資產(chǎn)負(fù)債表之戰(zhàn)：市場(chǎng)預(yù)期大幅下調(diào)但流動(dòng)性似乎比市場(chǎng)情緒暗示的更為強(qiáng)勁

1、North America Corporate Research16 March 2020Battle of the Balance SheetsEstimates slashed, but liquidity appears more robust than sentiment suggests. Thoughts on Lessors.We believe the collapse in air travel demand has the potential to materially reshape globalaviation, meaningfully more than the e

2、vents of 9/11. At the core of our view is the fact that North America drives just one-fifth of global activity, but generates two-thirds of global profits. Like the virus itself, demand destruction will exact the greatest toll on the weak and infirm. While this in no way immunizes our coverage unive

3、rse, it does imply that airline failures may solely occur elsewhere, thereby paving the way for higher international margins for the North American Big Four (DAL, UAL, AAL, AC) as the crisis fades. But lets not get ahead of ourselves. Airline stock picking and credit selection has grown increasingly

4、 complex, as securities must increasingly discount scenarios previously considered unthinkable (such as prohibiting healthy Europeans from entering the U.S., or the partial or complete shutdown of the U.S. airspace, a scenario we cant rule out). What we can offer is this: liquidity analysis consiste

5、nt with Uniteds stress-case scenario as described last week does NOT lead to any insolvencies within our coverage space, which we believe runs counter to the growing market view and results in attractive risk/reward, in our view, following the recent, unprecedented shellacking.Please join us for a c

6、all on Monday at 1:30pm ET please contact us for details.The situation is fluid, this (hopefully) wont be the last you hear from us our estimates are based on company disclosures through Saturday evening, March 14. For example, our Alaska model includes Fridays announced $388 million draw down of it

7、s credit facility and Deltas planned $2 billion capex reduction. We have not made any further adjustmentswhich is the point of our exercise: to estimate year-end liquidity if no further actions are taken by managements (we review and discuss the incremental liquidity options further in this report).

8、 We freely recognize that the shelf life of this piece may be measured merely in hours.Were encouraged by how equity and credit responded to aid chatter U.S. airline stocks responded enthusiastically on Friday in response to midday chatter regarding potential government aid (and credit was rallying

9、hard into the close). This implies to us that the market potentially believes a) such aid would make a material difference (it depends on the form, but sentiment is perhaps more important than substance at this point); b) the industry is on the precipice of a cash crunch (certainly NOT in the coming

10、 weeks or even next few months, but a longer than expected virus cycle of course is the real risk in our opinion); and c) liquidity levers are scant, and the government may proveEquity Ratings and Price TargetsAirlines & Aircraft Leasing/Equity Jamie Baker AC(1-212) 622-6713 HYPERLINK mailto:jamie.b

11、aker jamie.bakerBloomberg JPMA BAKER Abdul Tambal, CFA(1-212) 622-0302 HYPERLINK mailto:abdul.tambal abdul.tambalAirlines & Aircraft Leasing/Credit Mark Streeter, CFA AC(1-212) 834-5086 HYPERLINK mailto:mark.streeter mark.streeterIan B Snyder(1-212) 834-3798 HYPERLINK mailto:ian.b.snyder ian.b.snyde

12、rJ.P. Morgan Securities LLCCompanyTickerMkt Cap ($ mn)Price CCYPrice Rating CurPrevCur Price TaEnd Daterget Prev EndDateAir CanadaAC CN4,745.46CAD24.63OWn/c43.00Dec-2059.00n/cAlaska Air Group, Inc.ALK US4,715.10USD37.95Nn/c53.00Dec-2076.00n/cAmerican AirlinesAAL US6,234.28USD14.31OWn/c34.00Dec-2042.

13、00n/cDelta Air Lines, Inc.DAL US24,857.28USD38.36OWn/c68.00Dec-2078.00n/cJetBlue Airways Corp.JBLU US3,218.72USD11.18OWn/c15.00Dec-2024.00n/cSpirit AirlinesSAVE US1,033.78USD15.08OWn/c41.00Dec-2053.00n/cSouthwest Airlines Co.LUV US21,672.00USD41.28UWn/c49.00Dec-2056.00n/cUnited Airlines Holdings Inc

14、UAL US10,551.58USD41.64OWn/c99.00Dec-20123.00n/cSource: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 13 Mar 20.See page 30 for analyst certification and important disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports

15、. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. HYPERLINK / the only source (we disagree, the options are more p

