Cinda Securities released a research report stating that since early 2025, the aviation industry has maintained high load factors with robust demand on both domestic and international routes. Despite being the off-peak season, strong load factors and stabilizing fares suggest significant recovery in airlines' unit seat revenue.
The implementation of anti-cutthroat competition measures and the "China Air Transport Association Passenger Air Transport Self-Discipline Convention" is expected to reduce malicious low-price practices, potentially supporting fare recovery and further boosting unit seat revenue. Coupled with lower fuel costs, airline profitability may improve further. The firm remains optimistic about the earnings recovery driven by rising seat revenue and maintains a positive investment rating for the sector.
Key observations from Cinda Securities: 1) **Supply-Demand Dynamics**: Capacity growth rebounded, with load factors rising further. Industry ASK and RPK in October 2025 increased by 6.2% and 8.9% YoY, respectively, up 17.3% and 23.4% compared to 2019. The load factor reached 87.4%, +2.2 ppts YoY and +4.3 ppts vs. 2019. Data from six major airlines (Air China, China Southern, China Eastern, Spring Airlines, Juneyao Air, and Hainan Airlines) showed November ASK and RPK up 7.0% and 10.3% YoY, with load factors at 85.6% (+2.6 ppts YoY). Domestic/international ASK rose 4.2%/13.9% YoY, while RPK grew 6.8%/19.6%, with load factors at 86.6%/83.2% (+2.1/+4.0 ppts YoY).
2) **Fares**: Off-peak December fares softened. Year-to-date (as of Dec 15), the average domestic fare was RMB 839 (-7.0% YoY). The December average domestic fare (including fuel surcharges) stood at RMB 709 (-6.2% YoY).
3) **Fuel & Forex**: December jet fuel prices edged up, while the RMB strengthened. Domestic jet fuel prices (including tax) in October, November, and December were RMB 5,572/5,625/6,045 per ton (+3.9% YoY in December). The USD/CNY mid-rate appreciated to 7.0602 by Dec 16, 2025 (-1.78% from end-2024).
**Airlines’ Operations**: - **Domestic Routes**: From Jan-Nov 2025, most carriers saw slight YoY capacity growth except Air China and Juneyao. Load factors remained elevated, with the "Big Three" airlines posting notable YoY gains. All except Juneyao reported higher domestic RPK, led by Spring Airlines (+8.4%) and China Eastern (+5.9%). - **International Routes**: China Eastern and Juneyao exceeded 2019 RPK levels, while China Southern, Spring, and Air China neared pre-pandemic levels. Hainan Airlines lagged significantly. - **Fleet Expansion**: In November, Air China and China Southern each added seven aircraft. Year-to-date, China Southern led with 47 net additions, followed by Air China (26) and China Eastern (21).
**Risks**: Weaker-than-expected travel demand, limited fare hikes, oversupply, intensified competition, surging oil prices, and RMB depreciation.
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