China's international air capacity improved year over year, but routes to Japan and Macau continue to weigh on recovery

Overview

Morgan Stanley published its weekly tracking of China aviation capacity in the Asia Pacific region on June 2, 2026, focusing on China's non-domestic aviation ASK, flight frequency, and the recovery of major routes relative to 2019 for the week ending June 1, 2026. Overall, the data show that international capacity is still recovering, but differences across routes remain substantial.

Core views

The core view is that, excluding Japan, ASK growth on China's non-domestic routes is stronger, indicating that overall improvement in international capacity is continuing; South Korea routes have already exceeded 2019 levels, and European routes have shown notable recent improvement. However, routes to Japan, Macau, and the United States continue to be drags, especially U.S. routes, where seat capacity is only 29% of 2019 levels, showing that long-haul recovery remains incomplete.

Analysis framework

The report primarily uses weekly aviation capacity data to compare China's non-domestic ASK, flight frequency, year-over-year and sequential changes by destination route, and recovery rates relative to 2019, while also supplementing this with changes in capacity deployment on European Union routes by the big three airlines and their subsidiaries.

Methodology notes

• Aviation operating metricsASK

  Available seat kilometers

  ASK is used to measure the seat capacity airlines have available for sale. By incorporating flight distance, it better reflects changes in international route supply than seat count alone.

• Time comparisonYear over year, sequential, and 2019 baseline

  Capacity recovery tracking

  The report simultaneously uses year-over-year, sequential, and relative-to-2019 comparisons to distinguish short-term marginal changes, annual growth, and the degree of recovery versus the pre-pandemic baseline.

• Route structureDestination route breakdown

  Divergent regional recovery

  By breaking down routes to Japan, South Korea, Thailand, Europe, the United States, Hong Kong, and Macau, the report identifies the structural strengths and weaknesses behind overall ASK growth.

Asset mapping & comparison

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

• China aviation sector

  Directly affected by China's non-domestic ASK and the recovery of international routes.

  Strengths

  Excluding Japan, ASK rose 9% year over year, with strong performance on South Korea and Europe routes.

  Weaknesses

  Flight frequency fell 4% year over year, and recovery on Japan, Macau, and U.S. routes remains insufficient.

  Comparison

  South Korea routes have recovered to 103% of 2019 levels, significantly stronger than the 29% on U.S. routes.

  Risks

  Uneven route recovery, policy and traffic rights restrictions, and fluctuations in international demand may affect capacity deployment.

• Air China Limited

  As one of the big three airline-related entities, the report shows its European Union route capacity increased 23%.

  Strengths

  Growth in European Union route capacity exceeded the 18% combined level of the big three airlines and their subsidiaries.

  Weaknesses

  The report does not provide company-level profitability, load factor, or fare data.

  Comparison

  Growth on European Union routes was higher than CSA's 17% and CEA's 14%.

  Risks

  Long-haul demand, fuel costs, exchange rates, and changes in international traffic rights may affect earnings realization.

• China Southern Airlines (CSA)

  As one of the big three airline-related entities, the report shows its European Union route capacity increased 17%.

  Strengths

  Capacity on European Union routes continues to expand.

  Weaknesses

  Growth was slightly below the 18% combined level of the big three airlines and their subsidiaries.

  Comparison

  Lower than Air China's 23%, but higher than CEA's 14%.

  Risks

  If international demand recovery falls short of capacity deployment, yield pressure may result.

• China Eastern Airlines (CEA)

  As one of the big three airline-related entities, the report shows its European Union route capacity increased 14%.

  Strengths

  Capacity on European Union routes is still increasing.

  Weaknesses

  Growth was lower than Air China and CSA.

  Comparison

  Below the 18% growth of the big three airlines and their subsidiaries combined.

  Risks

  Route mix, the pace of demand recovery, and fare performance may affect the effectiveness of capacity expansion.

Key data

• China non-domestic ASK YoY+4%For the week ending June 1, 2026.
• China non-domestic ASK YoY excluding Japan+9%Shows that Japan routes are a notable drag on overall growth.
• China non-domestic flight frequency YoY-4%ASK growth coexists with declining flight frequency, indicating uneven recovery quality.
• Hong Kong route capacity sequential change+1%A slight week-over-week increase.
• Macau route capacity sequential change-17%A notable week-over-week decline.
• South Korea route ASK YoY+9%Year-over-year growth, with seat capacity already above 2019 levels.
• Thailand route ASK YoY+2%A modest year-over-year increase.
• Europe route ASK YoY+13%Strong growth among major international long-haul routes.
• U.S. route ASK YoY+3%A modest year-over-year increase, but seat capacity is still only 29% of 2019 levels.
• Japan route ASK YoY-49%One of the main drags.
• Macau route ASK YoY-29%Weak both year over year and sequentially.
• South Korea route seat capacity relative to 2019103%Already above pre-pandemic levels.
• Japan route seat capacity relative to 201956%Still not fully recovered.
• Thailand route seat capacity relative to 201953%Recovered to just over half.
• U.S. route seat capacity relative to 201929%Long-haul recovery remains clearly insufficient.
• European Union routes versus the week ending March 1+15%Recent marginal improvement.
• European Union route capacity of the big three airlines and subsidiaries+18%Air China +23%, CSA +17%, CEA +14%.

Impact & implications

For the aviation sector, the continued recovery in international route supply provides clues of ongoing fundamental improvement, especially with more visible improvement on South Korea and Europe routes. However, the low recovery rates on routes to Japan, Macau, and the United States suggest that demand, traffic rights, geopolitical, or policy constraints may still limit a full recovery. From an investment interpretation perspective, the report is more suitable as a high-frequency industry tracking signal rather than a direct stock trading recommendation.

Risks

• Weak recovery on Japan and Macau routes may drag overall non-domestic ASK growth.
• The year-over-year decline in flight frequency shows uneven recovery quality; ASK growth does not necessarily mean a full recovery in flight numbers.
• Seat capacity on U.S. routes is only 29% of 2019 levels, and long-haul recovery may still be affected by policy, traffic rights, demand, and geopolitical factors.
• The report discloses that Morgan Stanley has investment banking, market-making, or other service relationships with multiple covered companies, so investors should pay attention to potential conflicts of interest.
• The report does not provide stock ratings, target prices, earnings forecasts, or a valuation framework, and cannot serve as a standalone basis for investment decisions.

What to watch

• Whether the year-over-year growth rate of China's non-domestic ASK and the gap excluding Japan continue to widen.
• Whether recovery rates relative to 2019 improve for routes to Japan, Macau, and the United States.
• Whether South Korea routes can maintain strength after surpassing 2019 levels.
• Whether capacity expansion on Europe and European Union routes continues, especially the deployment pace of the big three airlines and their subsidiaries.
• When flight frequency year-over-year turns from negative to positive, confirming whether recovery is extending from ASK expansion to improved flight numbers.