HK Stock Market Move | Airline stocks continue recent decline Aviation fuel prices rise much faster than global oil benchmarks Airlines face significant cost pressures

Airline stocks continued to decline recently. As of the time of writing, China Eastern Airlines (00670) fell 5.95% to 3.48 Hong Kong dollars; China Southern Airlines (01055) fell 4.43% to 3.88 Hong Kong dollars; Air China Limited (00753) fell 3.98% to 4.58 Hong Kong dollars; CATHAY PAC AIR (00293) fell 2.71% to 11.84 Hong Kong dollars. On the news front, data from the International Air Transport Association showed that the average aviation fuel price in the Asia-Pacific region was $204.95 per barrel from the 14th to the 20th, an increase of 16.6% from the previous week and a soaring 129.8% from the previous month's average price. There were reports that the speed and magnitude of the increase in aviation fuel prices far exceeded the global oil benchmark Brent crude. Last Thursday, the settlement price of Brent crude was $108.65 per barrel, up about 50% since the Middle East conflict began. JP Morgan had previously released a research report stating that Chinese airlines are entering the strongest supply and demand situation in over a decade. However, the war between Iran and the US has become the dominant short-term risk, with Brent crude sharply rising to $115 per barrel, an increase of about 50%, and Chinese airlines have no hedging in place, with fuel accounting for one-third of operating costs. The bank's base case scenario predicts oil prices of $80 per barrel in 2026-2027, which would result in the three major mainland airlines recording losses or nearing breakeven in 2026. The bank stated that it maintains a cautious outlook until the oil price outlook becomes clearer.