Civil aviation data shows a positive start to the year, with industry-wide transport flight hours reaching 3.771 million and flight movements totaling 1.406 million in the first quarter, representing year-on-year increases of 5.2% and 3.4%, respectively. Total transport turnover reached 42.8 billion tonne-kilometers, while passenger traffic hit 200 million people, up 10.9% and 6.5% from the same period last year. The industry maintained a stable safety record, indicating a strong operational beginning for 2025.

The second quarter is expected to benefit from the May Day and Dragon Boat Festival holidays. Zhongtai Securities notes that for the Summer-Autumn 2026 flight season, domestic airlines' planned domestic slots have decreased year-on-year, reflecting regulatory efforts to control capacity and support fares. Conversely, international slot allocations have increased. With visa-free policies and growing corporate overseas expansion, international routes are poised for both volume and price growth.

Huatai Securities reports that near-term oil price pressures have eased, allowing airlines to effectively manage costs, while current valuations appear attractive. Looking ahead, the key focus is on airlines' ability to sustain pricing power. Medium to long-term industry dynamics remain favorable due to improving supply-demand fundamentals. In Q1, the three major carriers plus Spring Airlines, Juneyao Airlines, and Hainan Airlines saw a net reduction of five aircraft, a 0.15% decrease from the end of 2025, suggesting low supply growth. Demand is supported by recovering business travel, rapid growth in inbound and outbound tourism, the silver economy, family travel, and seasonal holiday trends, combined with reduced industry competition, supporting a positive outlook for sector recovery. Investors are advised to consider increasing exposure to airline stocks.

Related Hong Kong-listed airline stocks include CHINA EAST AIR (00670), CHINA SOUTH AIR (01055), and AIR CHINA (00753).