16、lentiful than we think most realize). Add to this the dozens of investor requests to explain what forward mileage sales entail. Our point is that the level of liquidity modeling that we believe has actually been conducted is scant and equities and credit may be discounting outcomes more dire than ne

17、cessary (if, and this is the critical assumption, we assume the virus runs its course over a few months). Whether equities and credit have bottomed is not clear, but we are optimistic that improved market liquidity cognizance (and further clarity on government intervention) could potentially lift st

18、ocks and credit from here.First, the big picture North America represents 20% of global capacity, but 65% of global airline profits, and reaps nearly all the benefits of lower fuel (limited to no hedging). In contrast, the majority of global airlines are meaningful profit laggards and in some cases

19、hedge 90% of near-term fuel needs with cash collateral at risk (a reckless policy that we are shocked is still employed globally). 2019 was already witness to a record number of airline failures despite a salubrious fundamental backdrop. To believe that 2020 is characterized by anything other than a

20、 rash of international airline failures is foolhardy, in our view, though widespread government bailouts (given the sheer importance of air travel to so many economies) remain a wild card.Fewer international players bodes well for the North American Big Four As business models go, long-haul/low-cost

21、 hadnt proven resilient even when times were good. To the extent that these airlines and possibly others permanently exit the Atlantic, long-term international profitability at Air Canada, American, Delta, and United is expected to emerge higher than pre-crisis levels. Trans-Pacific capacity is also

22、 expected to rationalize, though Chinese aid could interfere with market forces. Latin America is a mixed bag and demand trends thus far are not as bleak, though winter is coming.A few other thoughts before we get to what matters “What if businesses learn to live with less corporate travel?” is a do

23、wnturn media staple. It was asked after 9/11, SARS, the full-size toiletry ban, and the GFC. Our advice is to ignore the topic. Downturns have spurred domestic consolidation and this crisis may prove similarthough current fundamentals are gyrating with such momentum that achieving merger traction ma

24、y prove difficult (though from a regulatory perspective, its hard to imagine the government blocking even the largest of deals). Our point is that should push come to shove, domestic consolidation is far easier for us to fathom than any carrier of size exiting the business. Lastly, unlike prior down

25、turns where consumer demand handily outperformed corporate, we believe consumer/corporate aversion to commercial air travel will be roughly the same.Government aid remains a global wildcard We generally prefer the U.S. not interfere with airlines. After all, post-9/11 ATSB loans were disproportionat

26、ely extended to airlines that ultimately exited the business, suggesting (at least then) that the government was more adept at picking losers than winners. However - and youve heard us say this before - this is not your parents airline industry (at least not in the U.S.). We can all squabble about U

27、LCC growth rates or Uniteds efforts to bolster its hub penetration, and whether these actions are good or bad for the sector. But the U.S. airline sector currently doesnt have any “bad actors”, in our view. No one deserves to fail (yes, even American with its “didnt have to be $30bn+ debt load if ma

28、nagement used excess cash to reduce debt rather than buy back stock” predicament). With the President having already effectively shut down most travel between Europe and US (Ireland and the UK added to the list over the weekend) and several countries imposing their own airspace restrictions (Norway,

29、 Spain, Italy to name a few), we do believe that governments throughout the world will need to, and in the case of the U.S., will want to, step in. The2situation is indeed so fluid that on Tuesday airline CEOs (at the J.P. Morgan Industrials Conference) were downplaying any need to request aid while

30、 by Friday the narrative shifted: “We are in discussions with the White House and Congress regarding the support they can provide to help us through this period. Im optimistic we will receive their support. That said, the form and value is unpredictable, and we cant put our companys future at risk w

31、aiting on aid from our government.” Ed Bastian, CEO Delta.Battle of the Balance Sheets We are applying Uniteds stress test analysis, rolled out on Tuesday at the J.P. Morgan Industrials Conf, to all of our models (and kudos to United management for their heightened level of preparedness relative to

32、peers). On Tuesday, we felt this case was indeed a “stress” case. By Sunday, it now forms the basis for our “base” case for the industry. In broad industry terms, -35% y/y revenue decline at the Big Four, $1.00/gallon fuel for the remainder of the year, roughly 0.5% ex-fuel CASM upside for every 1.0

33、% of capacity cut, though estimated cuts vary by airline. For domestic- centric airlines where we had expected modest revenue growth (chiefly SAVE), we are reversing growth by the aforementioned 35%. In the case of United, these inputs tie to the companys year-end liquidity illustration of $3 billio

