What's new
　　Air China announced April data, with revenue passenger kilometer（RPK） down 79.2% YoY, available seat kilometer （ASK） down 74.2%YoY, and passenger load factor （PLF） down 15.6ppt YoY to 65.4%.
　　Comments
　　YoY decline of RPK and ASK expands MoM in April. Air China’s ASKand RPK fell 74.2% and 79.2% YoY in April compared with 62.4% and73.5% in March.
Domestic ASK and RPK fell 56.0% and 64.4% YoY in April,compared with 50.7% and 63.3% YoY in March, as theemergency response level for COVID-19 remained high in Beijingand April is high season for official and business activities.
International ASK and RPK fell 97.3% and 98.6% YoY in April,compared with 77.4% and 87.1% YoY in March, as the CivilAviation Administration of China （CAAC） allows each airline tooperate only one flight per week on the route remained to eachcountry or region since March 29. Regional flights （i.e. to andfrom Hong Kong, Macau and Taiwan） were also affected, withASK and RPK sharply declining.
　　Among China’s Big Three airlines, Air China has the highest exposureto international and regional ASK （44% in April 2019）。 Therefore, AirChina was more affected.
　　ASK and RPK likely bottomed in April; to benefit from recoveringbusiness and official travel demand in future. We expect recovery ofBeijing’s air travel demand to accelerate as the city lowered itsemergency response level on April 30. Air China has the highestexposure to international ASK. That said, we estimate easing travelrestrictions in Beijing will boost recovery of business and officialtravel demand, of which we think Air China will benefit most.
　　Valuation and recommendation
　　Air China A/H are trading at 1.1x/0.6x 2020e P/B. The YoY decline inair passenger volume has narrowed, but Air China’s share price hasretreated and its valuation has returned to lows. We maintainOUTPERFORM, earnings forecasts. Maintain A/H share TPs ofRmb8.9/HKD7.0, implying 1.4x/1.2x 2020e P/B, 33%/ 46% upside.
　　Risks
　　Disappointing demand; uncertainty around COVID-19; sharp renminbidepreciation against the US dollar; sharp rise in oil prices.