What's new
　　Air China announced March operating data, with revenue passengerkilometers (RPK) down 73.5% YoY, available seat kilometers (ASK)down 62.4% YoY, and passenger load factor (PLF) down 23.9ppt YoYto 56.8%.
　　Comments
　　YoY decline in ASK narrows in March; YoY drop in passenger volumeslower than sector. Air China’s ASK declined 62.4% YoY in March,compared to a 68.1% drop in February. Passenger volume fell 69.1%YoY compared to sector decline of 71.7%. PLF fell 23.9ppt YoY to56.8%, but rose 5.4ppt MoM. 1Q20 ASK and RPK declined 42.2% and51.8%, while PLF dropped 13.6ppt YoY to 67.8%.
　　Domestic flights recovering; demand has likely bottomed. DomesticASK and RPK fell 50.7% and 63.3% in March compared to declines of72.4% and 83.9% in February. PLF declined 21ppt YoY to 60.9% inMarch compared to 50.2% in February, implying marked recoverythanks to effective COVID-19 control and gradual work resumption inChina, in our view.
　　YoY decline in international flights expands in March and likely tocontinue in April. International ASK and RPK fell 77.4% and 87.1% YoYin March compared to drops of 59.5% and 73.2% in February. PLF fell33.7ppt YoY to 45% compared to 53.4% in February. YoY declineexpanded MoM in March, and we expect the drop to furtheraccelerate in April amid the Civil Aviation Administration of China’srequest to reduce international flights.
　　Freight load factor continues to rise in March. Freight utilization ratecontinued to rise 17.9ppt YoY to 61.1% in March, possibly driven bytransportation for medical supplies, in our view.
　　Valuation and recommendation
　　Air China A/H are trading at 1.1/0.7x 2020e P/B. Maintain 2020/2021earnings forecast at Rmb59mn/Rmb9.427bn. Maintain OUTPERFORMon Air China A and H with TP at Rmb8.9 (1.4x 2020e P/B with 30.5%upside) and HK$7 (1.0x 2020e P/B with 32.6% upside).
　　Risks
　　Disappointing air travel demand; worsening of COVID-19 outbreak;RMB depreciates against USD; sharp rise in oil prices