Citigroup: Lowering target prices of the three major airlines, Air China Limited (00753) is the top choice.

Citigroup released a research report stating that the rating of China Eastern Airlines (00670) has been downgraded from "buy" to "sell", with the target price reduced from 2.53 Hong Kong dollars to 1.7 Hong Kong dollars, and the rating of China Southern Airlines (01055) has been downgraded from "buy" to "neutral", with the target price cut from 3.8 Hong Kong dollars to 2.8 Hong Kong dollars. Although Citigroup maintained the "buy" rating and top pick status for Air China Limited (00753), the target price was also reduced from 5.35 Hong Kong dollars to 3.8 Hong Kong dollars. The report mentioned that the mainland aviation industry is experiencing high volume and weak pricing characteristics this summer. According to CAAC statistics, passenger traffic increased by 12% year-on-year, which is 18% higher than in 2019. International capacity has rebounded to 77% of the 2019 level, but the speed of price recovery has exceeded expectations. The average price of economy class tickets dropped by 11% compared to last year. Citigroup also noted that the industry's profitability in the Asian region is facing challenges. The three major airlines were conservative in capacity adjustments in July this year, but outbound capacity has recovered strongly. Overall, the industry's performance in the summer is somewhat disappointing. In addition, from the perspective of the second quarter performance, demand for business travel remains weak and may not be able to support prices during the off-peak season when capacity is increasing.