Summary of Conference Call on New Year Holiday Travel Data Industry Overview - The conference call focused on the aviation and tourism industry during the 2026 New Year holiday period, highlighting significant growth in travel demand and pricing dynamics [2][4][12]. Key Points on Aviation Industry - **Travel Demand Growth**: During the 2026 New Year holiday, overall travel volume increased by 20% year-on-year, with rail travel up by 54%, road travel by 17%, and civil aviation by 13% [2]. - **Ticket Price Increase**: Domestic flight ticket prices rose approximately 10% year-on-year, with an overall increase of about 13% when including fuel surcharges. This price elasticity is attributed to strong demand and improved supply-demand dynamics [2][3]. - **Recovery of the Aviation Market**: The aviation market is expected to continue its recovery, with passenger traffic increasing by 5%-6% year-on-year, domestic traffic up by 4 percentage points, and international traffic exceeding 20% growth [2][6]. - **Optimistic Outlook for 2026**: The aviation industry is projected to maintain a favorable supply-demand balance, with fleet growth remaining low and demand continuing to recover. This is expected to enhance ticket prices and profitability, potentially surpassing pre-pandemic levels [7][8]. - **Positive Seasonal Trends**: The strong performance during the New Year holiday is expected to positively influence demand for the upcoming Spring Festival and summer peak travel seasons, with airlines likely to adopt proactive revenue management strategies [8][10]. Key Points on Tourism Industry - **Tourism Sector Performance**: The overall tourism industry exceeded expectations during the New Year holiday, with visitor numbers and total spending both showing year-on-year growth. Duty-free sales saw a significant increase of 52% compared to the previous year [11][12]. - **Future Growth Drivers**: The tourism market in 2026 is anticipated to benefit from increased family travel, inbound tourism, and the aging population's travel needs. These factors are expected to drive growth in the sector [12]. - **Investment Opportunities**: Traditional airlines with strong route networks and customer bases, such as Air China, are recommended for investment due to their potential for profitability and valuation increases in the context of the aviation super cycle [11]. Additional Insights - **Market Dynamics**: The aviation industry's recovery is supported by a favorable supply-demand relationship and the ongoing marketization of ticket pricing, which is expected to enhance revenue potential during peak seasons [5][7]. - **Sectoral Performance Variability**: Different segments within the tourism and retail sectors are experiencing varied growth rates, with some companies benefiting significantly from recent tax reforms and market conditions [13][14]. This summary encapsulates the key insights from the conference call, emphasizing the optimistic outlook for both the aviation and tourism industries as they recover and adapt to changing market dynamics.

Investment Rating - The report maintains an "Overweight" rating for the aviation and oil transportation sectors, indicating a positive outlook for both industries [35]. Core Insights - The aviation sector is expected to see robust demand growth, driven by increased travel during the New Year holiday, with significant year-on-year increases in both passenger volume and ticket prices. The report suggests a strategic investment during the off-peak season, anticipating a long-term super cycle [3][4]. - In the oil transportation sector, while seasonal price declines are noted, the report emphasizes the potential for future price increases due to ongoing global oil production growth and limited capacity expansion. It recommends a contrarian investment approach during the off-peak period [3][4]. Summary by Sections Aviation Sector - The report highlights a strong increase in travel demand during the New Year holiday, with a 19% year-on-year increase in overall passenger movement from December 31, 2025, to January 2, 2026. Specifically, civil aviation saw a 13% increase [3][4]. - Domestic ticket prices are estimated to rise by over 10% year-on-year during the holiday period, despite a projected short-term dip in passenger flow post-holiday [3][4]. - The aviation industry is experiencing high load factors while ticket prices remain at historical lows, suggesting a favorable environment for profitability growth driven by demand recovery and market pricing dynamics [3][4]. Oil Transportation Sector - The report notes that the average daily earnings for Very Large Crude Carriers (VLCC) reached $51,000 in 2025, significantly higher than the $36,000 in 2023-2024, driven by improved capacity utilization and increased oil production from the Middle East and South America [3][4]. - Despite a recent decline in freight rates during the traditional off-peak season, the report maintains a positive outlook for future price increases, supported by ongoing global oil production growth and limited fleet expansion [3][4]. - The report suggests monitoring geopolitical developments, particularly in Venezuela, and recommends increasing positions in companies like COSCO Shipping Energy, China Merchants Energy Shipping, and China Shipbuilding Leasing [3][4].

