Wanlian Securities: The sector has considerable recovery potential; it is recommended to actively pay attention to the aviation industry.

Wandian Securities has published a research report stating that during the peak summer travel season, both passenger volume and ticket prices remain resilient, and the deployment of air capacity is kept restrained. Negotiations between the U.S. and Iran continue, and rising oil prices still exert pressure on the aviation sector. Although there is short-term pressure on the aviation sector, the long-term trend of improving supply-demand dynamics remains unchanged. Currently, valuations in the sector are at historical lows, and if oil prices recede, alleviating the main factors pressuring airline stocks, there is significant potential for recovery in the sector. Therefore, it is recommended to pay close attention. The main points from Wandian Securities are as follows: The overall industry performance remains relatively stable. From January to July 2026, the total turnover of civil aviation reached approximately 99 billion ton-kilometers, reflecting a year-on-year increase of 6.40%, consistent with the previous figure. Among these, domestic routes saw a year-on-year increase of 2.30%, up 0.4 percentage points from the growth rate in January to June, while international routes grew by 13.30%, which is a decrease of 0.8 percentage points from the earlier period. In the same timeframe, passenger traffic amounted to 450 million person-times, with a year-on-year increase of 1.50%, which is up 0.5 percentage points from January to June. Of these, international routes carried 47.575 million passengers, reflecting a 5.20% year-on-year increase, down 0.5 percentage points from the prior period, while domestic routes experienced a 1.10% year-on-year growth, increasing by 0.6 percentage points from January to June. From January to July, the growth rates for capacity deployment and demand among listed airlines have increased. From the perspective of listed airline data, the six listed airlines saw RPK (Revenue Passenger Kilometer) and ASK (Available Seat Kilometer) increase by 5.2% and 2.8% year-on-year, respectively, both rising by 0.4 and 0.2 percentage points from January to June. Specifically, domestic routes increased by 2.9% in RPK and 1.7% in ASK, while international routes experienced year-on-year increases of 11.2% and 5.9%, respectively. The RPK growth rates for the six listed airlines from January to July were: Spring Airlines (16.6%) > Air China (7.5%) > China Eastern Airlines (4.7%) > China Southern Airlines (3.7%) > Juneyao Airlines (3.4%) > Hainan Airlines (0.3%); for ASK growth rates: Spring Airlines (14.1%) > China Southern Airlines (4.2%) > Air China (2.2%) > China Eastern Airlines (2.1%) > Juneyao Airlines (1.0%) > Hainan Airlines (-1.3%). Average ticket prices during the summer travel period remain resilient. According to data from Flight Manager, the average ticket price over 54 days during the summer travel peak was 861.7 yuan, an increase of 0.5% year-on-year and a decrease of 7.6% compared to 2019. Overall performance remains resilient, and it is expected that, with improvements in the supply-demand dynamics, ticket prices will continue to warm up. The passenger load factor has further increased. From January to July, the passenger load factor in China's civil aviation reached 85.80%, an increase of 1.6 percentage points year-on-year and up 0.1 percentage points from January to June. For the six listed airlines, the overall load factor was 85.79%, rising by 0.06 percentage points compared to January to June. Specifically, the load factors for the six airlines from January to July were: Spring Airlines (92.71%) > Juneyao Airlines (87.11%) > China Eastern Airlines (86.97%) > China Southern Airlines (84.90%) > Air China (84.79%) > Hainan Airlines (84.43%); for July's monthly load factors: Spring Airlines (93.31%) > Juneyao Airlines (87.72%) > China Eastern Airlines (87.11%) > Hainan Airlines (85.26%) > China Southern Airlines (85.20%) > Air China (85.00%). In July, the six listed airlines' fleet introduced a net increase of 4 aircraft. As of the end of July 2026, the number of aircraft operated by the six listed airlines reached 3,417, reflecting a 1% increase from the end of the previous year, with a net increase of 33 aircraft. In July alone, there was a net addition of 4 aircraft, with China Southern Airlines, Air China, Hainan Airlines, and Juneyao Airlines each adding 1 aircraft. Negotiations between the U.S. and Iran continue to progress, and crude oil prices remain high, while prices for aviation fuel are expected to rise again from August to September. According to data from Longzhong Information, on August 1, the price of aviation kerosene in China (factory price, including tax) was 7,581 yuan per ton, a decrease of 5.6% from July 1 and down 34% from the peak on May 1. However, with the rebound in oil prices, it is expected that aviation kerosene prices will rise since August, increasing the cost of air transportation. Risk factors include: economic recovery not meeting expectations, international route recovery not meeting expectations, significant fluctuations in oil prices, substantial currency fluctuations, and aviation safety concerns.