Cinda: Airlines' passenger load factor is high, ticket prices are continuing to rebound, and we are optimistic about travel picking up in the fourth quarter.

Cinda released a research report stating that domestic airlines have a low growth rate in capacity deployment on domestic routes and are focusing on increasing investment in international routes. The net increase rate of aircraft fleet introduction by airlines is generally below 3%, leading to relatively tight supply. Passenger load factors continue to be high, with improvements in year-on-year and compared to the same period in 2019, especially notable on domestic routes. In terms of traffic volume, turnover on domestic routes is steadily increasing year-on-year, while turnover on international routes has grown significantly, essentially recovering to the level of the same period in 2019. On the ticket price front, industry discounts for the National Day and Mid-Autumn Festival holidays have turned positive year-on-year, and ticket prices have continued to rise in early October, indicating relatively strong demand. As the industry enters the off-season dominated by public and business travel in the fourth quarter, with a low base from last year, there may be a noticeable improvement year-on-year, driving a continuous recovery in unit seat revenues for airlines. Key points from Cinda are as follows: Since the beginning of 2025, industry passenger load factors have remained at high levels In terms of supply and demand, domestic airlines have a low growth rate in capacity deployment on domestic routes and are focusing on increasing investment in international routes. The net increase rate of aircraft fleet introduction by airlines is generally below 3%, leading to relatively tight supply. Passenger load factors continue to be high, with improvements in year-on-year and compared to the same period in 2019, especially notable on domestic routes. In terms of traffic volume, turnover on domestic routes is steadily increasing year-on-year, while turnover on international routes has grown significantly, essentially recovering to the level of the same period in 2019. On the ticket price front, industry discounts for the National Day and Mid-Autumn Festival holidays have turned positive year-on-year, and ticket prices have continued to rise in early October, indicating relatively strong demand. As the industry enters the off-season dominated by public and business travel in the fourth quarter, with a low base from last year, there may be a noticeable improvement year-on-year, driving a continuous recovery in unit seat revenues for airlines. The industry's passenger load factors remain at high levels, with strong travel demand on both domestic and international routes, and ticket prices have already seen continuous positive trends, indicating a significant recovery in unit seat revenues for airlines. At the same time, with the implementation of measures against "internal exhaustion" and the implementation of the "Convention," the industry's phenomenon of maliciously low prices is expected to decrease, potentially leading to a recovery in ticket prices and further boosting the recovery of unit seat revenues for airlines. Coupled with the decline in oil prices leading to cost reduction, airline profitability may further increase. Optimistic about the profit recovery elasticity brought by the increase in unit seat revenues for airlines. High passenger load factors, continuous positive trends in recent ticket prices Supply and demand: Passenger load factors continue to be high, with slowing growth in traffic for domestic routes. According to the latest industry data from the Civil Aviation Administration of China in August 2025, the industry's ASK and RPK increased by 5.1% and 5.8% year-on-year, respectively, compared to a 24.1% and 25.4% increase over the same period in 2019. The corresponding passenger load factor reached 87.5%, a year-on-year increase of 0.6 percentage points compared to 0.9 percentage points for the same period in 2019. By region, traffic on domestic routes increased by 3.5% year-on-year, while international and regional traffic recovered to 100.4% of 2019 levels. Ticket prices: Discounts on tickets with fuel surcharges during the National Day holiday turned positive year-on-year, and ticket prices continued to rise in early October. From the beginning of the year to October 15, the average domestic ticket price was 861 yuan, a year-on-year decrease of 7.9%. During the National Day and Mid-Autumn Festival period (including the day before the holiday), the average domestic ticket price with fuel surcharges was 942 yuan, a year-on-year decrease of 1.5%, resulting in a positive 1.2% year-on-year change in fuel surcharge prices. In the first half of October (up to October 15), the average industry ticket price increased by 2.2% year-on-year, indicating a sustained strong demand and continued positive trends in ticket prices. Over the past four weeks (September 15 to September 21, September 22 to September 28, September 29 to October 5, and October 6 to October 12), weekly average ticket prices increased by 3.4%, -3.0%, -1.0%, and 3.4% year-on-year, respectively. In the latest seven days (October 9th to October 15th), the average domestic ticket price increased by 4.9% year-on-year. Oil and exchange rates: The average aviation fuel price in October was down 0.1% year-on-year, and the renminbi exchange rate strengthened. In terms of oil prices, the average prices of aviation kerosene from the first to the third quarters of 2025 were 5952, 5385, and 5533 yuan per ton, respectively, which were 10.0%, 17.0%, and 11.2% lower than the same period in 2024 and 25.1%, 6.2%, and 13.3% higher than the same period in 2019. The ex-factory price of domestic aviation kerosene in October was 5572 yuan per ton, a year-on-year decrease of 0.1%. Regarding exchange rates, the renminbi exchange rate has appreciated since the beginning of 2025. By October 16th, the central parity rate for the US dollar against the renminbi was 7.0968 yuan, which was 1.27% lower than at the end of 2024 and 0.12% lower than at the end of the third quarter of 2025. The renminbi has been continuously appreciating since April. Airlines continue to increase international capacity deployment, high passenger load factors on domestic and international routes Operating conditions: On domestic routes, from January to September 2025, except for a slight decrease in domestic capacity deployment for Air China and China Joy, the rest of the airlines have seen slight growth in capacity deployment on domestic routes, with Spring Airlines showing the highest year-on-year growth rate at +6.4%, while the growth rates of other airlines are below 2%; passenger load factors remain at high levels, with significant year-on-year increases in passenger load factors for the three major airlines on domestic routes, with Eastern Airlines achieving a 3.4 percentage point increase, exceeding the 3.5 percentage point increase during the same period in 2019; except for China Joy, all airlines saw year-on-year growth in traffic on domestic routes, with Spring Airlines and Eastern Airlines achieving growth rates of 6.4%, and 6.1%, respectively, while the growth rates of other airlines were within 5%. On international routes, Eastern Airlines and China Joy's traffic turnover exceeded the levels of the same period in 2019, while China Southern Airlines and Spring Airlines had recovery rates close to those of the same period in 2019, and there is still a significant gap in the recovery of traffic turnover for Air China and Hainan Airlines. Aircraft fleet introduction: China Southern Airlines had the highest net increase in aircraft numbers in September In September, China Southern Airlines introduced 7 new aircraft, with a net increase of 5 aircraft, the highest among the six major airlines. China Southern Airlines introduced 7 new aircraft with a net increase of 4 aircraft, Eastern Airlines introduced 4 new aircraft with a net increase of 2 aircraft; Hainan Airlines introduced 1 new aircraft with no net increase in aircraft. Spring Airlines and China Joy did not introduce or retire any aircraft. Cumulatively from January to September, China Southern Airlines, Eastern Airlines, and Air China net increased 37, 16, and 16 aircraft, respectively, while Spring Airlines, China Joy, and Hainan Airlines net increased 5, 3, and 6 aircraft, respectively. Target recommendations We recommend focusing on China Southern Airlines (600029.SH), China Eastern Airlines Corporation (600115.SH), Air China Limited (601111.SH), Spring Airlines (601021.SH), Juneyao Airlines (603885.SH), etc. Risk factors Lower-than-expected growth in travel demand, lower-than-expected ticket price increases, risks of industry supply exceeding expectations, increased market competition risks, significant increases in oil prices risks, and significant depreciation risks for the renminbi.