Guotai Haitong Securities has released a research report highlighting that domestic airlines' ticket pricing marketization ensures high load factors on trunk routes can fully translate into pricing power, while fleet expansion has slowed, reducing pressure from third and fourth-tier city investments and negative pricing drag. China's aviation industry supply and demand are gradually recovering, with current load factors already exceeding 2019 levels and ranking among the world's highest. Future supply-demand dynamics are expected to continue improving, and if business travel demand recovery sustains, airline profitability centers will rise significantly and sustainably, ushering in the long-anticipated "super cycle" for aviation.

Considering the consecutive National Day and Mid-Autumn Festival holidays with notable extended vacation effects, Golden Week travel demand is expected to be robust. Airlines maintain optimistic expectations with currently strong pre-sale volumes and pricing. Attention should be paid to the impact of extended vacations on near-closing ticket prices.

**China's Aviation Industry Demonstrates Long-term Logic with Two Key Conditions for Price Increases Realized During the 14th Five-Year Plan**

Ticket pricing marketization ensures high load factors on trunk routes can fully convert to pricing power, while slowed fleet expansion reduces third and fourth-tier investment pressure and negative pricing drag. China's aviation industry supply and demand are progressively recovering, with current load factors surpassing 2019 levels and leading globally. Future supply-demand trends are expected to remain positive, and if business travel demand recovery continues, airline profitability centers will rise significantly and sustainably, bringing the long-awaited "super cycle" to aviation.

On the supply side, China's aviation industry has entered an era of low supply growth. China's airspace slot bottlenecks remain prominent and persistent, and airlines have rationally reduced capital expenditure intentions based on expectations of persistently low returns on new aircraft additions. The "anti-involution" approach is expected to further ensure that 15th Five-Year Plan fleet planning maintains low growth, with supplementary orders not altering planning.

On the demand side, Chinese aviation consumption remains in a preliminary stage of low frequency and low penetration, with aviation demographic dividends not yet concluded. Short-term demand fluctuations do not change the medium to long-term steady growth trend.

**Q3 Peak Season: Business Travel Unexpectedly Weakened During Summer Operations, Q3 Profitability Still Expected to Exceed 2019 Q3**

Business travel demand showed year-over-year recovery growth in April-May, with good supply-demand recovery ensuring airlines retained most fuel cost reductions during the off-season, leading to significant year-over-year loss reduction in Q2. July-August business travel demand unexpectedly weakened, preventing summer operations from demonstrating profit elasticity. Notably, under business travel demand reduction pressure, ticket price declines offset oil price drops, with estimated summer operation profitability still growing year-over-year.

After major events in early September, business travel demand rapidly recovered, with Beijing market driving volume and price recovery. Benefiting from pent-up business travel demand release during summer operations and business travel demand shifting forward due to major October meetings, September business travel demand is expected to potentially reach historic highs for the period, with domestic fuel-inclusive ticket prices turning positive year-over-year while again retaining a large proportion of fuel cost reductions.

Chinese airlines' Q3 profitability has exceeded 2019 Q3 for two consecutive years in 2023-24, with 2025 Q3 profitability expected to continue year-over-year growth and potentially exceed 2019 Q3 again, preliminarily demonstrating upward profitability center trends and potential. If business travel demand recovery continues, future peak seasons are expected to demonstrate ticket pricing marketization effects with significant profit elasticity.

**Q4 Off-Season: Anti-Involution Supports Q4 Loss Reduction, Focus on Business Travel Recovery Sustainability**

Considering consecutive National Day and Mid-Autumn holidays with obvious extended vacation effects, Golden Week travel demand is expected to be strong, with airlines maintaining optimistic expectations and currently good pre-sale volumes and pricing. Attention should be paid to extended vacation impacts on near-closing ticket prices.

Compared to Golden Week, greater attention is recommended for two aspects: 1) After important October meetings, closely observe business travel demand recovery. Strong September business travel demand preliminarily validates that unexpected summer weakness may have been temporary. If business travel demand recovery sustainability is further validated, airline profitability centers are expected to begin significant upward movement in 2026. 2) Chinese airlines are primarily central and state-owned enterprises, making anti-involution worth anticipating. China's Civil Aviation Administration is expected to continue strictly controlling slot growth during the 2025/26 winter season, with off-season low-price management helping airlines continue significant loss reduction, ensuring short-term full-year turnaround to profitability in 2025 while guiding airline revenue management improvement and accelerated profit increases medium-term.

**Recommend Increasing Aviation Holdings for Long-term Logic, Preferring High-Quality Route Networks**

The aviation "super cycle" long-term logic will provide dual performance-valuation expansion over the coming years, warranting strategic emphasis and advance positioning. Route network quality will determine traditional airlines' future profitability center upward potential and sustainability, with oil price declines and anti-involution expected to accelerate profit increases.

Recommend preferring high-quality route networks and increasing holdings in Air China (601111.SH), Juneyao Airlines (603885.SH), China Southern Airlines (600029.SH), China Eastern Airlines (600115.SH), and Spring Airlines (601021.SH).

**Risk Warnings** Economic fluctuations, policy changes, oil prices and exchange rates, dilutive equity offerings, safety incidents, and other factors.