Shenwan Hongyuan Group Co., Ltd. has released a research report stating that while a sharp rise in international oil prices is putting short-term operational pressure on airlines, this external shock does not alter the long-term optimization of the industry's supply-demand dynamics. Ticket prices have demonstrated resilience even during the April-May off-season. As peak season catalysts approach, the sector's profit elasticity is expected to be continuously unleashed, presenting a high-quality window for positioning in aviation stocks. The firm maintains its key recommendation for the sector. The main viewpoints are as follows:

Global Overview

Global airline passenger load factors reached a historical high for the first quarter. In Q1 2026, global Revenue Passenger Kilometers (RPK) increased by 4.0% year-on-year, while industry capacity (ASK) rose by 2.5%. Overall passenger demand growth outpaced capacity supply, leading the passenger load factor (PLF) to increase by 1.3 percentage points year-on-year to 82.4%, setting a Q1 record. Regionally, Asia-Pacific airlines' RPK grew 7.4% year-on-year, contributing the most to the global RPK increase, while African airlines recorded the highest growth rate at +10.1%.

US Market

A surge in jet fuel prices is impacting capacity deployment, with significant profit divergence among the four major US carriers. From January to April 2026, the increase in US jet fuel prices was seven times that of airfare increases. Consequently, airlines have lowered their Q2 and Q3 capacity growth forecasts. Regarding passenger traffic, as of the end of May 2026, the average daily security screening numbers at US airports reached 2.4 million, up 1% year-on-year compared to 2025 and 7% compared to 2019. In Q1 2026, the RPK growth of the four major US airlines exceeded their overall ASK growth, with load factors slightly increasing year-on-year compared to Q1 2025. Profitability among these carriers showed significant divergence: United Airlines, Southwest Airlines, and American Airlines saw net profits grow by 81%, 252%, and 19% year-on-year respectively, while Delta Air Lines' net profit fell by 220%. Compared to the same period in 2019, only United Airlines achieved positive net profit growth (+139%), while the other three experienced declines.

European Market

Flight volumes in Europe saw a slight year-on-year increase, but geopolitical conflicts caused a sharp drop in passenger traffic on Europe-Middle East routes. For weeks 1-21 of 2026, average daily flight volumes in Europe increased slightly by 0.8% year-on-year. However, affected by geopolitical conflicts, flight volumes on Europe-Middle East routes declined significantly starting in March, forcing airlines to undertake large-scale rerouting to avoid conflict zones. In early 2026, overall prices and airfares in the EU showed an upward trend. In April, influenced by the Easter effect and Middle East conflicts, airfares surged by 30% year-on-year. Representative European airlines also showed a divergence in profitability in Q1 2026: Lufthansa Group, IAG, Ryanair, and Air France-KLM reported net profit changes of +25%, +71%, -20%, and -1% year-on-year, respectively.

Major Asian Aviation Markets

Passenger traffic in Japan and South Korea remains above pre-pandemic levels, while traffic at transit hubs shows divergence. Airport passenger throughput in Japan, South Korea, Thailand, and other locations continues to improve year-on-year. Passenger volumes in Japan and South Korea have surpassed pre-pandemic levels. In Q1 2026, passenger traffic at Thailand's AOT airports, Japanese airports, and South Korean airports increased by 6%, 4%, and 5% year-on-year, respectively. Benefiting from growth in their own market demand and spillover demand from affected Middle Eastern transit hubs, passenger traffic at Singapore's Changi Airport and Hong Kong International Airport grew by 2% and 14% year-on-year in Q1 2026, respectively. Conversely, affected by the regional situation, passenger traffic at Dubai International Airport plummeted 21% year-on-year in Q1 2026, with a 65.7% drop in March alone.

Risk Factors

Key risks include demand growth falling short of expectations, a significant rise in oil prices, a substantial depreciation of the Renminbi exchange rate, and aviation safety incidents.