34、n, though we arrive at $6.5 billion inclusive of financing for planned aircraft capex (which is obviously subject to change). Most importantly, on this pass, we do not model for additional liquidity raises through forward mileage sales, borrowings against unencumbered asset pools, and so forth (and

35、we have no doubts that airline treasury teams have been working the phones non-stop to consider options), though we do suspend dividends and buybacks across the board and we do include the drawdown of existing revolvers/credit facilities.We are modeling for 2021 to recover, and resemble 2019 With 20

36、20 revenue contraction 2x that of 2009 (the previous worst year for travel demand since the dawn of commercial flight), our covered airlines arrive at year-end with adequate liquidity to enter 2021, where we then model for pretax income recovery to within 90% of 2019s result (though we believe AAL a

37、nd LUV do better relative to 2019 since both had challenging years, particularly LUV with the 737 MAX grounding).The big liquidity increases in 2021 are due to the snap-back in margins We do not assume COVID-19, or any other virus, impacting travel in 2021, an assumption that could prove mistaken, a

38、nd a risk factor we need to consider in terms of deserved equity multiples. Our liquidity assumptions are also bolstered by the material suspension of share repurchases/dividends.At Uniteds stress level, heres how YE20 liquidity looks for others Despite a forecasted loss of over $8 per share, UAL YE

39、 liquidity emerges at $6.6 billion, or 23% of trailing forecasted levels. AAL $3.2b/11%, DAL $5.4b/17%, ALK $1.3b/20%, LUV$3.9b/23%, JBLU $1.2/21%. Air Canada emerges at an impressive $5.6b/45%. With the exception of American, all of these are levels that we view as adequate with which to enter 2021

40、, assuming that demand recovery is nicely underway at such point. But clearly, according to our analysis, incremental liquidity efforts at AAL would be welcomeif not absolutely necessary (and we have no doubt the capital raising wheels are in motion in Ft. Worth).3SummaryFigure 1: Our December 2020

41、price targets are lowered. JPMEquity Price Targets/Ratings RatingsAirlineNewOld JPM New PT JPM Old PT Current Price PT % Change JPM Upside %AALO-O$34.00$42.00$14.31-19%138%ACO-O$43.00$59.00$25.37-27%69%ALKN-N$53.00$76.00$37.95-30%40%DALO-O$68.00$78.00$38.36-13%77%JBLUO-O$15.00$24.00$11.18-38%34%LUVU

42、-U$49.00$56.00$41.28-13%19%SAVEO-O$41.00$53.00$15.08-23%172%UALO-O$99.00$123.00$41.64-20%138%Source: Bloomberg, J.P. Morgan estimatesFigure 2: Profits? We dont think so. 2020 estimates are slashed.2020eNewOld% changeCons ensusAAL($7.26)$5.06-243%$3.75AC($4.94)$3.87-228%$2.77ALK($3.29)$7.13-146%$6.24

43、DAL($1.43)$7.67-119%$6.31JBLU($1.63)$2.66-161%$2.22LUV($1.02)$4.45-123%$4.07SAVE($0.20)$5.46-104%$5.20UAL($8.76)$13.17-167%$10.75Source: Bloomberg, J.P. Morgan estimates.Figure 3: Our 2021 earnings estimates are reduced as well, but we model for profits.2021eNewOld% changeCons ensusAAL$5.22$6.35-18%

44、$5.14AC$4.53$6.24-27%$4.90ALK$5.90$8.05-27%$7.31DAL$7.15$8.25-13%$7.46JBLU$1.85$3.00-38%$2.63LUV$4.93$5.65-13%$5.19SAVE$4.85$5.85-17%$5.89UAL$11.70$14.46-19%$12.85Source: Bloomberg, J.P. Morgan estimates.Figure 4: Summary Cash Flow StatementsACALKLUVJBLU$ Millions20202021202020212020202120202021Oper

45、ating Cash Flows1823,1912301,4391,2044,4221261,316Investing Cash Flows(2,200)(1,621)(750)(750)(2,250)(2,000)(1,450)(1,600)Financing Cash Flows747(912)273(94)(144)720485580Year End Cash8191,477(26)5691,3584,501120417Year End Liquidity5,6185,2761,2749693,8827,0251,2391,536FCF(2,018)570(520)689(1,046)2

46、,422(1,324)(284)SAVEAALDALUAL$ Millions20202021202020212020202120202021Operating Cash Flows208601(2,328)4,3061,8947,8451496,415Investing Cash Flows(820)(820)(3,347)(2,100)(2,000)(4,000)(4,500)(4,200)Financing Cash Flows2782911,691(1,830)(497)1,5463,9751,860Year End Cash644717(3,703)(3,327)2,2797,669

47、2,3866,461Year End Liquidity6447173,1923,5685,37910,7696,56810,643FCF(612)(219)(5,675)2,206(106)3,845(4,351)2,215Source: J.P. Morgan estimates.4Figure 5: Airline Metrics2020ACALKLUVJBLUSAVEAALDALUALCapacity change-22.4%-10.0%-6.5%-7.3%-8.5%-20.4%-20.7%-20.5%Revenue change-35.3%-27.8%-24.8%-27.9%-19.

