Zhongtai Securities: Aviation sector restoration begins to grasp the dual main lines of the industry
The Zhitong Finance App learned that Zhongtai Securities released a research report saying that aviation is already in a high odds range and is grasping the restoration of the two main lines. The bank believes that airline stock prices may follow a three-stage interpretation of “expectation—operation—performance.” ① Expected recovery: The geography slowed down, oil prices declined, costs deteriorated and expectations improved, and stock prices rebounded. ② Operational recovery: The oil price center actually declined, and the reduction in cost pressure led to an increase in capacity utilization. ③ Performance repair: The profit center moved upward, and the market was dominated by improved supply and demand, and flexible performance.
The main views of Zhongtai Securities are as follows:
2026 H1 review: Impact of high oil prices, simultaneous decline in stock prices and fundamentals
Sector performance: There has been a sharp correction in the sector since the beginning of 2026. In the first half of the year, due to the situation in the Middle East, international crude oil prices rose sharply, and the aviation sector adjusted deeply. China Airlines (-36.74%), China Eastern Airlines (-36.50%), and Air China (-35.43%) led the decline.
Fundamental performance: Under the influence of high oil prices, capacity investment has been tightened, and demand growth has slowed. From January to May 2026, the cumulative ASK/RPK growth rate of the entire industry was +3.51%/5.79%. Among them, the ASK/RPK growth rate of the entire industry declined year-on-year in May (-4.58%/-3.45%).
2026 H2 Outlook: Cost Pressure Eases, Aviation Restoration Begins
On the cost side, international crude oil prices have declined, and the cost pressure on airlines is expected to ease. Since the US-Iran conflict in March, international crude oil prices have soared, and the pressure on airline costs has increased sharply, but as the situation between the US and Iran eased in mid-June, oil prices have gradually declined. 1) The reduction in fuel prices and fuel surcharges relieves the pressure on airline costs and reduces passenger travel costs. The factory price of aviation kerosene in July was 8030 yuan, -17.54% month-on-month, and +46.08% year-on-year. The fuel surcharge was 50/100 yuan/person (less than 800 kilometers/person, down 30/50 yuan/person from before adjustment, compared to 10/20 yuan/person in the same period last year). 2) According to sensitivity tests, when the price of coal for Singapore Airlines is around 95 US dollars, the increase in the full fare of domestic airlines is only 1.5% to cover the cost of rising domestic oil prices.
Main line 1: Low-cost airlines have stable cost barriers, and Spring Airlines bucked the trend under high fuel prices
1) High passenger capacity, long flight range, and low fuel cost per unit make the cost pressure on the company less than in the same industry under the impact of the same fuel price. In 2025, the average domestic flight distance in spring and autumn was 1,724 kilometers, the average passenger occupancy rate was 91.53%, and the fuel cost per ASK was 0.10 yuan (74% of the average of the three major airlines). The long flight range dilutes the company's unit ASK fuel costs, and the high passenger occupancy rate makes the fuel surcharges levied by the company cover the increase in fuel prices higher than that of other airlines.
2) Capacity bucked the trend: From January to May 2026, the company accumulated ASK/RPK +15.27%/18.51% year-on-year, making it the only airline with a double-digit increase in supply and demand among listed airlines. The company expects the fleet growth rate to remain 9%-10% in 2026-2028, which is still significantly higher than the industry. 3) Profit realization: The company's profitability has been significantly higher than that of the industry since 2023, and has repeatedly reached record highs. In Q1 2026, the company achieved net profit of 980 million yuan, +45.15% over the same period last year. The company's stand-alone profit in 2025 was 17.29 million yuan. The stand-alone profit level has exceeded 2017 levels, ranking first among listed airlines. 4) Benchmarking leading overseas low-cost carriers, Spring Airlines's fundamentals and stock price trends diverged prominently. Compared with Ryanair, Spring Airlines, and Southwest Airlines, they each showed three trends: strong fundamentals+strong fundamentals+weak stock prices/weak fundamentals+strong stock prices. The bank believes that Spring Airlines profits have repeatedly reached new highs, and the stock price recovery is yet to be catalyzed.
Main line 2: Full-service airline dividends for international flights are beginning to appear, and profit flexibility is expected to be released
1) The fundamentals of the three major airlines are being restored year by year, and additional investment in international routes is an important driver. ① Profitability improved year by year: In 2025, China Southern Airlines achieved net profit of 857 million yuan. It was the first of the three major airlines to reverse losses throughout the year after the pandemic. China Eastern Airlines and Air China were still negative net profit due to the return of deferred income tax assets, but China Eastern Airlines' total profit was corrected. Q1 2026 was the Q1 with the best profit performance of the three major airlines since the pandemic. ② Continued increase in international investment brings marginal contributions. By the end of 2025, the international capacity of Air China/China Eastern Airlines/China Southern Airlines had recovered to 98%/113%/98% of the same period in 2019, respectively, and in Q1 2026, the three major airlines continued to increase their investment in international routes. The international route ASK increased by 7.68%/10.77%/16.07%, respectively. The shift in international capacity not only increases the utilization rate of wide-body aircraft, but also reduces domestic capacity investment and mitigates price competition; in the context of the sharp rise in Q2 oil prices, the reduction in international capacity was less than domestic, which also confirms that international demand is more rigid.
2) Benchmarking Japan Airlines, China's airline's international flights may be in the first half of development. ① Japan provides a full reference to “International Line-Driven Profitability”. First, Japan Airlines' domestic routes are greatly affected by the Shinkansen, and Japan's own land area is limited, so the development of international routes is inevitable; second, the “establishment of a tourism nation” policy compounded the “weak yen” advantage, making inbound tourism to Japan flourish. The number of inbound visitors to Japan in 2024-2025 continued to exceed pre-pandemic levels. The passenger occupancy rate of Japan Airlines and ANA rose to 83%-86%, and international flight seat occupancy increased by about 60% compared to 2019, driving JAL FY2026's net profit of 137.6 billion yen (+28.6%) and ANA's net profit of 169.1 billion yen (record). ② However, the development of international routes by domestic airlines is not simply replicated. China's high-speed rail also diverts domestic routes below 800-1,000 kilometers, but domestic aviation is still in the overall growth stage. The penetration rate is far from peaking, and the country is vast, and long-range domestic routes still have a lot of room for development; currently, China's international routes are still driven by outbound rather than inbound, but inbound travel has only just begun with the support of the visa-free policy. ③ Differences in stock price performance may partly reflect differences in the degree of international cashout. Since 2023, Japanese airline returns have been positive (All Nippon Airways +18%, JAL +26%), and the three major airlines are still bottoming out (Air China 42%, China Southern Airlines 32%, China Eastern Airlines 31%). Although stock prices were affected by multiple factors such as sector sentiment, fuel prices, and demand during this period, Japan's high boom in international routes has been realized in profit, and China Airlines' international routes are still recovering. Volume recovery is faster than price, compounded by domestic price competition.
Risk warning: macroeconomic downside risk, exchange rate fluctuation risk, oil price increase risk, risk of trustworthiness of third-party data, risk of untimely data updates in research reports.