Financial Associated Press, Dec 6th (Editor Hu Jiarong) Benefiting from the overnight decline in international oil prices, aviation stocks in the Hong Kong Stock Exchange strengthened. As of the time of publication, Beijing Capital Airport (00694.HK), Air China Limited (00753.HK), China Southern Airlines (01055.HK), and China Eastern Airlines (00670.HK) rose by 6.69%, 5.98%, 5.90%, and 3.73% respectively.

Note: Performance of aviation/airlines industry stocks

On the news front, international oil prices have recently shown continued weakness. Taking Brent crude oil futures as an example, the futures have accumulated a decline of over 4% since December 4.

Note: Performance of Brent crude oil futures since mid-November

In fact, the decline in oil prices is beneficial to aviation stocks. Fuel costs account for a large part of the operating costs of the aviation industry. The drop in international oil prices directly lowers the fuel costs of airlines, improving profitability.

China Securities Co., Ltd. pointed out that key driving variables for the aviation industry include flight volume, load factor, ticket prices, oil prices, and exchange rates. The firm pointed out that demand may benefit from fiscal policies, costs may benefit from lower oil prices, and exchange rates still face pressure.

Institutions are bullish on the reversal of aviation stocks in 2025

In addition to the bullish impact of the downward trend in oil prices, HTSC believes that as a pro-cyclical sector, aviation may be driven by a package of policies in the near future to promote macroeconomic recovery, marginally boost civil aviation demand, forecast a 7.4% year-on-year growth in 2025, and generate a supply-demand gap.

CITIC SEC holds a similar view, looking ahead to 2025, domestic route revenue management returning to normal, international hub construction, and the continuous accumulation of positive factors such as the decrease in aviation fuel costs. In contrast to the past, the traditional "late-stage cycle" performance of the aviation cycle is expected to be pushed forward. The biggest difference in this current upward cycle is that the industry has experienced five consecutive years of low aircraft introductions, with the introduction growth rate from 2020 to 2023 lower by 8.3 percentage points compared to the compound annual growth rate from 2010 to 2018.

The institution looks forward to the easing of aviation fuel pressure in 2025 driving the release of airline profits. Revenue management for domestic routes in 2025 is expected to return to normal. At the same time, with the continuous expansion of visa-free countries in the near term, positive policy signals persist, making the 2025 Spring Festival travel season a litmus test for the aviation cycle.