【Open the Door】Transportation Stocks Transform
April 18, 2021 (Sunday) Clear
・Transportation Stocks Transform: Aviation and Rail... The Leap Born from Adversity
One year has passed since the spread of the novel coronavirus plunged the transportation industry, including airlines, into an unprecedented crisis.
During this period, international movement of people across borders has almost stopped.
Domestic travel has continued to be tossed about by COVID-19, and compared with before the pandemic, the recovery of aviation at the present moment remains only about 30%–50%.
Even so, when planes are “full,” the main reason is drastic reductions in flights and tightening of seating capacity.
This can be regarded as an “artificial full occupancy” situation, and it itself reflects the aviation industry's hardship.
・Transportation Stocks Transform: Aviation and Rail... The Leap Born from Adversity
Many market participants believe that beyond this crisis lies a light of rapid earnings expansion.
ANA Holdings, which owns All Nippon Airways, <9202> [closing price 2,459.5 yen] has reduced its fleet mainly consisting of large aircraft and restrained personnel costs.
In fiscal 2021, it aims to cut fixed costs by 250 billion yen.
Japan Airlines <9201> [closing price 2,286 yen] reduced fixed costs by more than 120 billion yen versus the initial plan in the 2020 fiscal year.
For both companies, considering their consolidated operating profit before the pandemic was around 1600–1800 billion yen, these are enormous cost reductions.
Airlines, compared with other industries, are characterized by an exceptionally high fixed-cost ratio.
Conversely, if sales exceed the break-even point, most of that can be converted into profit.
The COVID shock has significantly lowered the break-even point, and
therefore, expectations are rising that the profit-up curve when demand recovers will be steep.
ANA HD and JAL are projected to turn to a net profit exceeding 50 billion yen in the fiscal year ending March 2023.
・Transportation Stocks Transform: Aviation and Rail... The Leap Born from Adversity
Railways are also taking reforms, similar to aviation.
JR Central <9022> [closing price 15,925 yen] focuses on a certain action.
JR Central has stopped selling Shinkansen rail passes on some routes.
The reason is the penetration of Internet-based ticket purchases.
The reduction of paper rail passes could be a preparation for bold pricing adjustments (dynamic pricing) depending on occupancy.
The COVID-19 crisis has acted as a catalyst transforming the traditional transportation industry.
Aviation and rail are pursuing a fundamental overhaul of their earnings structures,
and firms like Yamato HD <9064> [closing price 2,952 yen], where online shopping demand has surged, are seeking optimal solutions for cost control—their biggest challenge.
・Transportation Stocks Transform: Freight Becomes Normalized > Passenger
As the COVID-19 crisis enters year two, freight has become the norm to exceed passenger traffic in the transportation industry.
How will logistics respond to the sudden surge in demand? The “transformation” is being tested.
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