International aviation is forecasted to grow strongly in 2023, aviation stocks are about to “take off”?

According to VNDirect’s forecast, Vietnam’s international arrivals could fully recover to pre-pandemic levels in 2024, equaling 105.2% of 2019 levels.

International aviation will grow strongly in 2023

After the Covid epidemic was controlled, the aviation industry had a significant recovery. Domestic airlines have even regained what was lost during the pandemic. In the first nine months of the year, the total number of flights increased by 123% and the number of domestic passengers increased by 165% over the same period last year.

VNDirect Securities expects the number of domestic visitors in 2022 to increase by 231% over the same period and increase by 30.9% compared to 2019, maintaining a compound growth rate of 9.4% in the period 2017-2022. Accordingly, domestic visitor growth in 2022 may not be too strong, but shows that domestic travel demand has increased reasonably with potential sustainable natural growth.

In the period of 2023-2025, VNDirect thinks that domestic aviation growth may slow down a bit with 8.9% CAGR as people can travel abroad more easily, and many major domestic airports are too load.

The most prominent bright spot in the aviation picture is the expectation that international aviation will grow strongly in 2023. Most countries have lifted restrictions on visitors and this should support demand. international travel. International arrivals increased 35 times in the third quarter and recovered by 49.8% before the epidemic.

In the base scenario, VNDirect expects China to gradually lift travel restrictions from the second quarter of 2023. The volume of international arrivals may recover to 84% in the second quarter of 2023 and 100% in the fourth quarter of 2023, helping the total international arrivals increase by 195% over the same period in 2023.

VNDirect forecasts that Vietnam’s international arrivals will reach 12.5 million in 2022 (compared to 0.5 million in 2021) and may increase by 195.2% over the same period in 2023 – equal to 88, 5% of pre-pandemic levels.

Since the business results of Vietnamese aviation enterprises are highly dependent on international airlines, their business results will experience outstanding growth from 2023 thanks to a strong recovery. of the international market.

According to VNDirect’s forecast, Vietnam’s international arrivals may fully recover to pre-pandemic levels in 2024 (equivalent to 105.2% of 2019 level) and may reach 118.9% of 2019 levels in 2025.

Airline stock valuation to attractive levels

In 2022, the outlook for the airline business’s recovery is overshadowed by high fuel prices, exchange rate volatility and rising interest rates. In particular, the increase in interest rates and the strong USD have greatly affected the business results and the plans to expand the fleet of airlines.

However, VNDirect believes that the outlook for the global aviation industry will become brighter from 2023 thanks to a number of favorable factors. Specifically, further easing of COVID-19 restrictions in China, including the reopening of factories in the country, will also support the recovery of the global air cargo market in the coming period. .

At the same time, international travel restrictions in Asia will continue to be eased, which will help increase air freight capacity and make air freight rates attractive.

In Vietnam, the analyst team believes that profit growth from Q3/2202-2023 in most segments (ports, airlines, retail) is relatively solid due to the recovery of international visitors. .

In particular, the recent decline of the market has brought the stock prices of many airline companies to attractive valuations with strong growth expectations in the coming periods, therefore VNDirect believes that this is the right time. good to accumulate airline stocks with attractive price and solid earnings growth.

With the forecast that international aviation will recover strongly, VNDirect believes that aviation retail will be the most beneficial industry. The airline retail model can thrive thanks to high barriers to entry and outstanding profit margins. For airports, growth is relatively solid, but may slow in 2024 due to limited capacity.

Although the growth prospects of airlines are constrained by high fuel costs, exchange rate volatility and rising interest rates. However, VNDirect still believes that the low-cost airline model has more potential than traditional airlines because it is less volatile in the unstable financial environment and high fuel costs.

Ha Anh/Market life