China Merchants Securities has released a research report indicating that passenger transport growth has shown some improvement since July. In the first four weeks (June 26 to July 23), the number of civil aviation passengers increased by 1.3% year-on-year. However, revenue from domestic routes continues to face pressure. International and regional passenger traffic rose by 1.6% year-on-year, reflecting relatively weak demand in the passenger sector. In the cargo sector, the average TAC Shanghai outbound air freight price index in July increased by 23.8% year-on-year. The passenger aviation segment is expected to see year-on-year profit pressure due to high fuel costs and weak demand. The current market capitalisation of the sector has dropped significantly, awaiting catalysts from improvements in demand and costs. The air cargo segment benefits from growing export demand and tight industry supply, keeping air freight rates at elevated levels. Under high oil prices, operating profits are expected to continue growing.
The key views of China Merchants Securities are as follows:
Core Data for June in Air Passenger Transport
1) Demand: In June 2026, the civil aviation passenger turnover was 107.4 billion passenger-kilometres, up 13.0% compared to 2019 and down 2.1% compared to 2025. Domestic routes (excluding regional) had a passenger turnover of 79.1 billion passenger-kilometres, up 18.3% compared to 2019 and down 5.2% compared to 2025. International and regional route passenger turnover was 28.3 billion passenger-kilometres, up 0.3% compared to 2019 and up 2.6% compared to 2025.
2) Supply: In June 2026, available seat kilometres (ASK) in civil aviation were 126.8 billion, up 11.1% compared to 2019 and down 2.2% compared to 2025. The passenger load factor for scheduled flights was 84.7%, up 1.4 percentage points compared to 2019 and up 0.1 percentage point compared to 2025. The daily aircraft utilisation rate reached 8.2 hours, down 7.9% compared to 2025.
3) Performance of Listed Airlines: In June, the year-on-year changes in RPK for domestic routes for China Southern Airlines / Air China / China Eastern Airlines / Hainan Airlines / Spring Airlines / Juneyao Airlines were -5.5% / -6.7% / -7.1% / -8.3% / +20.3% / +3.4%, respectively. The year-on-year changes in ASK for domestic routes for these airlines were -4.0% / -7.7% / -5.6% / -6.8% / +21.5% / +4.6%, respectively. For international routes, the year-on-year changes in RPK for these airlines were +7.2% / +7.4% / +4.7% / -5.2% / -4.8% / -5.4%, respectively. The year-on-year changes in ASK for international routes were +7.8% / -1.6% / -0.3% / -7.4% / -7.3% / -9.3%, respectively.
Core Data for June in Air Cargo
1) Cargo and Mail Volume and Turnover: In June 2026, the international and regional cargo and mail transport volume was 425,000 tonnes, down 0.7% month-on-month and up 11.0% year-on-year. The international and regional cargo and mail turnover was 3.11 billion tonne-kilometres, down 0.3% month-on-month and up 13.5% year-on-year.
2) Freight Rates: In June 2026, the average TAC Shanghai outbound air freight price index was 6,072 points, up 2.2% month-on-month and up 35.7% year-on-year.
Jet Fuel Price Increase Expected to Be Stable in August
Benefiting from the easing of the Middle East situation in June, both international crude oil prices and jet fuel prices fell significantly. On July 1, the year-on-year increase in the domestic jet fuel ex-factory price moderated to 46%. Since July, due to fluctuations in the Middle East situation, international jet fuel prices have risen again. It is expected that the increase in the domestic jet fuel ex-factory price in August will remain above 40%, with a relatively stable month-on-month trend.
Risk Warning
Risks include macroeconomic downturn, significant depreciation of the Renminbi, substantial oil price increases, major natural disasters, and safety production accidents.
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