The Middle East crisis has limited direct impact on China's travel and leisure sector, but cost pressures are more pronounced for airlines and luggage-and-bag companies

Overview

This report focuses on the impact of the Middle East crisis on China's travel and leisure industry, covering sub-sectors such as online travel agencies, airlines, luggage and bags, and Macau gaming. The core conclusion is that overall direct geographic exposure is limited and demand has not broadly deteriorated; however, airlines are under pressure from fuel costs and route adjustments, while luggage-and-bag companies are more affected by higher raw-material and freight costs.

Core views

Online travel platforms have low exposure to Middle East-related business, and the main risks come from fuel surcharges raising long-haul ticket prices and constrained flight capacity. Chinese carriers have canceled most Middle East flights and shifted capacity to markets such as Europe, Southeast Asia, and Australia, but higher oil prices will still erode profits. Middle East revenue accounts for about 1% of luggage-and-bag companies' sales, but fewer outbound travelers to the Middle East, weaker consumer sentiment in markets such as India and ASEAN, and higher material and freight costs may create greater operating pressure. Macau gaming is seeing limited near-term impact and may even benefit from visitor spillover as fares to long-haul destinations rise.

Analysis framework

The report combines company interviews, flight seat capacity tracking, regional revenue exposure, cost structure decomposition, and FY26 earnings sensitivity analysis to assess the impact of the Middle East conflict on demand, capacity, ticket prices, costs, and profits.

Methodology notes

• Flight capacity trackingCTrip flight seat capacity tracker

  Tracks year-over-year changes in regional flight seat capacity on a weekly basis.

  The report uses CTrip data, compiled by Goldman Sachs Global Investment Research, to observe flight seat capacity trends across Asia, Europe, the Middle East, North America, and other regions in order to identify the impact of flight reductions and rerouting after the conflict.

• Earnings sensitivity analysisFY26 earnings sensitivity analysis

  Measures the impact of changes in fuel, raw materials, and freight on FY26 profit or margins.

  The report estimates the impact on FY26 net profit for Chinese airlines from each US$1/bbl increase in fuel prices, and measures the effect on Samsonite's gross margin and EBITDA from each 10% increase in raw materials and freight.

• Disclosure methodologyGS Factor Profile

  A Goldman Sachs framework used to compare stocks' growth, financial returns, valuation multiples, and composite attributes.

  The disclosure section explains that GS Factor Profile uses standardized rankings and percentiles to compare a stock's key attributes against the market and peers, but this report mainly relies on operating feedback and sensitivity analysis rather than factor rankings as the core evidence.

Asset mapping & comparison

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

• Online travel agencies

  Demand and booking-platform exposure

  Strengths

  Middle East-related bookings account for a low-single-digit percentage of outbound and international travel booking GTV, and recent domestic travel trends remain resilient.

  Weaknesses

  Higher long-haul ticket prices and flight rerouting may weigh on outbound travel demand.

  Comparison

  Compared with airlines, OTA faces lower direct cost pressure but is more sensitive to transaction volume and travel willingness.

  Risks

  If ticket prices continue to rise or international flight capacity remains constrained during the Labor Day holiday period, booking demand may slow.

• Chinese airlines

  Capacity, oil prices, and ticket-price transmission

  Strengths

  Middle East capacity is only 0.2% of total capacity and 2.6% of international capacity, and some capacity can be redirected to Europe, Southeast Asia, and Australia.

  Weaknesses

  Fuel accounts for about 30% of operating costs, carriers typically do not hedge, and profits are highly sensitive to higher oil prices.

  Comparison

  Compared with OTA and Macau gaming, airlines face the most direct cost shock.

  Risks

  Fuel surcharges can only partially offset higher oil prices and may suppress demand through higher ticket prices.

• Luggage and bag companies

  Travel consumer goods and cost exposure

  Strengths

  Middle East sales account for about 1%, while sales in China, Korea, and Japan are currently relatively stable; 4 to 5 months of inventory can help support gross margins in the short term.

  Weaknesses

  As a durable consumer category, demand may be cut more sharply amid macro uncertainty; both raw materials and container freight costs are rising.

  Comparison

  Compared with airlines, direct fuel-cost exposure is lower; but compared with OTA, pressure from raw materials, logistics, and consumer sentiment is more pronounced.

  Risks

  If price increases in materials such as nylon, polyester, plastic, and aluminum continue, gross margins may come under pressure after one to two quarters.

