Reduced Optimism amid a Soft Start to the Summer

Research evidence excerpt

Reduced Optimism amid a Soft Start to the Summer

Idea

July 6, 2026 08:00 PM GMT

Morgan Stanley Asia Limited+MChinese Airlines | Asia Pacific Qianlei Fan, CFA

Equity Analyst

Reduced Optimism amid a Soft Qianlei.Fan@morganstanley.comEvan Chen +852 2239-1875

Research Associate

Evan.Chen@morganstanley.com +852 2848-7317

Start to the Summer Tenny Song

Tenny.Song@morganstanley.com +852 3963-1737

Jet fuel pricing normalization is supportive, and inbound travel

demand remains encouraging. However, soft domestic demand

reduces our optimism. We relatively prefer Spring Airlines and

Cathay within our airlines coverage.

Hong Kong/China Transportation &

Domestic demand is soft, despite normalizing jet fuel prices. While we are unsure

Infrastructure

whether the soft demand is led by structural macro headwinds, or delayed by Asia Pacific

expectation of further fuel surcharge normalization, domestic RPK growth turned Industry View In-Line

negative YoY since May-26, weakening our optimism in Chinese airlines' sustained Also read: Hong Kong/China Transportation &

utilization and margin improvements story - domestic still contributes over 60% of Infrastructure: Catalyst Preview: Mandatory

Chinese airlines' pax revenues, we estimate. Profit Alerts (30 Jun 2026)

Jet fuel pricing, inbound travel, and Chinese airlines' share gain on international

routes are supportive. Our oil strategist expects the oil market to turn to a surplus

in 2027, making airlines potential beneficiaries, if crack spreads further normalize

from the current elevated level. We also think Chinese airlines have better margins

in international businesses, given strong inbound travel demand growth and share

gains from Middle East airports as transit hubs connecting Asia and Europe.