A decline in Chinese air travel demand and tighter controls are jointly pressuring OTA airline ticketing

Overview

This report summarizes an aviation travel expert conference call organized by Nomura’s China internet and new media team. It focuses on China’s air travel demand, fuel surcharge levels, changes in airline distribution policy, and the impact of these factors on OTA airline ticketing businesses. The tone is cautious, concluding that weakening air ticket volume is already pressuring OTA revenue, while stronger carrier channel control could create more persistent structural effects.

Core views

Core views include: first, Chinese air passenger demand has weakened significantly since Q2 2026, mainly due to higher oil prices and fuel surcharges driven by Middle East geopolitical tensions; second, demand in the summer travel period is still not strong, with experts expecting a 4% year-on-year decline in passenger traffic in July and August; third, airlines have tightened regulation of both online and offline ticket agents, especially by restricting travel agencies from selling tickets on OTAs, which weakens OTA high-commission third-party ticketing revenue; fourth, although airline ticketing revenue is under pressure, OTAs still need to keep ticketing because flights remain a key demand gateway to cross-sell higher-margin products such as hotels and package tours.

Analysis framework

The report uses a combined approach of expert conference-call takeaways and industry value-chain analysis. It first explains rising fuel surcharges and fare changes through macro and geopolitical factors, then analyzes how changes in airline distribution policies affect OTA business models, and finally maps the implications to Trip.com and similar online travel platforms’ revenue and strategic outlook.

Methodology notes

• industry expert interviewconference call takeaways

  Assesses near-term industry shifts based on insights from leading experts in China flight operations and airline ticketing.

  The report mainly relies on expert observations on passenger traffic, fuel surcharges, airline policy, and OTA business models to conclude that the airline ticketing market is under pressure and that OTA ticket revenue is vulnerable.

• valuation approachPE multiple method

  Trip.com target price is based on FY27F P/E of 12x.

  Disclosure shows Nomura values Trip.com at 12x FY27F P/E, with a target price of USD51 and Nasdaq Composite as the reference index.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Trip.com (TCOM US)

  primary OTA name most affected

  Strengths

  Has a user traffic advantage and one-stop travel-service capability; ticketing can drive cross-selling of higher-margin products such as hotel stays and packaged tours.

  Weaknesses

  Domestic airline ticketing revenue is volume-sensitive, and third-party travel agency commission channels are constrained by airline policies.

  Comparison

  Compared with airline-owned channels, OTAs still control an important traffic entry point in the Chinese airline booking market, although carriers are trying to direct users to their own channels.

  Risks

  Weak air travel demand, fuel surcharges remaining elevated, further tightening of airline distribution policies, and intensifying competition.

• Chinese OTA airline ticketing business

  sector under pressure

  Strengths

  Strong traffic aggregation capacity; acts as a demand hub for cross-selling travel products.

  Weaknesses

  As ticketing commissions approach zero, operations become dependent on substitute revenue sources and more sensitive to airline policy changes.

  Comparison

  Third-party agency commissions are generally higher than those in airline and OTA self-operated ticketing, but this channel is now restricted.

  Risks

  Carriers prohibiting travel agencies from selling on OTAs, non-compliance fines, and demand shifting to high-speed rail or self-driving.

• Airline carriers' self-operated channels in China

  potential beneficiary channels

  Strengths

  Can increase direct booking share and reduce reliance on OTAs through official websites, apps, and official flagship stores.

  Weaknesses

  Experts note carriers still lack sufficient infrastructure capacity and operating experience, making it hard to absorb the volume managed by OTAs fully.

  Comparison

  Carrier-owned channels seek to replace OTA distribution, but their short-term execution capability is weaker than that of large OTAs.

  Risks

  Difficulty in user migration, insufficient service capability, and limited order handling capacity.

Key data

• 2026 H1 domestic carrier passenger traffic in China375 million passengers, up 1% year-on-yearQ1 was up about 7% year-on-year, while Q2 was down 4% to 5% year-on-year.
• Fuel surcharge on routes over 800 kmCNY170 per flight in May 2026, CNY100 per flight in JuneIt was CNY20 per flight in January 2026; in 2025 it was below CNY40 per flight.
• 2026 H1 domestic economy-class average fareCNY808 (USD115), up 9% from 2025Q1 was CNY784, up 3% year-on-year; Q2 was CNY827, up 5% quarter-on-quarter and 15% year-on-year.
• Summer peak (July–August) passenger forecastdown 4% year-on-yearExperts are cautious on the summer peak travel period in 2026.
• Airline ticketing policy penaltiesCNY20,000 per ticketTravel agencies and OTAs each bear this penalty for every non-compliant ticket sold.
• Trip.com domestic airline ticketing guidanceIf ticket volume falls 10%, revenue declines 20% to 30%The report views this as a direct transmission of tighter airline controls and weaker volume to OTA revenue.
• Trip.com valuation disclosureTarget price USD51, disclosed price USD41.00, rating NeutralPrice date was 2026-07-02; the target price is based on 12x FY27F P/E.

Impact & implications

For OTAs, airline ticketing faces a short-term volume-price mismatch: fares rise with higher fuel surcharges, but commissions are more volume-linked, so weaker passenger traffic directly suppresses revenue. More importantly, carriers are trying to steer traffic to their own websites, apps, and flagship stores, which could structurally reshape the profit pool in airline ticket distribution over time. At the same time, carriers still face execution challenges in call center capacity, operational capability, and handling large OTA-originated order volumes, so OTA advantages in traffic and one-stop travel service remain strategically valuable.

Risks

• Continued high fuel surcharge levels could keep air travel demand weak.
• A soft macro environment may keep travelers shifting from long-haul air travel to self-driving, high-speed rail, or nearby trips.
• Major carriers may further tighten commission and distribution policies, further squeezing OTA airline ticketing revenue.
• Declines in Trip.com’s domestic airline ticketing revenue may exceed the decline in ticket volume.
• Greater competition from new entrants could pressure operating margins of online travel platforms.

What to watch

• Whether and how much fuel surcharges decline in the second half of 2026.
• Whether summer peak air passenger traffic in July to August delivers the 4% year-on-year decline expected by experts.
• The enforcement intensity of major carriers’ restrictions on travel agencies and OTA ticket sales.
• The actual decline in Trip.com’s domestic airline ticketing revenue versus ticket volume.
• Whether OTAs can offset ticketing pressure through cross-selling of hotels, packaged tours, and other products.
• Whether carriers can close gaps in call center, technology, and operational capability in their own channels.