Guotai Haitong: More than half of the Q2 aviation off-season oil price transmission, Q3 summer travel passenger flow hits new high

Guotai Haitong released a research report stating that the high oil prices in the off-peak season of 2026 Q2 have put pressure on industry operations. It is estimated that more than half of the oil price transmission has occurred, with a significant increase in ticket prices on the China-Europe route helping the oil price transmission to be better than expected. It is expected that the demand for summer travel for families remains resilient, with record high passenger traffic and potential for improvements in operations. There is a huge growth space for aviation demand, and consumer boosting and visa-free agreements in many countries will guarantee continued stable growth in demand. The improvement in supply and demand will drive profit growth, and it is recommended to seize the opportunity of long-term logic positioning at low stock prices and to choose high-quality aviation network sources. Guotai Haitong's main points are as follows: 3 major airlines: The oil price transmission in the off-peak season of Q2 is close to 60%, and the high prosperity of the European routes helps the transmission be better than the pessimistic expectations The three major airlines released their performance reports, estimating that Air China, China Eastern Airlines, and China Southern Airlines incurred losses of 4.1, 3.7, and 5.2 billion yuan respectively in the second quarter (forecast median). The off-peak season of Q2 saw operational pressures due to high oil prices, with a significant increase in ticket prices on the China-Europe route helping the transmission of oil prices at major airlines to be better than expected. The estimated fuel consumption of major airlines in a single quarter is about 2 million tons, and the domestic aviation fuel ex-factory price in 26Q2 increased by 90% year-on-year. Static calculations show that the fuel cost for a single quarter increased by approximately 10 billion yuan year-on-year, with net profits of Air China, China Eastern Airlines, and China Southern Airlines decreasing by 4.3, 3.3, and 4.4 billion yuan year-on-year, respectively. The bank estimates that the transmission of high oil prices accounts for close to 60%, which is better than pessimistic expectations. 1) Domestic: It is difficult for high oil prices to transmit in the off-peak season of Q2, airlines generally increase prices and reduce flights, with trunk lines benefiting from the resilience of public and private passenger groups and the transmission of oil prices being better than the industry. 2) International: The conflict in the Middle East has led to the closure of hubs such as Dubai. The China-Europe route benefits from the return of domestic and international transit flows, and the increase in ticket prices. The three major airlines' share of the China-Europe route is more than half, benefiting from the second quarter and helping the overall transmission of oil prices. Juneyao Airlines: The oil price transmission in the off-peak season of Q2 is close to 70%, significantly better than the industry and expectations The company's performance report estimates that it will remain profitable in the first half of 2026, with a net profit of 140-210 million yuan, and an estimated loss of 230-300 million yuan in Q2, which is better than the industry and market expectations. The estimated fuel consumption for the company in a single quarter is about 300,000 tons, with static calculations showing that the fuel cost in 26Q2 increased by about 1.4 billion yuan year-on-year, while the company's profit in Q2 decreased by only 400-500 million yuan year-on-year. The bank estimates that the transmission of oil prices accounts for 70%, significantly better than the industry. On the one hand, the company reduced flights less than the industry in Q2, with domestic ASK still slightly growing year-on-year, due to flight maintenance leading to an optimization of the airline network since 2025. On the other hand, the company has cultivated its European routes for many years, with estimated European revenue accounting for more than 10%. Q2 has fully benefited from the high prosperity of European routes, with ticket price increases surpassing the industry. The impact of flight maintenance in 2025 peaked, and it is expected to weaken in the second half of 2026. The gradual recovery of turnover efficiency in the future will help accelerate the huge profit potential of the company's high-quality airline network. Summer travel: Family trips start late but still resilient, with a new high in passenger traffic and potential for operational improvements as oil prices fall The demand for air travel for secondary trips in the spring of 2026 was strong, and air travel demand (quantity and price) also maintained year-on-year growth in the second quarter, influenced by the continued demographic dividend from the "Fifteen Five" plan. It is expected that summer travel for family trips will remain resilient. Due to factors such as late summer vacations for primary and secondary schools and extreme weather in some areas, passenger traffic for summer travel in 2026 started later than in previous years, with passenger traffic starting in the second week of July and turning positive year-on-year. As the recent impact of typhoons has weakened, ticket issuance and air passenger traffic have grown rapidly, with domestic passenger traffic reaching a new high for the same period and a year-on-year increase in passenger load factor of 2% to over 86%. The estimated domestic ticket prices including oil prices fell by nearly 10% year-on-year, reflecting a weaker demand compared to the previous year. Domestic aviation fuel ex-factory prices decreased by more than 20% in July compared to Q2, taking into account recent fluctuations in oil prices, it is expected that domestic oil prices for summer travel will increase by over 40% year-on-year. The bank predicts that airlines will maintain high flight operation rates under oil price pressure during summer travel, and passenger traffic and load factors will increase year-on-year. It is recommended to pay attention to the trend of future ticket price improvements, as there is a potential for operational improvements for airlines. The growth in aviation demand in the "Fifteen Five" plan will drive the long-term logic development, and attention should be paid to the timing of bottom positioning for layout opportunities Aviation is one of the few industries with a long-term logic. In the "Fourteen Five" plan, ticket prices achieved marketization, and in the "Fifteen Five" plan, it entered an era of low supply growth. There is a huge space for aviation demand growth, and consumer boosting and visa-free agreements in many countries will guarantee continued stable growth in demand, driving the logical development of profits. It is recommended to seize the opportunity of long-term logic positioning at low stock prices and to choose high-quality aviation network sources. Recommended companies include Air China Limited, China Eastern Airlines Corporation, Juneyao Airlines, Spring Airlines, and China Southern Airlines. Risk warning: Geopolitical oil prices, economy, industry policies, dilution of issuance, safety accidents, etc.