HK Stock Market Move | The three major airlines extend their recent declines; Brent crude remains at a high of $105; airlines face operating pressure amid high oil prices.

The three major airlines extend their recent declines. As of press time, Air China Limited (00753) fell 3.04% to HK$3.51; China Eastern Airlines (00670) dropped 2.93% to HK$2.32; China Southern Airlines (01055) declined 2.5% to HK$2.73. On the news front, attacks on Saudi Arabia and the Strait [of Hormuz] have escalated simultaneously, with Brent crude holding at a high of $105. Notably, affected by the Middle East situation, international oil prices rose over 30% cumulatively in the third quarter of this year. According to Guotai Haitong estimates, Q3 passenger traffic grew 3-4% year-on-year, while domestic fuel-inclusive ticket prices fell about 5% year-on-year. Airline fuel costs are estimated to have risen over 40% year-on-year. Weak summer travel demand and airlines' increased capacity investment to trade price for volume have limited the pass-through of oil prices, and the industry is expected to face operating pressure. JPMorgan pointed out that China's aviation industry underperformed the bank's expectations for passenger traffic during the Mid-Autumn and National Day consecutive holidays, with aviation continuing to lose share to high-speed rail rather than seeing a broad recovery in aviation demand. The bank maintained a cautious view, believing that demand is entering the off-season, that fuel surcharge increases may further suppress demand, and that elevated fuel costs continue to weigh on profitability.