CITIC Securities Says Higher Oil Prices Are Widening Airlines' Profit Divergence

CITIC Securities said surging oil prices are sharply widening profitability differences among airlines. Domestic full fares for the first three weeks of April and in May rose 17.0% and 12.7% year on year to 900 yuan and 916 yuan, respectively, creating room for fare flexibility, according to Jiemian News. The broker said if oil prices stabilize and retreat, leading to lower fuel surcharges, base fares could absorb part of that surcharge-cutting room. It added that the airline sector was hit by short-term disruptions at the start of the summer travel peak, but traffic growth has already improved on a month-on-month basis after stripping out typhoon effects. The second half of July could be an important window to test demand resilience and fare recovery. CITIC Securities also said the next two years will face tight constraints on aircraft deliveries and slot additions, and expects easing jet fuel costs and base-fare replacement to eventually combine and feed through to quarterly profits.