CITIC Securities: We recommend paying attention to the valuation recovery of the aviation sector driven by stable oil prices, the turning point of summer transportation volume and prices, and the continued demand in the international routes sector.

The report from CITIC Securities stated that the sharp increase in oil prices significantly amplifies the profit differentiation of airlines. In the first three weeks of April and May, domestic ticket prices increased by 17.0% and 12.7% to 900/916 yuan. The double-digit increase in domestic ticket prices opens up elastic space. If subsequent oil prices stabilize and fall, leading to a reduction in fuel surcharges, naked ticket prices are expected to be able to absorb some of the reduction in surcharges. In the early stages of the summer peak travel season, the industry was affected by short-term disruptions. Excluding typhoon weather, the growth rate of traffic has already seen a recovery on a month-to-month basis. The second half of July may be an important window to validate demand resilience and ticket price improvement. The aviation industry cycle may be late but never absent. Considering the strong constraints on aircraft introductions and capacity expansion in the next two years, anticipation is for a resonant moment when aviation fuel costs ease and naked ticket prices increase, eventually transmitting to quarterly profits. It is recommended to focus on stable oil prices, the turning point of summer peak travel volume and prices, and the valuation recovery of the aviation sector driven by the continued prosperity of international routes.