GTHT has released a research report stating that the 2026 Spring Festival travel season experienced robust demand, with both air passenger volume and ticket prices rising. This trend is expected to support improved profitability for the airline industry in the first quarter. The upcoming flight schedule transition will continue to enforce strict control over slot allocations. Benefiting from policies aimed at stimulating consumption, the supply-demand dynamics for air travel are projected to remain favorable. Recent geopolitical risks have highlighted potential oil price volatility; however, the actual impact of oil prices depends on underlying supply and demand conditions and does not alter the fundamental value or long-term outlook for airlines. The report suggests investors consider contrarian opportunities to position for the sector's long-term growth cycle. The quality of an airline's route network is identified as a key determinant of the extent and sustainability of profitability improvements for traditional carriers. Key points from the GTHT report are summarized below.
The 2026 Spring Festival travel season concluded with strong demand, with air passenger growth leading the transportation sector. Robust demand was observed during the 2026 Spring Festival period, further supported by an extended 9-day holiday which boosted both family visits and tourism, including a notable increase in secondary trips. Popularity rose notably in southern coastal cities, with Guangdong, Hainan, Yunnan, and Guangxi being particularly popular destinations. According to the Ministry of Transport, total passenger trips during the 40-day Spring Festival period increased by 4.3% year-on-year based on the lunar calendar. Road travel, accounting for over 80% of the total, grew by 4.2%. Railway travel increased by 4.8%, with active additional services during peak periods and a standby success rate exceeding 70%. Air travel grew by 5.3% (estimated from daily growth rates published by the Ministry of Transport), representing the highest growth rate among all modes of transport. Total air passenger volume reached approximately 94.39 million, setting a new historical record and approaching the Civil Aviation Administration of China's forecast of 95 million. Domestic passenger traffic increased by 5%, while international and regional traffic rose by 9%. The number of additional flights during the Spring Festival period was limited, as authorities strictly controlled the addition of new routes and frequency increases by airlines on trunk routes. According to Civil Aviation News, the average daily scheduled passenger flights increased by only 2.7% year-on-year. GTHT estimates that the passenger load factor increased by over 2 percentage points compared to the same period last year.
During the 2026 Spring Festival period, lower oil prices and rising airfares are expected to contribute to industry profitability in Q1. Passenger load factors reached new highs, driving ticket prices up as anticipated. GTHT estimates that the average domestic base airfare (excluding taxes and fees) during the 2026 Spring Festival period increased by approximately 3-4% year-on-year based on the lunar calendar. 1) Pre-holiday: Ticket prices saw a modest increase during the travel peak, somewhat influenced by additional railway services. 2) Holiday period: The extended holiday fueled strong demand for secondary trips. With clear market segmentation between air and high-speed rail passengers, high load factors supported a significant 8% year-on-year surge in domestic base airfares during the holiday, exceeding expectations from both capital markets and the industry. 3) Post-holiday: The upward trend in ticket prices continued during the return travel peak. Prices moderated after the Lantern Festival, influenced by important domestic conferences. A rapid recovery in business and commercial travel is anticipated subsequently. GTHT estimates that the average domestic all-in airfare (including fuel surcharges) for the first quarter of 2026 will increase by over 4% year-on-year. Considering that the average ex-factory price for domestic aviation fuel in Q1 2026 is estimated to be 8% lower year-on-year, this implies a significant year-on-year expansion in airlines' gross margins. Airline profits are expected to show marked improvement year-on-year, with the potential for the industry to return to profitability overall.
The new flight season continues strict control over slot growth, and consumption stimulus policies are expected to maintain favorable air travel supply-demand conditions. The transition to the 2026 summer flight season is imminent. Analysis of pre-filed flight plans indicates that the total scheduled passenger flights for the new season have decreased by 1.6% compared to the 2025 summer season, reflecting the CAAC's ongoing efforts to curb excessive competition and strictly control slot growth. 1) Continued international expansion with route structure adjustments: The total number of scheduled domestic passenger flights for the new season has decreased by 2.7% year-on-year. In contrast, scheduled international passenger flights have increased by 3.3% overall, with flights operated by Chinese carriers up 14% and those by foreign airlines down 13%. The reduction in flights to Japan continues to have an impact. Chinese carriers have significantly increased frequencies on routes to Southeast Asian destinations such as Malaysia, Vietnam, Thailand, Singapore, and Indonesia, as well as to South Korea. 2) Stable domestic flight schedules at core airports: Slot allocations at the six major coordinated airports in Beijing, Shanghai, Guangzhou, and Shenzhen have increased by 2.7% year-on-year. Domestic slots remain largely flat, while international slots have grown by 11%, continuing the focus on building international hubs and benefiting from visa-free policies for citizens of several countries and policies encouraging inbound tourism spending. It is important to note that the strict slot control reflects prominent and persistent airspace capacity constraints in Chinese civil aviation, which are expected to be a long-term issue. Aircraft fleet planning during the 16th Five-Year Plan period is anticipated to maintain low growth rates, indicating that the industry has entered an era of constrained supply growth. Demand is expected to benefit from consumption stimulus measures, leading to continued favorable supply-demand dynamics for air travel.
The report recommends seizing contrarian opportunities presented by geopolitical oil price volatility to position for the long-term logic of the aviation super-cycle. China's aviation industry has already achieved market-based pricing for tickets. With continued favorable supply-demand conditions, the sector is poised to enter a profitable and sustainable "super-cycle" of rising earnings. While recent geopolitical events have heightened oil price risks, the actual impact of oil prices is contingent on supply and demand fundamentals and does not undermine the intrinsic value or long-term investment thesis for airlines. Investors are advised to consider strategic positioning during market downturns. Ultimately, the quality of an airline's route network will be the decisive factor in the magnitude and durability of profitability gains for traditional carriers. Risks to consider include geopolitical oil price shocks, economic fluctuations, policy changes, equity dilution from secondary offerings, and safety incidents.