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“Each side is desperately trying to store more water on its own site and let itself live first.”

Look at the business with a point of view. Super perspective, cutting-edge observations from new business practitioners.

Text | Special Observer Sun Guohui

Editing | Cui Yandong

After the battle against the epidemic started, the tourism industry became the first batch of quick-frozen industries. Combined with data from the aviation industry, an important part of the aviation and travel industry, let’s see how fast it is.

Quick freeze mode

Massive refunds, massive refunds

When the Spring Festival is coming, home visits to family members and domestic and foreign travel users are the two main customers. On January 20, the Spring Festival transportation across the country reached its highest peak, with nearly 100 million passengers traveling by rail, road, air, and water. After Zhong Nanshan announced the news, a large number of refunds appeared, and with the rapid decline in ticket sales, on January 21, the number of refunds was close to 50% of the number of tickets sold on that day; on January 23 (the 29th of the month of January), Wuhan announced the closure At that time, the city reached its first peak. On this day, the major OTA platforms, the number of refunds on that day was even close to the number of tickets sold on that day.

January 24th to February 6th, a total of 13 million refunds (source: Civil Aviation Administration’s February 6 press conference), a rough estimate of at least 10 billion; Li Jian, deputy director of the Civil Aviation Administration of China in February At the press conference of the State Council Information Office on the 15th, domestic and foreign airlines handled a total of 20 million free refunds, involving a total face value of more than 20 billion yuan. On March 18, Ctrip disclosed that only Ctrip refunded 31 billion during the Spring Festival.

The pressure for refunds has increased rapidly, causing service personnel in the industry to refund overtime for a long time, and the complicated procedures and the refund cycle of airline companies have also left a lot of hidden dangers to the current industry.

Low price and low volume, slow recovery

Under the huge wave of refunds, airlines are also under tremendous pressure. The load factor during the Spring Festival is almost half of the same period last year, and the load factor for the week after February 6 is only 30%. Impact); and this is still the result of sales under the condition of many air tickets dozens of yuan (by March, cabbage prices):

Many airline companies have chosen to cancel their flights, and the aviation industry is almost “zero.” The corresponding global tourism industry naturally inevitably receives the same impact. To this day, domestic routes have not fully recovered, and international routes have become more serious. As you can see in the chart below, the recovery rate is lower internationally than domestically.

The hardest hit area of ​​the capital market

The response of the capital market to the aviation industry and even the tourism industry affected by the epidemic is extremely rapid.

· Air China dropped from RMB 9.35 / share on January 17 to RMB 7 / share on February 4 with a drop of 25.2%.

· China Eastern Airlines dropped from 5.6 yuan / share to 4.23 yuan / share on January 17, a 25% drop.

· Although Buffett bought Delta Air Lines for $ 45 million in February, it still cannot save Delta’s stock price. From February 14 to the present, Delta Air Lines has fallen 49%, far exceeding the market average.

· Expedia, an online travel site, has fallen by nearly 61% since February 14, while the Dow Jones Index has fallen 33% over the same period. However, as prices have fallen, companies such as Expedia (and even Booking) have fallen to 11-15, which may be a good opportunity from a value investment perspective, but it may take a long time to wait for a rebound Of course, the premise is that these companies can walk through this “hundred billion dollar pit.”

Dried up cash flow

At present, due to the sudden outbreak, the entire cash flow of the airline, ticketing, and air travel industries has suddenly dried up, and each party is desperately trying to save more water on its own site and let itself live.

Airline

Low profit margins, high costs, and huge losses

The airlines seem to be very beautiful, and they have a lot of money. In fact, the airline industry ’s profit margins arenot tall.

IATA’s statistics from 2014 show that the average profit margin of the global industry is about 2.5%; in 2015, this number rose to 4.6%; in 2016, the net profit margin rose to 5.1%. It can be seen that the industry’s net profit margin is only about 5%, and the average profit that airlines get from each passenger is less than $ 10, which is quite a distance from the industry’s view that 7-8% is a reasonable profit margin.

