China Merchants Securities released a research report indicating that the first half of the Spring Festival travel season showed growth in both passenger volume and fares, with overall performance meeting expectations. Benefiting from the extended holiday period and the release of pent-up travel demand, domestic passenger traffic and ticket prices have increased rapidly. Even after accounting for the impact of data sampling on yield calculations, the strong demand growth momentum across the industry and the stabilizing trend in yields remain clear signals. For the full year, supported by demand growth, slowing supply expansion, stabilizing yields, and potentially improved fuel and foreign exchange conditions compared to the previous year, the industry's profitability is expected to continue recovering. Since late January, increased volatility in the sector has been observed due to factors such as the rapid rise in international oil prices and Spring Festival travel data performance. It is recommended to closely monitor the volume and price performance in the latter half of the Spring Festival travel season, the implementation of supply and demand policies, and the impact of the Middle East situation on oil prices. The main views of China Merchants Securities are as follows:

Passenger traffic growth in civil aviation and domestic route yield performance during the first 20 days of the Spring Festival travel season were largely in line with expectations. Data from days 11–20, benefiting from the extended holiday and strong demand for secondary trips, outperformed the first 10 days. During the first 20 days (February 2–21), civil aviation passenger traffic increased by 6.3% year-on-year, with domestic routes up 6.5% and international and regional routes up 4.4%. Domestic fuel-inclusive fares rose by 3.3%, and the domestic passenger load factor increased by 1.4 percentage points. In the first 10 days (February 2–11), passenger traffic grew by 4.9% year-on-year, with domestic routes up 5.1% and international and regional routes up 3.3%. Domestic fuel-inclusive fares increased by 2.7%, and the domestic load factor rose by 0.6 percentage points. From days 11–20 (February 12–21), passenger traffic surged by 7.6% year-on-year, with domestic routes up 7.9% and international and regional routes up 5.5%. Domestic fuel-inclusive fares increased by 3.9%, and the domestic load factor improved by 2.2 percentage points.

Supply growth has been rapid during the Spring Festival travel season, significantly contributed by increased utilization of narrow-body aircraft. Benefiting from fleet growth and higher utilization rates, available seat kilometers (ASK) for the first three weeks reached 95.8 billion, up 6.9% year-on-year. The average aircraft utilization rate for the civil aviation fleet was 9 hours, an increase of 3.4% year-on-year. Narrow-body aircraft utilization averaged 9.03 hours, up 3.4%, while wide-body aircraft utilization was 10.83 hours, up 0.9%.

The average flight distance for domestic routes during the first three weeks was 1,394 kilometers, a slight increase of 1.7% year-on-year, influenced by shifts in travel consumption hotspots and adjustments to the route network. After adjusting for the impact of flight distance, the average bare passenger revenue per kilometer was 0.64 yuan per passenger-kilometer, up 1.7% year-on-year.

Passenger traffic to Southeast Asia and South Korea has grown rapidly, with strong demand for outbound travel during the extended holiday. In the first three weeks, international and regional flights operated by Chinese carriers carried a cumulative total of 5.612 million round-trip passengers, an increase of 5.1% year-on-year. The top five destinations were Thailand (803,000 passengers, +10.6%), South Korea (586,000 passengers, +20.8%), Japan (478,000 passengers, -55%), Malaysia (381,000 passengers, +68.6%), and Singapore (352,000 passengers, +32%). Excluding the impact of routes to Japan, round-trip passenger volume on other international and regional routes increased by 20.1% year-on-year, indicating robust demand for non-Japan destinations and a continued strengthening of the recovery foundation for international routes. However, due to the shorter flight distances and higher passenger revenue per kilometer on Japan routes, the decline in the proportion of Japan-bound flights is expected to structurally lower the overall passenger revenue per kilometer for international routes.

Risk warnings include macroeconomic downturn, significant depreciation of the renminbi, sharp increases in oil prices, and major natural disasters.