• Macau gaming

  Regional leisure consumption and potential visitor substitution

  Strengths

  March GGR and inbound traffic still showed year-over-year growth, and industry participants believe it may benefit from visitor spillover as fares to long-haul destinations rise.

  Weaknesses

  It may still be affected by broader weakness in consumer sentiment.

  Comparison

  Compared with long-haul outbound travel and airlines, Macau as a short-haul destination looks more resilient in the near term.

  Risks

  If macro uncertainty spreads to consumer confidence in Asia, gaming and tourism spending could also be dragged down.

Key data

• OTA Middle East-related booking shareLow-single-digit%A leading OTA said that Middle East travel bookings account for only a low-single-digit percentage of its outbound and international travel booking GTV.
• Middle East capacity exposure for Chinese carriers0.2% of total capacity; 2.6% of international capacityCarriers generally believe that canceling Middle East flights has little impact on overall operations, and they are redeploying capacity to markets such as Europe, Southeast Asia, and Australia.
• China-Middle East flight change-88%Calculated using the seven-day average from Mar 25 to Mar 31, 2026, versus the 2025 daily average.
• China to Europe/Southeast Asia/Australia flight changes+11% / +24% / +5%The report observed that carriers redeployed some capacity to other international markets.
• Implied ticket price impact of fuel surchargesAbout +10%Goldman Sachs estimates that fuel surcharges may correspond to roughly a 10% increase in ticket prices and could weaken airline demand.
• Jet fuel pricesUS$195/bbl, versus US$89/bbl in FebruaryJet fuel prices rose sharply in March versus February; fuel costs account for about 30% of Chinese carriers' operating costs, and they typically do not hedge.
• Domestic flight fuel surchargesRmb60/120 per personThe CAAC introduced fuel surcharges for domestic segments shorter than 800 km and longer than 800 km starting on Apr 5.
• Macau gaming GGRAbout MOP730mn/day, +15% yoyAlthough March is traditionally a post-Lunar New Year off-season month, industry GGR tracking remained stable.
• Macau inbound visitor traffic109k/day, +10% yoyThe observation period is Mar 1 to Mar 20; 2M26 yoy was +15%.
• Airline fuel sensitivityFor Air China/CEA/CSA/Spring Airlines, each US$1/bbl increase in fuel prices reduces FY26 net profit by Rmb200/178/218/22mnThe corresponding FY26 net profit impact is -2.0%/-2.6%/-2.8%/-0.7%, assuming fuel surcharges are already included.
• Samsonite raw-material cost sensitivityEach +10% in raw-material costs lowers gross margin by 1.4% and EBITDA by 8%Estimate assuming all other conditions remain unchanged.
• Samsonite freight cost sensitivityEach +10% in freight costs lowers gross margin by 1.2% and EBITDA by 7%Estimate assuming all other conditions remain unchanged.

Impact & implications

For investors, the key is to distinguish between direct geographic exposure and cost sensitivity. OTA and Macau gaming show relatively strong near-term fundamental resilience, while airlines face a more direct hit from oil prices, the second-order impact of fuel surcharges on demand, and route redeployment. Luggage-and-bag companies face both deferred consumption and rising costs. If the conflict persists and pushes up oil prices or long-haul ticket prices, demand pressure could spread from Middle East-related routes to broader international travel.

Risks

• An escalation or longer-than-expected duration of the Middle East conflict could further squeeze international flight capacity.
• Persistently high oil prices could pressure airline profits and suppress passenger demand through fuel surcharges.
• Rising raw-material and container freight costs could erode gross margin and EBITDA for luggage-and-bag companies.
• Demand could weaken in markets such as India and ASEAN, which are more sensitive to oil prices or consumer sentiment.
• If higher ticket prices and insufficient capacity occur at the same time during peak holiday periods, outbound travel bookings may slow.

What to watch

• Changes in domestic and outbound travel bookings around the Labor Day holiday period.
• The pace of China-Middle East flight recovery, and whether flights from China to Europe, Southeast Asia, and Australia continue to increase.
• Jet fuel prices, CAAC fuel surcharge policy, and actual ticket-price changes.
• Whether Macau GGR and inbound traffic continue the resilience seen in March.
• Retail and wholesale orders for luggage and bags, inventory digestion cycles, and raw-material and freight price trends.