Zheshang: The reversal of supply and demand in the aviation industry is imminent, the peak season of summer travel is approaching, and it is recommended to keep an eye on related sectors.

Zheshang released a research report stating that there is a turning point in short-term high-frequency data. In May, the seat occupancy rate of the aviation industry remained high, and ticket prices increased year-on-year. The peak travel season is approaching, and the peak season is worth looking forward to. Due to the escalation of the conflict between Israel and Palestine, the short-term surge in oil prices brings certain pressure, and it is recommended to position oneself at low levels. It continues to recommend the three major airlines H/ China Xia (002928.SZ)/ Spring Airlines (601021.SH)/ Joy Air (603885.SH)/ the three major airlines A. In the medium to long term, the delivery capacity of upstream aircraft manufacturers and engine manufacturers is long in recovery period and delivery quality is reducing. The backlog period for Boeing and Airbus orders may reach 10 years, taking into consideration the peak of aircraft retirement and leasebacks, the aviation industry will face a long period of tightening supply. The consumption attribute of aviation demand is enhanced, demand is expected to grow steadily, and the supply-demand relationship continues to improve. The company's calculations for the supply-demand difference in 2025 and 2026 are respectively +4.1% and +4.2%, with the industry's supply-demand relationship expected to reverse in 2025, and industry profits will depend more on cost improvement, with the supply-demand gap expected to further widen in 2026, expecting a gradual release of ticket price elasticity. Zheshang's main points are as follows: 1. Profitability of airlines and key drivers of aviation stock market: supply-demand mismatch, rising oil prices, RMB appreciation. 2. The supply side may be restricted until at least 2027: upstream delivery capacity is limited, the industry is expected to welcome a reverse in supply-demand in 2025. 3. Demand side: consumption attributes are strengthened, expected to maintain steady growth in the medium to long term. 4. Price increase: At the end of 2017, the domestic fare market reform was pushed, fare increases have been sufficient in recent years, preparing for a strong business cycle. 5. Turning point in high-frequency data has occurred: Seat occupancy rate maintains a high level, ticket prices increase year-on-year. 6. Investment advice: The reversal of supply and demand in the aviation industry is imminent, the peak travel season is approaching.