GTHT released a research report stating that China's aviation industry is set to welcome a "super cycle" and recommends positioning for the sector's long-term logic during the off-season. With the implementation of market-based pricing during the "14th Five-Year Plan" period and the aviation supply entering an era of low growth, future demand growth and the recovery of passenger structure are expected to drive an upturn in fares and profitability starting in 2026, with high prosperity being sustainable. The Chinese aviation industry is poised for a long-awaited "super cycle." It is emphasized that the unfolding of this long-term logic will provide room for both performance and valuation growth, while continued positive fundamental feedback and strong peak-season performance will catalyze optimistic market expectations. The quality of the route network will determine the future upside and sustainability of profitability for traditional airlines. GTHT's main views are as follows:
In 2025, China's aviation supply has entered an era of low growth, with structural changes in demand being the core issue. From 2023 to 2025, China's aviation demand has recovered rapidly and continues to grow. During this period, private demand has remained robust over the past three years, while the proportion of business and official travel demand has continued to be lower than 2019 levels through 2024-2025. 1) Air passenger traffic: It is estimated that China's civil aviation passenger traffic will increase by 5-6% year-on-year in 2025, representing a cumulative growth of 17% compared to 2019. 2) Airfares: In 2025, China's civil aviation load factor reached a new historical high, ranking first among globally comparable markets, yet fares remain at historically low levels. It is estimated that domestic fares including fuel surcharges in 2025 will be lower than in both 2024 and 2019. The industry's profitability has not yet recovered, with the core issue being that the proportion of business and official travel demand remains below 2019 levels. Airlines continue to prioritize load factor strategies, trading price for volume to ensure passenger growth and higher load factors. Bottlenecks in Chinese airspace and time slots are prominent and persistent, and aviation supply has entered an era of low growth. Future continued growth in aviation demand and the recovery of passenger structure will drive an upturn in fares and profitability.
Review of the 2025 Spring Festival travel period: Passenger traffic hit a new record high, while fares decreased year-on-year. According to the Ministry of Transport, during the 40-day 2025 Spring Festival travel period (Jan 14-Feb 22), cross-regional passenger movements in society exceeded 9 billion person-times, setting a new historical record with a 7% year-on-year increase. This was broken down as follows: road travel +7%, railway +6%, and civil aviation +7%. The pre-holiday period (first 14 days) saw concentrated and overlapping passenger flows due to the early timing of the Spring Festival; the holiday period (8 days) benefited from an extended vacation and the "piggybacking" leave effect, with robust secondary travel filling the traditional trough; the post-holiday period (last 18 days) featured dispersed and delayed return passenger flows. 1) Air passenger traffic: Estimated to have grown 7% year-on-year, with domestic traffic up 4-5% and international traffic surging nearly 30%. 2) Airline load factor: Estimated actual operated flights increased by only 5% year-on-year, while the load factor improved by 2 percentage points. 3) Airfares: Affected by a high base period and increased high-speed rail services, the estimated domestic base airfare decreased by 5% year-on-year, and the domestic fare including fuel surcharges fell by nearly 10% year-on-year. Domestic base fares were flat year-on-year before the holiday but declined during and after the holiday, turning positive after the Lantern Festival.
Outlook for the 2026 Spring Festival travel period: Demand is expected to remain strong, with recent pre-sales beginning. After the New Year's Day holiday, the aviation market entered its traditional off-season, with airlines intensifying efforts to curb internal competition and manage irrational low-price competition. As schools begin their holidays and business travel gradually recovers, recent aviation volume and prices have started to rebound. The 2026 Spring Festival travel period (40 days) will run from February 2 to March 13. Advance sales for train tickets for the first day of the travel period began 15 days early on January 19, and recent pre-sales for Spring Festival air tickets have also commenced, with a significant increase in daily ticket issuance and year-on-year growth. The institution expects demand for the 2026 Spring Festival travel period to remain strong, with the potential for sizable secondary travel during the holiday period, particularly in popular southern coastal cities and tourist destinations like Hainan and Yunnan. Civil aviation authorities will strictly control the addition of airlines on trunk routes and the increase of both domestic and international flights, expecting the overall number of additional flights during the travel period to be relatively limited. The "piggybacking" leave effect during the Spring Festival is expected to be weaker than in previous years, with passenger peaks anticipated before and after the holiday. Combined with high load factors and market-based pricing, this is favorable for airline revenue management.
Risk warnings include economic fluctuations, policy changes, oil prices and exchange rates, equity dilution from additional share issuances, and safety incidents.
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