UBS: The ceasefire agreement between the United States and Iran is expected to push oil prices lower. It is expected that the three major Chinese aviation stocks will see improving profits on a quarterly basis.

UBS released a research report stating that the ceasefire agreement between the United States and Iran caused the price of crude oil to fall below $90 per barrel. The bank believes that while the signing of the ceasefire agreement may not necessarily lead to an immediate collapse of oil prices to pre-conflict levels in the short term, it provides a more optimistic outlook for the continued downward trend of oil prices. The bank pointed out that the Middle East conflict caused oil prices to soar from around $60 per barrel in February to over $100 per barrel in May this year. As fuel costs account for 30% to 40% of the total operating costs of Chinese airlines, which is the largest single cost, the sharp rise in oil prices led to Chinese airlines facing losses of about 1.2 to 1.5 billion RMB on average per month during April and May. Although this loss trend continued into early June, the bank expects airline profitability to improve in late June as oil prices subsequently fall. UBS stated that although Chinese airlines have been pressured in recent months due to rising oil prices, and their stock prices have been weak, the market has largely digested the relevant negative factors, and the downside is limited. With the potential for future reductions in fuel surcharges expected to stimulate demand, the bank expects Chinese airlines to see continuous quarterly improvements in profitability, and a year-on-year improvement in quarterly profits.