China is set to reopen its borders once more on January 8, 2023 as quarantines for incoming travelers will be shelved while passport applications for outbound travel will also resume.<\/p>\n\n\n\n
This is a welcome development for air carriers such as CEB (Target Price: P60.00), given that the return of Chinese travel will go a long way towards restoring the performance of its international flights (only 6% of total pax topline), whose revenues have so far lagged that of the domestic segment. <\/p>\n\n\n\n
We note that prior to the pandemic, visitors from China accounted for over 21% (1.7 Million passengers) of foreign tourist arrivals in the PH. While inflows from China are expected to trickle in slowly due to the ongoing COVID wave in the country, an eventual return to the norm, potentially in the 2nd half of 2023 and beyond, would provide CEB with roughly 340k additional passengers (assuming 1.7 Million pax and 20% market share for CEB) which would bode well for the company\u2019s long-term outlook. <\/p>\n\n\n\n
Risks pertaining to oil price volatility continue to remain however, as Russia\u2019s response to the oil price cap, the impact of sanctions, and a potential resurgence in China\u2019s oil demand towards latter 2023 may result in some upward pressure for price levels. Management is currently targeting a return to profitability by the 1st half of 2023.<\/p>\n\n\n\n