proportion of non-ancillary revenues which tend to be resilient.While there are question marks around its other leisure businesses,we think that the debt load from Sunseeker is manageable and mgmt.would be willing to change course on some of their other ventures(laser tag and golf course management)if they prove to not be quickly additive to earnings.This is proving to be the case,with Teesnap that management is now actively shopping.Guidance given during last years conferences?No update(guidance issued at analyst day in mid-September 2018)Fig 11 YTD Indexed Stock Performance vs.S&P 500 and XAL Source:FactSet,Macquarie Capital(USA),September 2019 Key Issues We Are Asking Management About Can you focus on the difference in your operations in Summer 2019 vs Summer 2018 when you still had MD-80s in your fleet?How has this impacted your operations?What type of YoY improvements could be in store for upcoming holiday travel season this year?How does travel demand between the smaller,overlooked city pairs that ALGT services behave during economic slowdowns compared to bigger,more competitive routes?Are you currently seeing signs of weakness that you would attribute to a slower economy?Do you see new aircraft types like the A220 potentially opening up more opportunities to grow between lower frequency city pairs?Does this potentially introduce more competition on your current monopoly routes?Where is there room to grow in your niche of low frequency cities?What type of runway for long-term growth do you see remaining?How is Sunsee