Dongxing Securities: Individual stock prices have reflected pessimistic expectations, and it is recommended to focus on the flexibility of the performance of major airlines

The Zhitong Finance App learned that Dongxing Securities released a research report saying that judging from the comprehensive capacity investment and passenger occupancy rate indicators, the relationship between supply and demand in the industry showed a certain recovery during the July peak season. Although the current price of aviation fuel is still about 30% higher than before the US-Iran conflict, the decline in fuel price fluctuations has enabled airlines to make better use of fuel surcharges and other means to hedge against changes in costs. The bank believes that the current stock price already reflects the airline's pessimistic market expectations, so the bank suggests left-side allocation to give priority attention to the performance flexibility of large airlines.

Dongxing Securities's main views are as follows:

Domestic routes: The impact of fuel prices is gradually being digested, and capacity investment and passenger occupancy rates are slightly higher than the same period last year

Domestic flight capacity investment of listed companies increased by about 3.6% year on year in July 2026, and a sharp increase of about 30% compared to June. The industry entered its peak season in July, and the continuous decline in fuel surcharges also helped the demand side recover. Airline capacity investment returned to positive growth after experiencing negative growth in May-June.

According to airline divisions, the capacity investment of Chunqiu and Jixiang is relatively high year-on-year, but the month-on-month growth rate is low. The bank believes that the advantages of medium carriers in cost control and more flexible aircraft scheduling have enabled them to maintain a relatively high aircraft utilization rate during the off-season. On the other hand, the airline showed low year-on-year growth and high month-on-month growth. In July, capacity investment generally increased by more than 30% month-on-month. This in turn indicates that the aircraft utilization rate of Air Lines fell to a low point in May-June, and achieved a recovery in July through the peak season.

In terms of occupancy rate, the overall occupancy rate of listed companies in July increased by about 2.3 pct compared to the same period in 25 years, and increased by about 1.9 pct over the previous month. The overall occupancy rate performance was better than expected. Although the year-on-year increase was due to the low base in July of last year, the high month-on-month increase in capacity investment combined with the month-on-month increase in passenger occupancy also certainly indicates that the industry is gradually recovering from the slump in May-June.

In terms of oil prices, high oil prices do put a strong pressure on capacity investment in the off-season, but the impact during the peak season is relatively limited. Furthermore, the bank believes that the suppression of oil prices on the supply side will continue to weaken in the future. Although the current price of aviation fuel is still about 30% higher than before the conflict, the fluctuation in oil prices has been significantly mitigated compared to the beginning of the US-Iran conflict, which allows airlines to better use fuel surcharges and other means to hedge against cost fluctuations.

International routes: Capacity investment increased markedly month-on-month, passenger occupancy rate declined slightly month-on-month

In terms of international routes, the capacity investment of listed airlines in July '26 increased by about 5.9% year-on-year, and increased by about 17.6% compared to June. Capacity investment increased markedly during the peak season compared to the low season. In terms of passenger occupancy rate, the passenger occupancy rate for international routes increased 2.7 pct year on year in July and decreased by 0.8 pct month on month. The passenger occupancy rate performance was slightly lower than expected.

There was a slight month-on-month decline in passenger occupancy during the peak season. The bank believes that on the one hand, there is a slight oversupply for some routes due to a large increase in capacity investment during the peak season; on the other hand, it shows that the negative impact of the situation in the Middle East on the transit of China-Europe routes in the Middle East region has slowly subsided.

Risk warning: macroeconomic downturn; civil aviation policy changes; safety incidents; large fluctuations in oil prices and exchange rates; abnormal weather factors, changes in the international situation, etc.