Shenwan Hongyuan Securities·2026-01-30 07:47Core Insights - The aviation sector has been on a continuous upward trend since Q4 2025, driven by strong high-frequency data performance and improved market expectations, with the aviation transportation index rising by 10% since September 30, 2025 [11] - The current supply constraints are expected to lead to a prolonged period of tight supply, with historical comparisons indicating that this cycle's sustainability will exceed previous cycles [4][11] - The supply-demand mismatch in the aviation industry is anticipated to become more pronounced over time, leading to significant price elasticity and performance improvements that may exceed market expectations [4][12] Group 1: Supply Constraints and Capacity - Supply constraints have become evident, with domestic passenger traffic growth slowing to approximately 680 million passengers in 2025, a 4% year-on-year increase, indicating that supply limitations are restricting growth [18] - The passenger load factor reached a historical high of 87.5% in August 2025, with limited capacity for further increases, reflecting the tight supply environment [45] - The average age of the aircraft fleet is increasing, with over 640 aircraft expected to retire by 2030, exacerbating supply constraints as existing orders are insufficient to meet replacement needs [12][49] Group 2: International Demand Recovery - Cross-border passenger traffic is recovering rapidly, with an estimated 130 million passengers in 2025, a 15% year-on-year increase, driven by strong inbound tourism and a low base from the previous year [31] - The domestic airlines have significantly increased their share of international flights, with domestic airlines operating 104% of 2019 levels compared to only 65% for foreign airlines [34] - The international demand is expected to be a core growth engine in 2026, supported by the expansion of visa-free policies that have led to a surge in foreign visitors [3][49] Group 3: Investment Recommendations - The aviation sector is recommended for investment due to strong supply logic and limited growth in fleet size, with significant performance improvement potential driven by demand elasticity and external factors such as oil prices [4][11] - Specific airlines such as China Eastern Airlines, China Southern Airlines, Air China, Spring Airlines, Huaxia Airlines, and Juneyao Airlines are highlighted as key investment opportunities [4] - The report also suggests monitoring global aircraft leasing companies and airport sectors with improving performance [4]