The cost of airlines is very high, about 30% of the cost of air tickets is fuel costs; about 30% of flight attendant services; aircraft maintenance lease or depreciation of about 25%; others are marketing administration and communications navigation And other costs. The cost per hour of a flight is about 70,000 to 100,000 (depending on the specific model). As long as the plane is on the sky, most of the costs will occur, so a large number of vacant seats will not reduce the cost, so a large number of refunds will bring a lot of losses.

Although grounding has brought down costs, the proportion of amortized costs such as aircraft leasing, personnel, and space has increased, greatly reducing the scale effect. From the table below, the daily utilization of aircraft can be seen in less than 3 hours. come out. (Industry experts have analyzed that short- and mid-range aircraft take up some time due to the large number of take-offs and landings. The daily utilization rate may be 6 hours, and the long-range aircraft may reach 11-12 hours. The overall average daily utilization rate during normal operation. More than 10 hours.)

Furthermore, the number of seats on flights that continue to operate is limited (seats are sold at intervals between outbreaks), and airlines still carry huge losses. A large amount of cash flow was consumed without entering, causing tremendous funding pressure.

Control refunds and alleviate funding pressure

In order to alleviate the financial pressure, many airlines have already delayed the refund of refunds (mainly for agents and travel agencies), extending the refund cycle; even for tickets purchased directly from passenger websites, the refund cycle is also being extended.

According to industry practitioners, refunds from low-cost airlines such as AirAsia have been refunded to the agent account instead of cash; and on March 19, the airline company that refunded such vouchers has already changed from AirAsia. This type of low-cost airlines has spread to full-service airlines, including many well-known foreign airlines. However, the wording of its external notice is rather obscure. In essence, it is to publicize the refund by changing the refund to a free reschedule. This shows that the impact of the spread of foreign epidemics on overseas airlines has appearedObviously, there is no food left in the main house.

Domestic state-owned airlines, as industry participants responsible for national economy and people ’s livelihood, have not followed up and introduced similar measures at this crisis, reflecting their due responsibility and sense of social responsibility. However, the cash pressure they are facing is also lengthening the refund cycle objectively.

Ask for government relief, otherwise it will be difficult to continue

The normal operating cash flow is broken, and financing channels such as the stock market cannot be replenished with new funds. On March 16th, the Asia Pacific Aviation Center CAPA issued a report: It is expected that most of the airlines in the world will fail in May without government assistance. Due to viruses and multinational travel bans, many airlines may be technically bankrupt, at least unable to repay their debts. If half of the planes are unable to fly, the cash reserves will run out very quickly.

The International Air Transport Association IATA has made a thrilling forecast of the global aviation industry for the epidemic, which will require US $ 200 billion. Without external funds to support 75% of the practitioners, the airlines would not be able to pay even the fixed costs within 3 months.

“China Business News” reported on March 18 that the United States Airlines has sought $ 50 billion in assistance or loans from the government to alleviate financial pressure, or it will go bankrupt at the end of May.

The bankruptcy of airlines seems rare to us. In the past ten years, many airlines around the world have suffered bankruptcy or reorganization. The country with the prefix “China” has received good international assistance and reorganization. In 2018, five small airlines in Europe went bankrupt, and many airlines closed in 2019. In addition to poor management, the disruption of capital flows is an important cause.

Although domestic airlines, as participants in the national economy and people’s livelihood industry, have strong support from governments at all levels, the challenge of funding pressure is still not optimistic, and they have taken some self-help measures. For example, ICBC Sichuan Branch successfully issued Sichuan Airlines 1 billion Yuan epidemic prevention and control of ultra-short-term financing bonds; Spring and Autumn Airlines intends to publicly issue corporate bonds of no more than 5 billion yuan. After deducting the issuance costs, it will be used to supplement liquidity and repay interest-bearing liabilities. It doesn’t matter.