Investment Rating - The report assigns an "Overweight" rating for the aviation industry [6]. Core Insights - The Chinese civil aviation industry is expected to continue its recovery in supply and demand in 2025, with a forecasted industry-wide turnaround from losses to profitability [3][6]. - Demand is projected to grow steadily, with an estimated 5-6% increase in passenger traffic in 2025, including a 4% rise in domestic routes and over 20% in international routes [6][10]. - The supply side is entering a low growth phase, with a projected 3.7% increase in the fleet size of seven A-share airlines by November 2025 compared to the end of 2024 [6][19]. - The passenger load factor is expected to reach a historical high of 85%, an increase of 1.8 percentage points year-on-year [6][22]. - Ticket prices remain at historically low levels, with domestic ticket prices estimated to decrease by 2-3% year-on-year in 2025 [6][25]. - The industry is anticipated to significantly reduce losses and turn profitable in 2025, with quarterly performance showing improvements in profitability [6]. Summary by Sections Demand and Supply - Passenger traffic is expected to grow by 5-6% in 2025, with domestic routes increasing by 4% and international routes by over 20% [6][10]. - The industry is entering a low growth phase, with a projected 6% increase in available seat kilometers (ASK) [6][19]. Load Factor and Pricing - The passenger load factor is projected to increase by 1.8 percentage points to 85% [6][22]. - Domestic ticket prices are estimated to decrease by 2-3% year-on-year, while international ticket prices may see significant increases in the latter half of the year due to strong inbound demand [6][25]. Profitability Outlook - The industry is expected to turn profitable in 2025, with significant reductions in losses anticipated throughout the year [6]. - Quarterly performance indicates that the first quarter may see limited profit improvement due to high base effects, while the second quarter is expected to show substantial recovery [6].

Aviation Industry - The aviation industry is expected to recover in supply and demand throughout the year, with a focus on reversing internal competition and boosting consumption. Demand growth is anticipated to drive ticket prices and profitability upward, suggesting a contrarian approach to the super cycle [1] - For the New Year holiday, travel demand is expected to be strong, with December's volume and pricing likely to exceed expectations. By 2025, the industry is projected to see a 5-6% year-on-year increase in passenger traffic, with domestic traffic up 4% and international traffic up 22%. The passenger load factor is expected to increase by 1.7 percentage points, reaching a historical high [1] - Domestic ticket prices are estimated to decrease by 2-3% year-on-year, despite a rise since September. The holiday effect is expected to support strong travel demand, with airlines optimistic about post-holiday business travel recovery [1] - The industry is entering a low growth phase in supply, with high passenger load factors and historically low ticket prices. The market's ticket pricing is becoming more market-driven, and the recovery in demand and passenger structure is expected to sustain profitability growth [1] Oil Shipping Industry - The oil shipping market has entered the traditional off-season during the Christmas holiday, with crude oil freight rates expected to decline as anticipated. The increase in crude oil production from the Middle East and South America has been evident, and India's reduction of Russian oil imports has driven VLCC TCE rates to rise significantly [2] - The VLCC TCE rate for the Middle East to China route has dropped to $57,000, reflecting a substantial correction from previous highs. Despite this, the annual average profitability for oil shipping is expected to reach a ten-year high [2] - The outlook for oil shipping remains optimistic, with expectations of continued demand growth driven by global crude oil production increases. The aging fleet of oil tankers and limited growth in compliant market capacity are expected to support a favorable trend in oil shipping profitability [2] - The recommendation is to maintain a bullish stance on both aviation and oil shipping sectors, as the super cycle in aviation may begin, and the outlook for oil shipping remains positive despite short-term fluctuations [2]

Group 1: Aviation Industry - The aviation sector is expected to enter a super cycle, driven by high passenger load factors and low ticket prices, with demand growth anticipated to boost profitability by 2026 [1] - Recent public and business demand has shown recovery, with ticket prices increasing year-on-year due to the release of suppressed demand from the summer season [1] - The State-owned Assets Supervision and Administration Commission emphasized the need for state-owned enterprises to resist "involution" competition, which may enhance revenue management and profitability in the aviation sector [1] Group 2: Oil Transportation - Oil transportation rates remain high, with the VLCC TCE maintaining around $120,000, driven by increased global oil production and limited effective supply due to aging tankers [2] - The outlook for oil transportation is positive, with expectations of demand growth exceeding forecasts, despite potential short-term impacts from seasonal fluctuations [2] - The U.S. has intensified sanctions on shadow fleets, which may further support the upward trend in oil transportation rates [2] Group 3: Airport Duty-Free - Shanghai Airport has announced a new duty-free contract model, shifting to a fixed fee plus actual sales commission, which may stabilize or enhance duty-free revenue [3] - The introduction of competition between domestic and international duty-free operators is expected to drive sales growth and improve pricing competitiveness [3] - The new contract structure and competitive environment are likely to incentivize duty-free operators, potentially leading to increased operational enthusiasm [3]

