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BoAML lifts Air China (00753) to HK$9.1
BofA Merrill Lynch lifted its target price for
Air China (00753) to HK$9.1 from HK$8.4, but downgraded its rating from "buy" to 
"underperform".
  The CAAC has announced it will allow airlines to lift the maximum price they can charge
for tickets by 10% every six months on most major domestic routes. However, the research 
house said few tickets are sold at the maximum price. With anticipation of price 
liberalization helping to drive a 58% rise in airline stocks over the past three months, 
BoAML thinks the rally is overdone.
  It added that the annual impact is just a 0.8% increase in domestic yields.
  BoAML believes Air China is likely to see the biggest actual benefit given it operates 
on most of the busiest routes, has acute slot constraints at its main Beijing hub and
already has the highest average yield on domestic routes - implying more routes are likely
priced at or near the cap.
  A 0.8% yield increase for Air China would lift net income by CNY470mn. While this is 5%
of net profit, it can be offset by just a USD1.30/bbl increase in the price of jet fuel. 

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