Aviation stocks continued their downward trend, with CHINA EAST AIR (00670) having fallen more than 35% so far this month. At the time of writing, CHINA EAST AIR dropped 6.07% to HK$3.56; AIR CHINA (00753) declined 5.16% to HK$4.78; CHINA SOUTH AIR (01055) decreased 4.21% to HK$4.10; and CATHAY PAC AIR (00293) slipped 2.18% to HK$12.13.

The declines come as several major domestic airlines, including Juneyao Air, Loong Air, Spring Airlines, and Xiamen Air, have recently announced successive increases in fuel surcharges for international routes. This follows a sharp spike in international aviation fuel prices.

According to an earlier research report from China Merchants Securities, the current fuel surcharge mechanism provides a relatively high coverage rate for jet fuel costs under static conditions. However, the actual formation of ticket prices during the surcharge implementation process must also consider consumer affordability and real market supply and demand.

Guohai Securities noted that with supply expected to tighten by 2026 and travel demand likely to grow steadily, improvements in supply-demand dynamics and high load factors should support a rebound in low ticket prices. This is anticipated to drive high earnings elasticity for airlines. While the industry faces significant cost pressure from the recent rapid rise in oil prices, certain hedging measures can provide relief. The ongoing trend of improving supply and demand conditions supports optimism for profit recovery driven by higher yields per seat.