Goldman Sachs has released a report indicating that the summer travel season for China's airline industry is showing a steady recovery in passenger traffic. As of August 9, cumulative total passenger volume rose 4.2% year-on-year, with domestic and international routes increasing by 4.3% and 3.1% respectively. This performance has surpassed market expectations.
Domestic airfare, inclusive of fuel surcharges, has narrowed its year-on-year decline to near-flat levels, while fares on major international routes have risen by 9% year-on-year. However, the firm notes that persistently high fuel prices continue to erode profitability. Fuel surcharges are estimated to cover only about 55% of the three major airlines' additional fuel costs, prompting Goldman Sachs to lower its 2026 profit forecasts and target prices for several carriers.
The report projects that fleet supply growth for the three major airlines in 2026 will be a mere 0.4%, with ongoing delays in aircraft deliveries supporting a tight supply environment. Nonetheless, based on a Brent crude oil price assumption of $86 per barrel for 2026 and the limited coverage of fuel surcharges, Goldman Sachs has revised its 2026 earnings estimates downward. For Air China Ltd (00753), the forecast has been adjusted from a loss of 497 million yuan to a loss of 5.39 billion yuan. For China Eastern Airlines Corp Ltd (00670), the estimate has moved from a loss of 2.156 billion yuan to a loss of 6.009 billion yuan. For China Southern Airlines Co Ltd (01055), the projection has shifted from a loss of 1.427 billion yuan to a loss of 4.9 billion yuan.
In terms of target prices, the H-share price target for Air China has been reduced from HK$7.30 to HK$6.40. The H-share target for China Eastern Airlines has been cut from HK$5.00 to HK$4.40, and the H-share target for China Southern Airlines has been lowered from HK$5.30 to HK$4.60. All three stocks retain a "Buy" rating.
For Spring Airlines Co Ltd (601021.SH), its low-cost business model makes it less sensitive to oil prices. Consequently, its 2026 earnings forecast has been reduced by only 11% to 2.095 billion yuan. The target price for Spring Airlines has been slightly adjusted from 57.1 yuan to 56.3 yuan, with a maintained "Buy" rating.
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