2025-10-21 15:00Summary 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.