Group 1: Aviation Industry Outlook - The aviation sector is expected to significantly reduce losses in Q4 2025 and achieve profitability for the entire year, despite fluctuations in Japanese routes not altering the long-term logic [1] - November passenger traffic is estimated to grow by 6% year-on-year, with domestic traffic increasing by 5% and international traffic by 18%, leading to a historical high in load factor [1] - Domestic oil ticket prices are projected to rise by 1-2% year-on-year, while international ticket prices show a notable increase, contributing to the anticipated reduction in losses for November [1] Group 2: Oil Shipping Industry Outlook - Oil shipping rates remain high, with VLCC TCE rates recently experiencing a slight decline to $120,000, but are still expected to reach a ten-year high in profitability for Q4 2025 [2] - The increase in global crude oil production is expected to continue driving demand for oil shipping, while aging fleets will limit effective supply growth, leading to a positive outlook for the oil shipping market [2] Group 3: Strategic Recommendations - The aviation sector is poised to enter a "super cycle," with high load factors and low ticket prices, where market-driven pricing and low supply growth will drive profitability upward [4] - The oil shipping sector is anticipated to continue its upward trend in profitability, with limited impact from geopolitical negotiations such as the Russia-Ukraine talks [4]

Core Viewpoint - The aviation sector is experiencing a significant rise, driven by strong growth in passenger and cargo transport volumes in October, with expectations for a "super cycle" in Chinese aviation by 2026 [1] Group 1: Stock Performance - China National Aviation (601111) shares rose by 4.27%, reaching HKD 6.6 [1] - China Southern Airlines (600029) shares increased by 2.66%, reaching HKD 5.41 [1] - China Eastern Airlines (00670) shares grew by 2.18%, reaching HKD 4.69 [1] - Capital Airport (00694) shares rose by 1.43%, reaching HKD 2.84 [1] Group 2: Industry Data - In October, China's civil aviation transport scale showed strong growth, with a total transport turnover of 146 billion ton-kilometers [1] - Domestic routes transported 60.845 million passengers, a year-on-year increase of 4.4% [1] - International routes transported 6.99 million passengers, a year-on-year increase of 20.4% [1] - Both international passenger transport and cargo mail transport volumes grew by over 20% year-on-year [1] Group 3: Future Outlook - According to Guotai Junan Securities, the reduction in passenger flow on Japan routes is leading airlines to shift focus, but the long-term logic of an aviation super cycle remains unchanged [1] - The overall performance of airlines is expected to achieve counter-cyclical growth in Q3 2025 despite weaker demand during the summer peak [1] - The industry is projected to significantly reduce losses in Q4 2025, with a full-year turnaround expected in 2025 [1] - The Chinese aviation sector is anticipated to enter a "super cycle," driven by market-driven ticket pricing, steady demand growth, and optimized passenger source structure, leading to an increase in profitability by 2026 [1]

Core Viewpoint - The aviation sector is experiencing a significant rise, with major Chinese airlines showing notable stock price increases, driven by strong growth in passenger and cargo transport volumes in October [1] Group 1: Airline Stock Performance - China National Aviation (00753) increased by 4.27%, reaching HKD 6.6 [1] - China Southern Airlines (01055) rose by 2.66%, reaching HKD 5.41 [1] - China Eastern Airlines (00670) grew by 2.18%, reaching HKD 4.69 [1] - Capital Airport (00694) saw a rise of 1.43%, reaching HKD 2.84 [1] Group 2: Industry Transport Data - In October, China's civil aviation transport scale showed strong growth, completing a total transport turnover of 146 billion ton-kilometers [1] - The international passenger transport volume and cargo mail transport volume both saw year-on-year growth exceeding 20% [1] - Domestic routes carried 60.845 million passengers in October, a year-on-year increase of 4.4% [1] - International routes transported 6.99 million passengers, marking a year-on-year increase of 20.4% [1] Group 3: Future Industry Outlook - Guotai Junan Securities reported that despite a reduction in passenger flow on Japan routes, airlines are expected to shift focus without altering the long-term logic of an aviation super cycle [1] - The overall performance of airlines is projected to achieve counter-cyclical growth in Q3 2025, despite pressures from weakened summer demand [1] - A significant reduction in losses is anticipated in Q4 2025, with the industry expected to turn profitable for the entire year [1] - The Chinese aviation sector is set to enter a "super cycle," driven by market-driven ticket pricing, steady demand growth, and optimized passenger source structure, which will elevate profitability by 2026 [1]

