HK Stock Market Move | Airline stocks under broad pressure as high oil prices weigh on jet fuel costs; off-season capacity controls and fare protection lead to lower volume but higher prices.

Airline stocks under broad pressure. As of press time, China Southern Airlines (01055) fell 3.6% to HK$2.675; Air China Limited (00753) fell 3.42% to HK$3.385; China Eastern Airlines (00670) fell 2.99% to HK$2.27. On the news front, international oil prices have resumed their upward trend. Affected by the attack on Saudi Aramco's Shaybah oil field and the partial evacuation of personnel from the U.S. embassy in Saudi Arabia, Brent crude rose 1.47% to above $110 during Asian trading hours today, with Brent up more than 80% year-to-date. Elevated oil prices will directly hit airlines' cost side, as jet fuel costs typically account for 30% to 40% of operating costs. Guotai Haitong believes that after the dual holidays, oil prices remain elevated and the industry has entered the traditional off-season, with airlines continuing their strategy of capacity control and fare protection during the long holiday. The brokerage estimates that mid-October air passenger traffic fell 5% year-on-year, load factors were flat year-on-year, while bare fares turned positive year-on-year, with fuel-inclusive fares estimated to have risen more than 10% year-on-year.