Domestic air routes continue to face tight supply-demand dynamics, with the 2026 Civil Aviation Work Conference proposing a "crackdown on low fares." GLMS Securities is optimistic that domestic route fares will enter a moderate uptrend in 2026, while inbound tourism will drive airlines to continue allocating capacity to international routes. Within cyclical industries, aviation's characteristic of tight supply and demand stands out; the medium-term logic of constrained supply remains unchanged, and short-term indicators show utilization rates and load factors persistently operating at high levels, with the supply-demand gap already evident. The Civil Aviation Work Conference's proposal to "crackdown on low fares" helps bridge the transmission mechanism from tight supply-demand conditions to fare increases. For international routes, although 2025 still sees volume growth with falling prices, the firm believes international routes will gradually enter a phase of joint volume and price growth in 2026, driven by inbound tourism.

In December, industry-wide demand growth continued to outpace supply growth year-over-year, with the domestic load factor's year-over-year increase widening and the international load factor's year-over-year increase narrowing. Industry-wide supply and demand continued growing in December, with demand growth exceeding supply growth. According to company announcements, the combined ASK/RPK for the six A-share listed airlines in December increased by +6.6%/+9.1% year-over-year. The domestic load factor's year-over-year increase widened, while the international increase narrowed due to disruptions on Japan routes: 1) Domestic route supply maintained low growth in December: The six airlines' domestic ASK/RPK increased +4.2%/+7.2% year-over-year, with the load factor reaching 85.7%, up +2.4 percentage points year-over-year, the highest level recorded for any December; 2) International route supply-demand growth slowed year-over-year in December: The six airlines' international ASK/RPK increased +12.0%/+13.3% year-over-year, with the load factor up +0.9 percentage points year-over-year. International demand growth decelerated compared to November (November growth was approximately 20%). December ASK/RPK reached 107.2%/108.8% of the same period in 2019, respectively, with the monthly recovery pace slowing due to demand disruptions on Japan routes, though the overall trend continues.

In December, industry aircraft utilization remained high, with domestic fares experiencing a slight year-over-year increase and international fares declining year-over-year. December's industry volume and price performance continued trends seen in recent months, characterized by high utilization, high load factors, and stabilizing fares: 1) Utilization: Flight Master data shows industry aircraft utilization at 7.6 hours in December, down -0.1% year-over-year, with wide-body aircraft up +3.2% and narrow-body aircraft down -1.4% year-over-year; 2) Load Factor: The six airlines' domestic route load factor was 85.7% in December, up +2.4 percentage points year-over-year and +4.2 percentage points compared to the same period in 2019, reaching a historical high; 3) Price: Flight Master data indicates the industry's domestic economy class fare, including and excluding fuel surcharges, both increased +0.1% year-over-year in December. Ctrip data shows domestic airfare prices increased +0.2% year-over-year in December, while international airfare prices decreased -11.6% year-over-year (According to Ctrip's metrics, November domestic and international year-over-year changes were +4.4% and -5.8%, respectively). The sustained high levels of utilization and load factors are translating into a recovery in domestic prices.

The combined fleet of the six airlines grew by 0.4% month-over-month in December, with significant A320 deliveries; the fleet size over the first 12 months accumulated a 4.0% growth compared to the end of 2024. According to company announcements, as of December 2025, the six A-share listed companies collectively managed a fleet of 3,386 aircraft, a net increase of 14 aircraft month-over-month, representing a cumulative increase of +4.0% compared to the end of 2024. The fleet size of the six airlines continued to expand in December. Deliveries were predominantly A320 series aircraft: The six airlines collectively introduced 24 narrow-body aircraft (4 C919s, 4 C909s, 10 A320s, 1 B737, 3 A321neos, 2 B787s).

Risk warnings: Business travel demand recovery may fall short of expectations; Significant surge in oil prices; Fluctuations in the RMB exchange rate; Large-scale flight groundings due to aircraft malfunctions.