Shenwan Hongyuan Group: Airlines continue to increase capacity, paying attention to signals and trends of rising ticket prices following the "anti-inner circle" trend.

Shenwan Hongyuan Group released a research report stating that August ushered in the peak season of the summer travel rush, and the capacity and traffic of the aviation market have steadily increased. The aviation sector continues to be favored, with strong certainty in the supply logic. It is expected that the industry fleet supply growth rate will slow down in the next 3-5 years, and the demand side has elasticity. Both passenger traffic and passenger load factor have been continuously growing at relatively high levels. Investors can pay attention to the signals and trends of air ticket price rebound under the subsequent "anti-inner competition" of civil aviation. Meanwhile, with the cooperation of external oil and exchange rate changes, airlines can release significant performance improvement potential. It is recommended to pay attention to Air China Limited (601111.SH), China Express Airlines (002928.SZ), Spring Airlines (601021.SH), Juneyao Airlines (603885.SH), CATHAY PAC AIR (00293), China Southern Airlines (600029.SH), China Eastern Airlines Corporation (600115.SH). Key Points from Shenwan Hongyuan Group: The latter half of the summer travel season enters the peak season, with both capacity and traffic of civil aviation increasing year-on-year in August. According to data from Flight Master, the number of passengers transported by civil aviation in August was approximately 75.08 million, a year-on-year increase of 3.0%. Domestic capacity of civil aviation increased by 1.3% year-on-year, and domestic passenger traffic increased by 2.2% year-on-year. In August, there were about 61,000 international passenger flights, recovering to 88.6% of the level for the same period in 2019. Mainland China to Japan, South Korea, and Hong Kong flights ranked top three. The daily aircraft utilization rate of civil aviation in August was 8.9 hours, an increase of 0.3% month-on-month and 0.2% year-on-year. According to Flight Master data, the daily utilization rate of wide-body aircraft in August was 10.5 hours, narrow-body aircraft 8.9 hours, and regional aircraft 5.9 hours. Overall situation of airline data in August: The peak season of the summer rush, the airlines continue to increase capacity, passenger turnover continues to grow, and the load factor increased month-on-month for all airlines Year-on-year changes in ASK capacity of 6 listed airlines in 2014: Air China Limited (+2%), China Eastern Airlines Corporation (+7%), China Southern Airlines (+6%), Juneyao Airlines (-3%), Spring Airlines (+12%), Hainan Airlines Holding (+3%); Year-on-year changes in RPK passenger turnover of various airlines: Air China Limited (+3%), China Eastern Airlines Corporation (+9%), China Southern Airlines (+6%), Juneyao Airlines (-2%), Spring Airlines (+12%), Hainan Airlines Holding (+3%); Year-on-year changes in passenger traffic of various airlines: Air China Limited (-0.2%), China Eastern Airlines Corporation (+4%), China Southern Airlines (+5%), Juneyao Airlines (-6%), Spring Airlines (+13%), Hainan Airlines Holding (+0.7%); Spring Airlines has a significantly higher load factor than other airlines: Air China Limited (83.7%, up 0.8pct year-on-year), China Eastern Airlines Corporation (88.3%, up 1.6pct year-on-year), China Southern Airlines (87.0%, down 0.2pct year-on-year), Juneyao Airlines (89.0%, up 0.7pct year-on-year), Spring Airlines (93.9%, up 0.2pct year-on-year), Hainan Airlines Holding (87.7%, down 0.3pct year-on-year). Domestic Market: Overall supply and demand growth balance, Spring Airlines, China Southern Airlines, and China Eastern Airlines Corporation have significantly increased capacity and traffic Year-on-year changes in ASK in 2014: Air China Limited (-1%), China Eastern Airlines Corporation (+3%), China Southern Airlines (+5%), Juneyao Airlines (-7%), Spring Airlines (+9%), Hainan Airlines Holding (-1%); Year-on-year changes in RPK in 2014: Air China Limited (+0.02%), China Eastern Airlines Corporation (+6%), China Southern Airlines (+5%), Juneyao Airlines (-7%), Spring Airlines (+10%), Hainan Airlines Holding (-0.1%). International Market: Airlines have significantly increased international capacity year-on-year, and Air China Limited, China Eastern Airlines Corporation, Juneyao Airlines, and Spring Airlines have all recovered to pre-epidemic levels Year-on-year changes in ASK in 2019: Air China Limited (+4%), China Eastern Airlines Corporation (+17%), China Southern Airlines (-8%), Juneyao Airlines (+86%), Spring Airlines (+2%), Hainan Airlines Holding (-28%); Year-on-year changes in RPK in 2019: Air China Limited (+1%), China Eastern Airlines Corporation (+20%), China Southern Airlines (-8%), Juneyao Airlines (+83%), Spring Airlines (+0.4%), Hainan Airlines Holding (-31%). Regional Market: Overall recovery progress of capacity and traffic is relatively slow Year-on-year changes in ASK in 2019: Air China Limited (-1%), China Eastern Airlines Corporation (+2%), China Southern Airlines (-17%), Juneyao Airlines (-39%), Spring Airlines (-78%), Hainan Airlines Holding (-40%); Year-on-year changes in RPK in 2019: Air China Limited (+3%), China Eastern Airlines Corporation (+19%), China Southern Airlines (-9%), Juneyao Airlines (-33%), Spring Airlines (-76%), Hainan Airlines Holding (-39%). Risk Warning: Economic growth lower than expected, large fluctuations in oil and exchange rates, risk of safety accidents.