Ticket agents and travel agencies

Competition, service upgrades, bring cash flow windRisk

The agency system adopted by the air ticket distribution industry is not the dealer system, so consumers actually purchase air tickets with agreements signed with airlines. The agent draws commissions and corresponding service fees from it (the common practice abroad). However, traditionally, refunds and other acts occur. Agents help users to operate, submit to airlines, and wait for the airlines to pass the approval, or after the system confirms, return the funds to the entrusted agent to return the final consumer. In this process, the ticket agent and travel agency are the agents of the airline. In principle, the risk of incidents such as the failure of the airline company is borne by consumers.

But under the conditions of rapid development and high competition in China, especially in cooperation with OTAs, ticket agents and travel agencies must provide higher service standards to acquire more users and businesses. This process of The coupling is interrupted: that is, under normal circumstances, voluntary refunds (under clear rules), the agent or OTA platform will refund the user as quickly as possible, and then wait for the airline to refund the agent, which usually takes several days or even one month.

In this outbreak, OTA refunds may be faster than refunds for tickets purchased directly by airlines. In this case, under normal conditions, the refund rate is not high, and ticket agents and travel agencies can accept it. For example, in the past two years, several small airlines in Thailand went bankrupt, and many agents lost a sum of money because they could not refund, but because the proportion was relatively small, there was not much impact.

But under the conditions of this epidemic, almost all the tickets sold are refunded. This process introduces the hidden danger mentioned above: that a large amount of funds paid by users are returned to users, and aviation The company’s original refund rate was slow, coupled with its own cash flow constraints, further extending the cycle, or using vouchers instead, resulting in a sudden increase in pressure on the funds of agents and OTAs-this is equivalent to the funds being occupied by the airline company. And if a large number of airlines fail at the end of May (this may happen to foreign airlines; the probability of domestic airlines should be small, but the financial pressure is still not to be underestimated), then ticket agents and travel agencies will certainly follow Failure (Personal website purchases also face direct losses).

In fact, what is even more frightening is that many domestic funds are not very powerful agents and travel agencies. The current funding situation is likely to support less than the end of May. Due to the risk of airline companies, major platforms are also restricting sales of some airlines, and few poor passengers cannot consume the vouchers returned by airlines to help agents withdraw funds quickly; and the funds for small sales are also used The return of the platform’s advance funds did not actually solve the cash flow problem. In turn, the online platform may perform risk control on agents that are considered to be at risk, thereby exacerbating the plight of these agents or travel agencies. Therefore, the agents below the middle scale will face this kind of situation, like that song: “We are all right, it’s just inappropriate.”

Not only the air ticket industry, but also the tourism industry as a whole.There are similar problems in the segmented industries such as booking.

Inter-industry collaboration, financial services, and huge network risks

In the ticketing and travel agency industries, there are close inter-bank collaborations. In addition to airlines to agents, there are also a large number of inter-bank services between agents (wholesale versus temporary sales), agents and platforms, and financial services agencies and agents. There are a large number of credit issues, arrears, and accounting periods between these institutions. In this huge network they constitute, once a single point of this network has a problem, the crisis will spread throughout the network. For example, in 2018, the UK’s largest ticketing agent, Europa, experienced financial flow problems, which directly caused the global ticket industry to enter a high level of alert. Fortunately, the British Airline Association stepped in to avoid the expansion of risks, but also caused a lot of losses for the majority of partners .

If an important agent or financial credit institution in the network in order to avoid risks, shrink credit, or shorten the account period (reducing the leverage ratio), it will quickly reduce the network’s liquidity, and it will also quickly deteriorate the agent’s cash flow. The extension of the refund cycle and control of the airline company has deteriorated the liquidity of the entire network, allowing the entire network to level its own liquidity risk.

Financial service institutions in the network also face challenges in this network. If you reduce your risk exposure, it means to some extent that you increase overall market risk. It is not known whether these institutions have problems and will spread risks outside the industry.

It can be expected that if there is no good solution, the ecology of the entire tourism industry will change dramatically, because there are a large number of small and medium enterprises in this industry, and Baicheng ’s failure at this time will give no matter what the reason is. The industry has sounded the alarm.

