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On Monday, JPMorgan analysts downgraded Air China (OTC:AIRYY) Ltd. shares from Overweight to Underweight, significantly reducing the price target to HK$3.80 from HK$5.90. The downgrade reflects concerns over various difficulties currently plaguing Chinese airlines. These issues include intensified competition within the domestic market, persistently weak demand for international travel, and the impact of currency depreciation.
The analysts at JPMorgan highlighted that the combination of these factors could exacerbate financial strains on airlines like Air China, potentially leading to increased operational costs and diminished profitability. The decision to lower the price target was informed by an earnings revision of approximately 22% for the fiscal years 2025 and 2026 estimates. Moreover, the new price target is set with a view that extends to December 2026.
In their statement, JPMorgan analysts pointed out specific headwinds that could further impact the airline’s financial health. They noted, "Tariffs could further strain their financial performance," signaling that external economic pressures such as trade tariffs might contribute to a more challenging operating environment for Air China.
The downgrade comes at a time when the aviation industry is navigating a complex recovery landscape post-pandemic. Chinese carriers, in particular, are facing a unique set of challenges as they attempt to rebuild their international networks and stimulate domestic travel, all while managing the economic pressures that come with a rapidly changing global market.
Air China has not yet issued a public response to the downgrade. The revised outlook by JPMorgan will likely be watched closely by investors as they assess the future financial performance and stock potential of the airline.
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