Intelligent Finance News APP learned that Haitong Securities released a research report stating that in May, the supply and demand in the industry improved, especially the improvement of domestic demand in China, while the recovery of international and regional demand was slower than that of supply, which lowered the overall passenger load factor. In the short term, the strong demand for private travel during the summer holiday season and other peak seasons will drive a significant rebound in travel chain demand, but weak-season business travel may be flat or drag down the overall recovery progress. In the long run, the growth rate of air capacity import of Chinese airlines slows down, and the confidence in travel continues to recover. It is bullish on the long-term investment logic of the future aviation industry (i.e., the improvement of supply-demand pattern and ticket price marketization), waiting for economic recovery. It is expected that the profit center of airlines will be lifted in 2024, and it pays attention to investment opportunities in the aviation sector.

The main points of Haitong Securities are as follows:

May benefited from the promotion of the "May Day" holiday, and the supply and demand of the industry increased cyclically.

In May, the total supply and demand of the five listed airlines (Air China, China Eastern Airlines, China Southern Airlines, Spring Airlines, and Juneyao Airlines) increased by 5.7%/5.4% respectively, compared with 107.9%/107.2% in the same period of 2019 (Air China data is the same as Shandong airlines' results). The passenger load factor decreased by 0.2 percentage points to 81.3% compared with the same period in 2019, down 0.6 percentage points. The supply and demand in the industry improved in May, especially the improvement of domestic demand in China, while the recovery of international and regional demand was slower than that of supply, which lowered the overall passenger load factor.

Specifically speaking, the domestic supply and demand rose 5.4%/6.8% month-on-month, about 119.5%/120.0% of the same period in 2019, and the passenger load factor rose 1.1 percentage points month-on-month to 83.2%, about 0.4 percentage points higher than the same period in 2019. International supply and demand rose 6.7%/1.8% month-on-month, about 86.5%/82.9% of the same period in 2019, and the passenger load factor fell 3.7 percentage points month-on-month to 76.6%, down 3.4 percentage points from the same period in 2019. Regional supply rose 3.1% month-on-month, while demand fell 1.8%, about 81.4%/73.9% of the same period in 2019, and the passenger load factor fell 3.6 percentage points month-on-month to 72.7%, down 7.3 percentage points from the same period in 2019.

The three major airlines dominate the pace of recovery, Juneyao's recovery is more comprehensive, and Spring Airlines' passenger load factor is outstanding.

In May, the supply and demand of the three major airlines (Air China, China Eastern Airlines, and China Southern Airlines) increased by 6.0%/5.7% respectively, leading the pace of recovery. The supply and demand of domestic routes each recovered to 117.3%/117.8% of the same period in 2019, further than the recovery progress last month. Among them, the supply-side recovery of Eastern Airlines is faster than that of Air China and China Southern Airlines, and the demand-side recovery of China Southern Airlines is relatively faster, slightly faster than Eastern Airlines in the domestic market.

Small airlines have some differences in recovery: Juneyao Airlines reflects the characteristics of comprehensive recovery of routes, the demand for domestic/international/regional routes is 130.4%/173.5%/84.2% respectively of the same period in 2019, and the total demand has recovered to 135.5% of the same period in 2019, with a total passenger load factor of 82.4%, 3.2 percentage points lower than the same period in 2019. Spring Airlines maintains a leading passenger load factor, with a total/domestic/international/regional passenger load factor of 90.9%/91.2%/89.6%/90.0%, and the total passenger load factor exceeds the same period in 2019 by 0.2 percentage points.

International flight recovery accelerates, pay attention to investment opportunities in the big cycle.

During the peak season of the Spring Festival, the supply and demand of domestic and international routes increased significantly compared with the same period in 2019, and the rigid demand for travel drove airlines to raise prices in unison. Haitong Securities said that since this year, international flights have been further repaired, and with the gradual friendly policies of international relations, entry and exit visas, etc., it is expected that the demand for international air travel will continue to recover in 2024. In the short term, the strong demand for private travel during the summer holiday season and other peak seasons will drive a significant rebound in travel chain demand, but weak-season business travel may be flat or drag down the overall recovery progress. In the long run, the growth rate of air capacity import of Chinese airlines slows down, and the confidence in travel continues to recover. It is bullish on the long-term investment logic of the future aviation industry (i.e., the improvement of supply-demand pattern and ticket price marketization), waiting for economic recovery. It is expected that the profit center of airlines will be lifted in 2024, and it pays attention to investment opportunities in the aviation sector.

Recommended targets: Juneyao Airlines (601021.SH), Hainan Airlines Holding (600221.SH), Juneyao Airlines (603885.SH), Air China Limited (601111.SH).

Risk Warning: fluctuations in exchange rates and oil prices, economic downturn, safety accidents, etc.