Sealand Securities has released a research report indicating that global cross-border air cargo demand remains robust, with freight volumes continuing steady growth despite high oil price pressures. On the supply side, extended new aircraft delivery timelines are limiting net capacity expansion across the industry. Under this supply-demand dynamic, freight rates are expected to remain stable, and if oil prices continue to decline, profit margins could see further expansion.
In the passenger aviation segment, September saw a widening increase in fuel-inclusive ticket prices, drawing attention to the sustainability of supply-demand improvements ahead. During the first half of September, fuel-inclusive ticket prices expanded their year-on-year growth compared to August figures, while the year-on-year decline in fuel-exclusive ticket prices gradually narrowed. The industry’s supply-demand balance is improving, warranting close monitoring of sustained demand recovery. Looking forward, supply is likely to remain tight, and the brokerage believes steadily growing demand will support continued ticket price recovery, potentially driving flexible profit growth for airlines. Consequently, the firm maintains a "recommended" rating for the air transport sector.
Key Takeaways from Sealand Securities:
Freight: Volumes Steady Growth with Strong Year-on-Year Rate Momentum
1) Freight volumes maintained steady growth, though the off-season pace slowed slightly. According to the latest July industry data from the Civil Aviation Administration, total air cargo turnover rose 6.3% year-on-year, with domestic and international cargo turnover up 6.5% year-on-year and 9.6% year-on-year, respectively. Cumulatively from January to July, total air cargo turnover grew 11.8%, while domestic and international routes saw turnover changes of negative 1.2% and positive 15.4%, respectively.
2) Freight rates eased month-on-month but maintained strong year-on-year growth. Based on the TAC air freight rate index, Shanghai’s average air freight index declined 9.0% month-on-month in July and 3.5% in August, yet rose 23.8% and 20.7% year-on-year, respectively, keeping year-on-year growth above 20%. In the first two weeks of September (through September 14), Shanghai’s average air freight index edged up 1.2% versus the August monthly average, while the monthly average was up 19.1% compared to the September 2025 monthly baseline.
Passenger: Fuel-Inclusive Fares Expand Gains in September as Crude Oil Returns to Highs
1) Industry supply-demand: July capacity grew year-on-year. According to CAAC data, July industry ASK and RPK rose 3.7% and 5.9% year-on-year, respectively, with load factors reaching 86.3%, up 1.8 percentage points year-on-year and 2.7 percentage points above the same period in 2019. Domestic and international route turnover rose 5.3% and 7.9% year-on-year, respectively. Based on aggregate August operating data from six major carriers — including Air China, China Southern Airlines, China Eastern Airlines, Spring Airlines, Juneyao Airlines, and Hainan Airlines — combined August ASK and RPK increased 4.7% and 6.8% year-on-year, with load factors at 88.6%, up 1.7 percentage points year-on-year. Domestic ASK rose 4.4% while international and regional ASK grew 5.6%, with corresponding RPK gains of 6.1% and 8.7%, and load factors of 89.7% and 85.8%, up 1.5 and 2.5 percentage points year-on-year, and 2.6 and 2.1 percentage points above 2019 levels. Peak-season capacity deployment increased, with load factors remaining elevated and showing notable year-on-year improvements.
2) Ticket prices: Fuel-inclusive fares saw widening year-on-year increases in the first half of September. From September 1 to 15, the average fuel-inclusive economy fare on domestic routes rose 7.5% year-on-year, with the increase expanding versus August; fuel-exclusive fares were flat year-on-year, indicating a halt in their decline. The improvement in supply-demand dynamics has helped repair apparent fare levels. Cumulatively from January 1 to September 15, average fuel-inclusive domestic economy fares were up 6.6% year-on-year, while fuel-exclusive fares were down 1.1%.
3) Fuel and currency: Brent crude has returned above the 100 USD per barrel mark, while the renminbi continues to strengthen. Oil prices recovered steadily through August and September, with the average Brent price from early September through September 16 reaching 100.9 USD per barrel, up 49.3% versus the September 2025 monthly average, representing a marked acceleration compared to July and August increases. In terms of jet fuel, after domestic prices fell to 7,581 yuan per ton in August, September prices rebounded 7.8% month-on-month to 8,170 yuan per ton, a 45.8% year-on-year increase. On the exchange rate front, the mid-rate for USD/CNY stood at 7.029 at the end of 2025. By September 17, 2026, the mid-rate had appreciated to 6.758, down 3.85% from end-2025 levels and 0.78% below end-Q2 2026 levels.
August Capacity Growth Continues with Average Load Factors Exceeding 87%
1) Operational performance: In August, the latter half of the summer peak season, all carriers continued to grow capacity (ASK) year-on-year. Spring Airlines led with an 8% increase, while the three major carriers (Air China, China Southern Airlines, and China Eastern Airlines) each grew capacity by more than 3%. Regarding load factors, all carriers except Hainan Airlines posted sequential and year-on-year gains in August, with comprehensive load factors exceeding 87% and improving further from July. Cumulatively, from January to August, Spring Airlines’ total ASK rose 13.3% year-on-year, while all other carriers remained within 5% growth, indicating limited capacity expansion. Load factors on both domestic and international routes remained at elevated levels; apart from China Southern Airlines, which saw a slight year-on-year decline, all other carriers improved their load factors, with Air China recording the most significant gain of 4.1 percentage points year-on-year.
2) Fleet additions: In August 2026, Air China, China Southern Airlines, China Eastern Airlines, Spring Airlines, and Juneyao Airlines introduced 3, 5, 2, 2, and 2 passenger aircraft, respectively, while Hainan Airlines added none, bringing the six carriers’ combined net addition to 9 aircraft. For the January-to-August period, the six airlines added a total of 42 aircraft net.
Risk Warnings
Geopolitical risks, macroeconomic volatility, weaker-than-expected travel demand growth, unexpected industry supply increases, ticket price increases falling short of expectations, intensifying market competition, significant oil price spikes, substantial renminbi depreciation, and risks to earnings forecasts.