<div id="readability-page-1"><div>HSBC Research said in a report that overall travel demand in Mainland China during the May Day holiday remained intact, but due to high fuel surcharges, average airfares rose 9.7% YoY. Aviation performance lagged behind rail, with average daily air passenger traffic falling 5.7% YoY during the period, while average daily rail passenger traffic increased 4.6% YoY.The broker expects the three major domestic airlines to return to losses in 2Q26. It estimates that for every 10% increase in fuel prices, their full-year combined losses could widen by an average of 38%, and return on equity could be dragged down by 7.8 ppts.On stocks, the broker assigned Trip.com Group Limited (TCOM.US) a Buy rating, as it benefits from growth in long-haul and cross-border travel. It also gave TONGCHENGTRAVEL (00780.HK) +0.060 (+0.336%) Short selling $51.84M; Ratio 25.045% a Buy rating, citing its solid growth prospects in lower-tier domestic markets and margin recovery. The asset-light models of both companies shield them from the impact of rising fuel costs.In contrast, the broker rated AIR CHINA (00753.HK) -0.010 (-0.190%) Short selling $33.47M; Ratio 11.207% (601111.SH) +0.180 (+2.564%) , CHINA EAST AIR (00670.HK) -0.030 (-0.699%) Short selling $33.08M; Ratio 12.600% (600115.SH) +0.040 (+0.883%) and CHINA SOUTH AIR (01055.HK) +0.010 (+0.229%) Short selling $23.55M; Ratio 10.791% (600029.SH) +0.060 (+1.068%) as Reduce, as they face multiple structural headwinds, including increased price sensitivity among Chinese customers, weak pricing power, rising fuel costs without hedging, and limited ability to pass through higher ticket prices. (ss/j)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-05-07 16:25.) (A Shares quote is delayed for at least 15 mins.) (Real-time Streaming US Stocks Quote; Except All OTC quotes are at least 15 minutes delayed.)</div></div>

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HSBC Research reports that while travel demand in Mainland China remains strong during the May Day holiday, airfares have increased by 9.7% YoY due to high fuel surcharges. Average daily air passenger traffic fell by 5.7% YoY, while rail traffic rose by 4.6% YoY. The broker predicts the three major domestic airlines will incur losses in 2Q26, with potential losses widening by 38% for every 10% rise in fuel prices. Trip.com Group and TONGCHENGTRAVEL received Buy ratings, while AIR CHINA, CHINA EAST AIR, and CHINA SOUTH AIR were rated Reduce due to structural challenges.

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HSBC Research: Mainland Travel Demand Persists but Shifts to Rail; Big Three Airlines Expected to Post Losses in 2Q26