• Sun
  • Sep 21, 2014
  • Updated: 11:31am

Softer oil prices boost airlines, shipping firms

PUBLISHED : Saturday, 03 May, 2008, 12:00am
UPDATED : Saturday, 03 May, 2008, 12:00am

Softening oil prices lifted the share prices of airlines and shipping companies yesterday as the threat of rising fuel bills temporarily eased.

China Eastern Airlines Corp surged 11.04 per cent to close at HK$3.72. China Southern Airlines jumped 9.06 per cent to HK$5.54 and Air China rose 8.48 per cent to HK$6.27. Cathay Pacific Airways climbed 4.43 per cent to HK$16.98.

The price of fuel accounts for about 40 per cent of airline operating costs and prices have declined from a historical high of US$120 per barrel in four consecutive days to as low as US$111.78 yesterday.

The drop in international oil prices could relieve the pressure on rising domestic jet fuel prices, said Kelvin Lau, a transport analyst at Daiwa Institute of Research. 'The worst time for airlines seems over if oil prices maintain at this level,' he said.

Domestic jet fuel prices are about 1,200 yuan (HK$1,340) per tonne lower than international prices. Mainland oil refiners have pressed hard to increase jet fuel prices in a bid to alleviate their losses, only to be turned down by Beijing for fear of prompting a rise in general prices.

International heavyweights Cathay and Singapore Airlines could also benefit as a drop in oil prices gives them a chance to hedge their fuel supplies.

Meanwhile, global air traffic growth continued to slow in March. Passenger demand increased 5.8 per cent and freight traffic grew 3.2 per cent year on year. Passenger growth would have slowed to 4 per cent if not skewed by the Easter holiday which fell in April last year, according to the International Air Transport Association. Passenger demand rose 7.4 per cent last year on average.

Mr Lau said that mainland airlines could see a rebound in passenger demand in the next two months as the strong economy could sustain strong air traffic growth. He said the slowdown in passenger growth in the first three months was due to aircraft maintenance and fewer aircraft in operation. Air China and other mainland carriers start gearing up capacity in May.

In addition to airlines, shipping companies also saw a strong rebound yesterday in light of softening oil prices.

China Shipping Development, the major oil and bulk shipping company on the mainland, rose 6.08 per cent to HK$27.15. China Cosco Holdings, the largest global bulk shipping company, closed 6.88 per cent higher at HK$24.85. Orient Overseas International rose 8.98 per cent to HK$46.70.

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