The market's previously low expectations for Chinese airlines have now been fully reversed, whereas the market is considering an upcycle for the industry, Daiwa wrote in its report. That said, the broker reiterated its non-consensus view on the industry, particularly on airfares.

US airlines reported robust earnings in 4Q24, with Delta Air (DAL.US)      charting record earnings, of which the management foresaw travel demand to remain strong in 2025, targeting EPS growth of more than 10%, the broker said.

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However, the broker opined that the US airlines’ results are not indicative of the performance of Chinese airlines, given global aircraft supply bottlenecks due to OEM production problems and strong travel demand in China, but the broker saw a low chance for a China airfare recovery in the near term.

With high interest rates and the US dollar expected to remain strong, the broker expected Chinese airlines to continue to face FX risk in 2025. Based on the airlines’ 2023 results, a 1% depreciation of RMB against USD would reduce Chinese airlines’ annual profit after tax by RMB229-320 million.

The broker stayed bullish on strong travel demand and suggested investors to take profit of the strong share price rebound in airlines and switch to other airline-related stocks. The broker recommended TRAVELSKY TECH (00696.HK)  -0.020 (-0.184%)    Short selling $3.35M; Ratio 7.420%   and BEIJING AIRPORT (00694.HK)  +0.080 (+3.042%)    Short selling $2.18M; Ratio 7.166%   , both with Buy rating.
(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2025-04-17 16:25.) (Real-time Streaming US Stocks Quote; Except All OTC quotes are at least 15 minutes delayed.)

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