Self-help

The agent is facing this situation, and is thinking of various ways to take self-help:

· The tide of returning to China, both volume and price are rising, you can earn it when you grab it

Comprehensive data (non-industry global data) obtained from institutions in the industry shows that due to the spread of foreign epidemics, the wave of returning to China has been triggered. The number of European returning tickets has increased by 46%, and the price has nearly doubled. The price and volume of the return of the United States are also rising. Overall, the price of returning home has increased by 50%. This part of the rise in local demand, the skyrocketing ticket volume has become a life-saving straw for agents and travel agencies in trouble, which has eased the tight liquidity to a limited extent.

· As it is difficult to get a ticket to return to China, we have participated in the “business jet” charter business and obtained high profit subsidies for losses.

· Prepayment for tourism products.

· Refund funds in advance through prepayment to avoid cash flow drying up.

· Temporary career change, doing quotients

3, OTA platform

Since the OTA platform is in front of users, in order to improve the service quality, it has beenRefund processing overtime. It is said that the tickets for 2 months basically retired during the Spring Festival. The workload can be imagined, and the industry practitioners have also worked hard for the Spring Festival. The amount of refunds is quite large, and only Ctrip disclosed that the advance fund was 1 billion yuan. In this outbreak, whatever the OTA’s sudden cash flow disruption means, it means a loss of revenue.

At present, most of the OTA platforms have self-operated services, which also means that they face the same dilemma as ticket agents; while another identity serves as a platform, if the upstream airline fails or the agent fails, the OTA platform will not be allowed. Without taking responsibility for users, this potential risk cannot be underestimated.

In addition, OTAs are also pre-selling travel products in order to solve their own cash flow problems.

4. Consumers

Currently, consumers are experiencing an extended refund cycle to a certain extent, and this situation may be further strengthened in the future; while the refund policy of foreign airlines is changed to free and rescheduled, if the current OTA platform and agents are under financial pressure Under the circumstances, it is likely to be transmitted to the consumer side (however, there are not many overseas Chinese, mainly affecting foreign passengers).

Consumers will now also see a lot of pre-sale products. These are the last resorts airline companies have made in order to ease the pressure on cash flow. Because the profits of popular tourism products are very low (niche high-margin products, small salaries), making a relatively large discount basically means using future losses in exchange for current cash flow. And if the product discount is too low, consumers must be more careful, beware that this kind of product will be too restrictive in the future, or the service is too poor, and it may even be the current behavior of enterprises to quench their thirst.

Prisoner’s dilemma, how to solve it

In the current aviation market and the tourism market, all participants are in a prisoner’s dilemma: pass on risk to reduce losses, or does the industry seek to reduce risk as a whole? In this huge network, there are many participants, and the liquidity is rapidly depleting, the possibility of choosing the latter is minimal.

At present, the entire society and various industries are facing insufficient liquidity, so the central bank and the government have repeatedly increased liquidity investment. But why is the problem of the air travel industry so serious? It all starts with the characteristics of the industry. Let’s take air tickets as an example:

According to the theory of “new institutional economics”, air ticket transactions are typical post transaction risk business: traditional one-handed transactions and one-handed transactions, except for the quality of the product itself, other transactions The risk is the lowest; theoretically, when a ticket is paid for, a transaction occurs, but only when the user checks in can they start enjoying the products and services they have purchased. So there is a long time between payment and service enjoyment-domestic flights are generally within a week, and international flights may be 15-30 days. Participants in this process include platforms, participating generationsManagement, and airlines. Therefore, the long chain and long money interval have a high probability of change, and any change may cause risks.

Airlines are high-cost, low-margin companies that need a steady stream of cash to maintain operations. Therefore, any risk occurs, resulting in a rapid decrease in cash inflows. Due to the high fixed costs and high marginal costs, cash flows will naturally dry up quickly. And the network involved is huge and there are many links in the chain, so naturally it will cause huge and complicated risk transmission.

The products in the tourism industry are similar to air tickets. Especially in the mobile Internet era, most of them are forward-booked products. Naturally, it is difficult to escape doom, but the cost structure of the hotel industry and the scenic area industry is different, and the degree is different.

