HK Stock Market Move | Airline stocks extend declines; institutions say oil price pass-through is limited and expect industry-wide operating pressure

Airline stocks extend declines. As of press time, Air China Limited (00753) fell 3.65% to HK$3.43; CHINA EAST AIR (00670) fell 3.61% to HK$2.27; CHINA SOUTH AIR (01055) fell 3.56% to HK$2.71; CATHAY PAC AIR (00293) fell 2.29% to HK$13.22. On the news front, the Middle East situation continues to escalate, with Brent crude oil holding at a high of US$105. Guotai Haitong released a research report stating that Q3 passenger traffic is estimated to have grown 3-4% year-on-year, while domestic fuel-inclusive ticket prices fell about 5% year-on-year. Airline fuel prices 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 industry-wide operating pressure is expected. Q4 is the traditional off-season, and business travel performance will be key. 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 railways 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.