"Spring Festival Travel Rush" concept gains momentum? Fund managers: "Niche" tracks welcome multiple benefits

Along with the continued volatility in the precious metals sector and the consolidation of tech stocks, as mainline investments lose momentum, there are emerging signs of strength in consumer, tourism, and travel-related stocks. Among these, the relatively “niche” airline sector has been more resilient in recent trading days: stocks like China Express Airlines, China Eastern Airlines, Juneyao Airlines, and China Southern Airlines have all risen collectively after the New Year. The airline index under Wind classification has been rising against the trend for three consecutive days, and over a longer period, this index has approached a three-year high.

With the earnings forecasts of several companies turning profitable, some fund managers have pointed out that recently, airline seat occupancy rates have reached record highs, and there is a clear basis for airline ticket prices to increase. Additionally, factors such as a strengthening exchange rate, oil price fluctuations, and tight aircraft delivery schedules have all contributed positively to airline profits.

“Niche” Sector Steadily Climbing

During last year’s “tech bull” market, airline stocks did not double overnight but showed a steady upward trend. Many active equity funds increased their holdings in this sector in the fourth quarter of last year. As a result, the rise in individual stocks after the New Year has also boosted the performance of related fund products.

For example, the Bank of Communications Ruiyuan Three-Year Fixed Open Fund, managed by Yang Jinjing, held three airline stocks including China Express Airlines, China Southern Airlines, and Air China as of the end of last year’s fourth quarter. It continued to see gains after the New Year, and as of February 4, the fund had increased by approximately 9.43%.

Debon’s large consumer fund shifted its heavy holdings to the tourism and travel sector by the end of last year, including several airlines as well as China Duty Free Group, BTG Hotels, and Three Gorges Tourism. The fund manager believes that as consumer goods approach saturation, service consumption may become an important future growth area.

In last year’s quarterly report, Yang Jinjing explained her increasing holdings from the perspective of blue-chip stocks. She stated that most stocks are at their most expensive valuation levels in history, while leading blue-chip stocks across industries are pessimistic about their fundamentals and are near the lower end of their historical valuation ranges. Meanwhile, the overall macroeconomic environment, influenced by the capacity cycle, is showing signs of a turning point. “The extreme overvaluation of themes and micro-cap stocks versus the cheap and undervalued leading blue chips creates a stark contrast, forming a cyclical pattern reminiscent of early 2021 when the Maotai index was extremely overvalued and small- and mid-cap stocks were very cheap,” Yang Jinjing noted.

Public Fund Experts Optimistic About the Airline Sector

Several public fund managers have stated that within the travel chain, the benefits for the airline sector are more solid than the overall travel industry fundamentals. The supply-demand pattern is very favorable, with future supply growth expected to be very low, mainly because Airbus and Boeing’s large aircraft deliveries have continued to fall short of expectations.

A fund manager from North China said that, aside from China, airline ticket prices in major global regions have increased by 25% compared to 2019. While inflation factors are involved, the increase is still significant. Domestic ticket prices remain relatively low due to a high proportion of business travelers previously, but this decline is expected to be absorbed by 2026.

The aforementioned fund manager also pointed out that recent policies allowing visa-free travel and encouraging trips have pushed airline seat occupancy rates to historic highs. Currently, for some medium- and short-haul routes, ticket prices are even cheaper than high-speed rail tickets, indicating a clear basis for airline ticket prices to rise.

“Additionally, this sector benefits from falling oil prices and a strengthening RMB exchange rate. The appreciation of the RMB reduces the debt burden since many airlines owe dollar-denominated debt. Meanwhile, oil prices are expected to remain under downward pressure, which provides significant profit elasticity for these airlines,” the fund manager explained.

ICBC Credit Suisse Asset Management stated that looking ahead, the supply-demand pattern in the airline industry is expected to further improve.

On one hand, demand in 2026 is worth looking forward to. The recently issued “Work Plan for Accelerating the Cultivation of New Growth Points in Service Consumption” highlights service consumption as a key driver for growth in the opening year of the 14th Five-Year Plan, aiming to boost consumption and expand domestic demand. Under the national encouragement of service consumption and expanding visa-free policies, leisure travel, inbound and outbound tourism continue to grow rapidly, with the elderly, students, and family groups becoming new sources of airline demand.

On the other hand, supply in the airline industry remains constrained. Due to years of continuous losses, domestic airlines have fewer new aircraft orders, and global supply chain disruptions have led to declines in engine and aircraft deliveries. The industry may face at least a 3-5 year period of supply tightening.

Frequent Positive Earnings Reports

The 2026 Spring Festival travel rush has officially begun, and many airlines and travel platforms expect this year’s Spring Festival to set new records for popularity, with civil aviation passenger numbers potentially reaching historic highs.

Additionally, recent earnings forecasts show some airlines turning profitable ahead of schedule. HNA Holding expects a net profit attributable to shareholders of 1.8 to 2.2 billion yuan for the full year, reversing a loss of 9.21 billion yuan last year, with a year-on-year increase of 27.21 billion to 31.21 billion yuan; China Southern Airlines also expects to turn profitable, with net profits attributable to shareholders of 800 million to 1 billion yuan.

Research reports indicate that starting in 2023, travel demand is gradually returning to normal. However, macroeconomic pressures, weakening business demand, and slower-than-expected recovery of international routes have kept industry earnings at low levels, with seat revenue at historic lows, slow profit recovery, and relatively pressured stock prices, clearly reflecting a cyclical bottom.

By the end of 2024, as supply and demand gradually improve and capacity utilization rises to high levels, the industry’s price inflection point may become evident. In mid-September 2025, with the recovery of business demand, seat revenue levels are expected to turn positive again. Based on analysis of demand highlights and supply changes, price year-on-year growth is expected to continue into 2026, with ticket prices rising steadily and profits climbing step by step.

GF Securities also believes that demand remains the core variable for industry price recovery and profit improvement. Domestic routes are expected to see moderate growth in passenger volume supported by normalized travel consumption, increased leisure tourism, and refined revenue management by airlines. Under the restraint of supply, the price center is resilient, and features like “busier peak seasons and more stable off-peak periods” may be further reinforced.

(Article source: Securities Times)