Aviation Industry - The aviation sector is expected to achieve industry-wide profitability in October, driven by strong private travel demand and active business travel post-holiday, with an estimated 5% year-on-year increase in passenger flow [1] - Domestic oil prices remain stable year-on-year, while ticket prices have risen by 3-4%, indicating a positive trend for the industry [1] - The traditional seasonal impact of the transition period is weaker than in previous years, with a continued year-on-year increase in passenger load factors and domestic ticket prices [1] - The airline industry may enter a "super cycle," with market-driven ticket pricing and robust demand growth expected to elevate profitability by 2026 [1] Oil Shipping Industry - Q4 2025 is projected to see oil shipping profits reach a ten-year high, with expectations of a super bull market [2] - Increased oil production in the Middle East and South America, along with U.S. sanctions on Russia, are positively impacting compliant VLCCs and driving freight rates higher [2] - Despite a recent slight decline in freight rates, the overall market sentiment remains optimistic, with expectations of continued growth in oil shipping demand due to global oil production increases [2] Express Delivery Industry - The express delivery sector shows significant effects from anti-involution measures, with a slight slowdown in business volume growth but notable improvements in per-package revenue [3] - In Q3 2025, the industry saw a year-on-year volume growth of over 13%, while per-package revenue decreased by 5.8% [3] - Major express companies like Shentong, YTO, and Yunda reported varying growth rates in package volume and net profit, indicating a trend of price increases in key regions [3] - SF Express outperformed the industry with over 8% revenue growth and over 33% volume growth in Q3 2025, although net profit declined due to strategic investments [3]

Summary of the Conference Call on the Chinese Aviation Industry Industry Overview - The Chinese aviation industry is currently in the early stages of a super cycle, driven by a demographic dividend that continues to boost demand for air travel, alongside an increased willingness to travel post-pandemic, despite no significant improvement in the macroeconomic environment [1][4][12]. Key Points and Arguments - **Market Price Adjustments**: The marketization of ticket prices has largely been completed, with full ticket prices on major routes increased by 50%-70% [1][3]. - **Fleet Growth**: During the "14th Five-Year Plan" period, fleet growth has significantly slowed to single digits (2%-3%), alleviating investment pressure in third and fourth-tier cities, which is beneficial for enhancing industry profitability [1][3]. - **Demand and Supply Dynamics**: Since 2019, the passenger load factor in the Chinese aviation industry has significantly improved, with some routes nearing capacity limits. Future improvements in supply and demand will be reflected more in ticket prices, as the industry enters a low supply growth phase due to airspace bottlenecks and slow recovery in aircraft manufacturing capacity [1][8]. - **Long-term Growth**: By 2025, the Chinese aviation industry is expected to enter a phase of increasing supply, which is projected to last for 15 years, achieved through optimized airspace management, controlled aircraft introduction rates, improved fleet turnover efficiency, and increased passenger load factors [1][6][7]. Investment Opportunities - **Profitability Outlook**: The aviation sector is anticipated to see a recovery in profitability and valuation over the next two years, with a high probability of turning profitable by 2025 and potentially achieving profit margins higher than those in 2019 by 2026 [2][13]. - **Valuation Potential**: The traditional airline valuation could rise from 8-10 times earnings to 15-20 times during this super cycle, indicating significant investment potential despite recent stock price increases [2][14]. - **Recommended Airlines**: Key airlines to focus on include: - **Air China**: Strong network and quality of passenger sources, optimistic long-term profitability outlook [15]. - **Juneyao Airlines**: Expected to release significant profit potential in the next two years [17]. - **China Southern Airlines and China Eastern Airlines**: Both have substantial slot resources in the trunk market, poised to benefit from the super cycle [17]. - **Spring Airlines**: Leading profit margins and valuations in key markets, expected to maintain steady growth [17]. Additional Insights - **Passenger Load Factor**: The passenger load factor has reached levels between 88% and 90% during peak periods, indicating efficient utilization of existing seat resources [8]. - **Macroeconomic Factors**: Despite the lack of significant macroeconomic improvement, strong air travel demand persists due to the ongoing super cycle and increased travel willingness post-pandemic [4][10]. - **Strategic Timing for Investment**: The current period is viewed as an optimal time for strategic investment in the aviation sector, with expectations of continued demand growth and recovery in business travel [12]. This comprehensive analysis highlights the robust growth potential and investment opportunities within the Chinese aviation industry, driven by structural changes and favorable market dynamics.