UBS: China Transport Sector — Expert Call Takeaways on 2026 Air Cargo Outlook Amid Middle East Escalation
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UBS published a report on March 17, 2026, summarizing an expert conference call examining the 2026 air cargo outlook against the backdrop of Middle East geopolitical escalation. The expert indicated that the conflict could temporarily lift oil prices, while reduced regional freighter capacity may push Europe-Asia freight rates higher. Although tariff hikes negatively impacted demand last year, China-to-US air cargo volumes are expected to return to year-over-year growth in 2026, supported by favorable market dynamics and diminishing tariff effects. Meanwhile, China-to-Europe volumes may decline year-over-year as new European surcharges elevate freight costs.
Latin America, Southeast Asia, and Russia could emerge as new growth engines for Chinese air cargo. The upcoming China-US leaders' meeting may yield favorable policies, though the broader tariff landscape is unlikely to shift significantly. Notably, even with rising costs, Chinese goods remain competitively priced for US consumers amid domestic inflation.
The Middle East conflict disproportionately affects non-Chinese capacity on Asia-Europe routes, potentially boosting load factors for Chinese freighters capable of transiting Russian airspace. This routing advantage translates into meaningful time and cost savings. However, despite seemingly adequate global widebody freighter capacity, Boeing 777-class aircraft remain in tight supply. Freight rates are expected to stabilize in 2026 but remain below 2025 levels. The report does not specify a detailed forecast timeframe.
UBS maintains a Buy rating on China Eastern Airlines Logistics (601156.SS), last traded at Rmb18.06 on March 16, 2026, with a prior target price of Rmb23.10 set on February 12, 2026.