According to the financial news agency on November 26 (editor Hu Jiarong), the significant drop in international oil prices on Monday had a positive impact on Hong Kong's aviation/airlines industry, with most airlines witnessing an increase; china southern airlines' stock price increased by nearly 8%, but the gains of aviation stocks subsequently diminished.

As of the time of publication, china southern airlines (01055.HK), cathay pac air (00293.HK), and china eastern airlines (00670.HK) rose by 2.17%, 1.71%, and 0.83%, respectively.

In terms of news, influenced by the expectations for a ceasefire in the Lebanon-Israel conflict, international oil prices plummeted on Monday. Brent crude oil futures fell by 2.79%, closing at $72.54 per barrel.

As of the time of publication, Brent crude oil futures slightly increased by 0.10%, closing at $72.56 per barrel.

Why does the drop in oil prices benefit the aviation/airlines industry?

In the operation costs of shipping companies, fuel costs account for a significant portion. A decrease in oil prices means a reduction in fuel costs for shipping companies, which directly improves their profitability.

Institutions previously pointed out that international oil prices have significantly declined in the third quarter of this year. Due to the delayed adjustment of domestic aviation fuel ex-factory prices by about two months, it is estimated that the average fuel cost for airlines has slightly decreased year-on-year but is still nearly 30% higher than in the third quarter of 2019. It is expected that oil price pressures will significantly improve from the fourth quarter of 2024.

Recently, china has expanded the range of visa-exempt countries.

According to the Ministry of Foreign Affairs, to further facilitate the exchange between Chinese and foreign personnel, the Chinese side has decided to expand the range of visa-exempt countries. From November 30, 2024, to December 31, 2025, normal passport holders from Bulgaria, Romania, Croatia, black hills corp, North Macedonia, Malta, Estonia, Latvia, and japan will be eligible for the visa exemption policy.

From November 30, 2024, normal passport holders from 38 visa-exempt countries, including the aforementioned 9 countries, can enter china for business, tourism, visiting relatives and friends, cultural exchanges, and transit for no more than 30 days without applying for a visa.

gtja pointed out that this move is bullish for international aviation demand and the restoration of international flights, which is expected to accelerate the improvement of supply and demand in the aviation/airlines industry. Combined with the accelerated improvement of pressures such as fuel, the profitability center of airlines will rise.