48、7%-34.2%-35.0%-34.5%Revenue reversal-41.6%-34.1%-26.9%-33.6%-35.0%-37.0%-42.5%-39.3%Ex-fuel CASM15.9%13.2%10.7%7.3%17.9%13.4%13.3%11.3%Op Margin change-20.1%-20.2%-17.4%-20.3%-12.0%-19.4%-16.6%-19.0%Ending liquidity (USD mm)$5,618$1,274$3,882$1,239$644$3,192$5,379$6,568Liquidity as % of 2020 rev45%2

49、0%23%21%21%11%17%23%2021 vs. 2019ACALKLUVJBLUSAVEAALDALUALCapacity change-10.0%-4.0%0.0%-5.0%-5.0%-10.0%-10.0%-10.0%Revenue change-6.6%-4.9%-2.4%-4.8%-5.8%-6.9%-5.4%-6.4%Ex-fuel CASM6.0%2.0%-2.0%1.0%2.0%6.2%5.8%5.5%Op Margin change0.9%0.1%1.5%0.4%0.0%0.4%0.5%0.1%Pretax income-5.9%-8.6%5.7%-4.6%-6.4%

50、0.9%-4.5%-6.9%Source: J.P. Morgan estimatesHow will the market respond to international failures? We are torn as to how the market will respond to potential international failures. The pessimistic view would be akin to “the tsunami of failure is starting, head for high ground,” suggesting equities (

51、and credit) decline further. The optimistic view would be “the weak are failing, the survivors will strengthen,” suggesting equities (and credit) rise. Weve been asking this question of myriad investors, with no clear consensus having emerged.Should we raise our target equity multiples? Weve long be

52、lieved that passing the recessionary test defined by remaining profitable in a downturn would unlock stubborn multiples to their fullest potential. Weve never received any pushback on this, and its been both our opening number and encore for ages (much like how the band Europe used to open and close

53、 its shows with “The Final Countdown”). But we never imagined testing airline liquidity resilience with a 70% revenue decline in a single quarter, nor a 35% full-year correction. Could passing this far more rigorous examination while maintaining solvency take the place of the more placid recessionar

54、y test? Admittedly a conversation for calmer days, but should our forecasts prove accurate and certain North American airlines emerge stronger against a backdrop of fewer international competitorswe could envision making a strenuous case for the long-speculated sector re-rating. With one caveatThe i

55、ndustry never prepared for revenue declines of this magnitude Last Tuesday, we discussed with Deltas CFO the decision for Delta to carry less cash on the balance sheet vs. peers. Deltas liquidity analysis is (our understanding) based on a Monte Carlo simulation of potential industry shocks yet COVD-

56、19 has proven to be a true “Black Swan” event that lies far to the right on the extreme outcomes scale. Thankfully Delta has $20bn of unencumbered assets which it can borrow against (more on this below). Our point is that even Delta, with one of the better balance sheets, wasnt prepared for this cri

57、sis. No one really was because of its unprecedented scale. We think one potential outcome will be a demand by all stakeholders (not just creditors) to build more fortress-like balance sheets once the industry recovers (all management teams were enamored with the buyback math, but some more than othe

58、rs).Calling Omaha? One wild card we dont think has received enough attention Berkshire Hathaway remains the largest shareholder at Delta (a position that was5recently increased), American, United, and Southwest. While we dont envision BRK outright buying one of these airlines during this crisis, we

59、do think BRKs penchant for “rescue” financing is something to consider ($5bn preferred invested in Goldman, Sachs, $3bn in GE during the GFC).Tallying the carnage All securities aviation related completely fell off the cliff this week and especially on Thursday post the Wednesday evening announcemen

60、t limiting the ability for passengers from many European markets to enter the US (keep in mind that United generates 17% of revenue from the Atlantic, Delta 16%, American 11%, Air Canada 25%, although the historic domestic/international ASM splits may not matter much if US airspace is also closed or