The World Tourism Association predicts that 5 million tourism-related jobs worldwide may be lost due to the epidemic. The global tourism industry may lose 25% of its business, equivalent to three months of global tourism.

In this case, the crisis of liquidity can be effectively alleviated only by external, most likely the government’s huge liquidity support. Of course, this scale must be the “100 billion US dollars tiankeng” of the air travel industry that can only be filled with huge amounts of funds. And this also depends on the collaboration of multiple national governments. The capital injection from the top of the industry, airlines and hotel groups, may be more effective. Of course, this depends on these giants being able to take on the responsibilities of the industry, rather than take a look at it.

But pessimistically, considering the size and cost of government funds, it is likely to be just the head of the aid industry. Many small and medium-sized enterprises will inevitably go bankrupt, or be merged and reorganized. The impact on the industry is unavoidable.

Although import pressure still exists, China ’s epidemic situation has been effectively curbed, Wuhan has also gradually opened up citizens ’travel using the Green Code, and many provinces and cities have gradually resumed production and work. China ’s situation is more optimistic than the rest of the world. some.

Industry practitioners look forward to seeing a “revenge” rebound as soon as possible, but before that, everyone is facing the pressure of cash flow. From the perspective of quickly restoring the normality of the industry and reducing the economic and industrial harm caused by the epidemic, the government is urgently required to issue targeted policies to help large, medium and small enterprises in the industry to support and reduce corporate bankruptcy and work caused by cash flow disruption. Reduced posts.

Market after the epidemic

1. Aviation industry

In the past few years, there have been two trends in the aviation market: low-cost aviation and oligarchy.

Due to the low profit margin of the aviation industry, whether it is profitable often depends on world crude oil prices. The relatively high profit margin of low-cost airlines and the success of Southwest and AirAsia have promoted the “cheaper” of traditional airlines. On the one hand, the distribution ratio is reduced, and more direct sales are used to reduce the cost of sales expenses; on the other hand, the on-board services are gradually cancelled or converted to fee-based services, such as Lufthansa in Germany and even in Europe.Flights do not provide meals; 40% of American Spirit ’s revenue comes from non-ticket revenue; domestic airlines are increasingly adopting a similar approach. Seats such as seat selection are also gradually being charged.

The profits of airlines often depend on the advantages of scale. Therefore, the entire industry has been undergoing mergers and reorganizations worldwide over the past ten years. Air France, KLM, Lufthansa and other airlines have been seeking larger scales.

After the epidemic, the industry will inevitably be reshuffled. If small and medium-sized airlines do not receive assistance, the financial breakdown will likely be merged by the head company. The motive for increasing profit margins (returning state bailout funds) will further strengthen the trend of reducing costs and increasing fees. Therefore, the aggregation of suppliers and low-cost airlines are likely to push up the prices of air tickets and related services in the short term, and they may be selectively reduced. Of course, it may also be a narrower seat pitch.

2, Air ticket industry

The air ticket industry is now in the era of “big data” and “big money.” And this crisis will inevitably further strengthen the head effect, agents with weak capital strength will be eliminated, the remaining participants will decrease, and the fierce competition will decline. It may be accompanied by further “manageability” of the market and standardization and service enhancement. However, prices may also fluctuate upwards.

3. Tourism industry

The tourism industry is generally similar to the airline ticket industry. Small players are out and large players are bigger. It may take a long time for new vitality and participants to reappear in this industry.

Perhaps every change is an opportunity for new entrants; every crisis is just a “last feast” for big players.

The “Super Opinion” column is now launching the “Special Observer Settlement” program, inviting entrepreneurs from various race tracks, leaders of large company business lines, and other front-line business practitioners to share your entrepreneurial insights, dry goods, and methodologies. , Your industry insight, trend judgment, and look forward to hearing your voice from the forefront.

Welcome to contact us, WeChat: cuiyandong66; Email: guanchayuan@36kr.com.

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