Wanlian Securities: Civil aviation passenger load factor remains high in the first three quarters; actively monitor the aviation sector.

Wanlian Securities: Civil aviation passenger load factor remains high in the first three quarters; actively monitor the aviation sector. Wanlian Securities released a research report stating that in the first three quarters, total civil aviation turnover maintained stable growth, and the passenger load factor remained high. In September, airfares rose 6.5% year on year, and the winter flight schedule volume declined; under capacity-control and price-support measures, this is expected to drive a continued recovery in airfares. In October, aviation kerosene prices rose further, still weighing on the aviation sector. The aviation sector faces short-term pressure, but the long-term trend of improving supply-demand fundamentals remains unchanged. The sector's current valuation is at a historical low. If oil prices fall later, the core factor weighing on aviation stocks will ease, and the sector has significant recovery elasticity. We recommend actively monitoring the sector. The main views of Wanlian Securities are as follows: Overall industry performance is relatively stable From January to September 2026, total civil aviation turnover reached approximately 129.830 billion ton-kilometers, up 6.40% year on year, unchanged from the previous reading. Domestic and international routes grew 2.70% and 12.70% year on year, respectively, both unchanged from the previous reading. In September alone, total civil aviation turnover rose 6.5% year on year and 0.2pct month on month, of which domestic routes rose 2.6% year on year and fell 2.4pct month on month, while international routes rose 13.20% year on year and 4.5pct month on month. From January to September 2026, passenger volume reached 593 million person-trips, up 2.0% year on year, 0.1pct faster than the January-August growth rate. International routes carried 61.948 million person-trips, up 4.70% year on year, unchanged from the previous reading, while domestic route passenger volume rose 1.70% year on year, up 0.1pct from January-August. Supply and demand of the six major airlines remained steady in the first three quarters From the perspective of listed airline data, RPK and ASK of the six listed airlines changed by +5.4% and +3.3% year on year, respectively, from January to September, flat and up 0.2pct, respectively, compared with January-August. Domestic routes changed by +3.5% and +2.2% year on year, while international routes changed by +11.0% and +6.3% year on year. January-September RPK growth of the six listed airlines: Spring Airlines (15.1%) > Air China (8.2%) > China Eastern Airlines (5.4%) > China Southern Airlines (3.8%) > Juneyao Airlines (4.7%) > Hainan Airlines (-0.2%); January-September ASK growth: Spring Airlines (13.0%) > China Southern Airlines (4.0%) > Air China (3.2%) > China Eastern Airlines (3.2%) > Juneyao Airlines (2.5%) > Hainan Airlines (1.4%). Passenger load factors of the airlines declined month on month in September From January to September, China's civil aviation passenger load factor was 86.30%, up 1.4pct year on year and flat compared with January-August. From the perspective of listed airline data, the overall passenger load factor of the six listed airlines from January to September was 86.22%, up 0.03pct from January-August. Specifically, the January-September passenger load factors of the six airlines were: Spring Airlines (93.00%) > Juneyao Airlines (87.46%) > China Eastern Airlines (87.35%) > China Southern Airlines (85.40%) > Air China (85.23%) > Hainan Airlines (84.89%); September monthly passenger load factor and month-on-month change: Spring Airlines (93.03%, -1.76pct) > China Eastern Airlines (87.38%, -2.23pct) > Juneyao Airlines (87.65%, -1.83pct) > China Southern Airlines (85.85%, -2.16pct) > Air China (85.40%, -2.30pct) > Hainan Airlines (84.96%, -2.59pct). In September, airfares rose 6.5% year on year; the winter flight schedule volume declined, and capacity-control and price-support measures are expected to drive a continued recovery in airfares According to data from Flight Master, in September the average domestic economy-class airfare in civil aviation reached RMB 742.1 (tax included), up 6.5% year on year from 2025 and up 1.2% year on year from 2019. With the winter flight season approaching, the average weekly planned flight volume for the entire civil aviation industry in the 2026 winter-spring flight season is about 119,600 sorties, a decline compared with the 2025 winter-spring flight season. In addition, the Civil Aviation Administration of China recently issued the "Measures for Optimizing the Review of Domestic Route Flight Schedules" to further improve the scientific and refined management of domestic route flight schedules, promote differentiated competition in the industry and the efficient allocation and use of air transport resources, optimize the domestic route network structure, and promote high-quality development of civil aviation. In September, the six listed airlines had a net increase of 2 aircraft in fleet introductions As of the end of September 2026, the six listed airlines operated 3,428.00 aircraft, up 1.3% from the end of the previous year, a net increase of 44 aircraft. In September alone, there was a net increase of 2 aircraft: China Southern Airlines and China Eastern Airlines added 1 and 4 aircraft, respectively, while Air China and Hainan Airlines had net retirements of 2 and 1 aircraft, respectively. In October, aviation kerosene prices rose further month on month According to data from Longzhong Information, on October 1, China's aviation kerosene (ex-factory price, tax included) was RMB 8,946.00/ton, up 9.5% from September 1. In early October, oil prices continued to climb and have recently pulled back, but remain at a relatively high level, and short-term air transport cost pressure persists. Risk factors: economic recovery weaker than expected, international route recovery weaker than expected, large oil price fluctuations, large exchange rate fluctuations, aviation safety, etc.