GUOTAI HAITONG SECURITIES·2026-03-03 05:37Investment Rating - The report assigns an "Overweight" rating for the aviation industry [6]. Core Insights - The demand for air travel during the 2026 Spring Festival is robust, with post-holiday ticket prices continuing to rise, indicating a promising Q1 profitability for airlines. The escalation of geopolitical tensions in the Middle East has led to oil price risks, but this does not alter the long-term value and cyclical logic of airlines, suggesting a strategic opportunity for reverse positioning [3][6]. Summary by Relevant Sections Industry Overview - The Spring Festival demand is strong, with a year-on-year increase in overall passenger flow of 5.8% as of March 1, 2026. Specifically, air travel saw a 6.9% increase, while rail and road transport grew by 8.1% and 5.6%, respectively. The limited increase in flight schedules and strict control over capacity by authorities have contributed to a rise in passenger load factors [6][9]. Passenger Flow Trends - Pre-holiday air travel increased by 5.1%, with mid-holiday growth reaching 7.6% due to extended holiday periods boosting family visits and travel. Post-holiday, the growth rate further increased to 9.8%, driven by concentrated return travel and a gradual recovery in business travel [6][9]. Ticket Pricing Dynamics - Ticket prices have shown a positive trend post-holiday, with domestic ticket prices estimated to rise by 4-5% year-on-year. The high load factors during the holiday period have supported a significant price increase of nearly 8% during the mid-holiday period. The report anticipates that ticket prices will continue to rise in March, supported by a low base effect and high load factors [6][9]. Profitability Outlook - The report estimates that the average load factor for January and February 2026 increased by approximately 1-2 percentage points year-on-year, with domestic ticket prices (including fuel) rising by about 6%. Despite a 9% year-on-year decrease in average fuel prices, the net profit for major airlines is expected to improve significantly in Q1 2026, potentially leading to industry-wide profitability [6][9]. Geopolitical Oil Price Risks - The report highlights that the escalation of geopolitical tensions has led to an increase in oil prices, with the average crude oil price rising from $60 to $70 per barrel. The impact of oil prices on airline profitability is significant, as fuel costs account for nearly 40% of airline expenses. However, the report suggests that the strong demand and high load factors in the Chinese aviation market may mitigate the adverse effects of rising oil prices [6][9]. Long-term Industry Outlook - The report emphasizes that the long-term growth logic of the aviation industry remains intact, with expectations of a "super cycle" driven by sustained demand growth and a shift towards market-oriented pricing. The report recommends strategic investments in major airlines such as Air China, Spring Airlines, China Eastern Airlines, China Southern Airlines, and Juneyao Airlines [6][9].