Chinese airlines surge by daily limit in Shanghai as oil slumps
Chinese airlines surged by their daily limit in Shanghai today on optimism declining oil prices will boost profitability.
(Bloomberg) -- Chinese airlines surged by their daily limit in Shanghai today on optimism declining oil prices will boost profitability as the carriers prepare to release full-year earnings next week.
The A-share listings of Air China Ltd., China Eastern Airlines Corp. and China Southern Airlines Co. rose by the 10 percent maximum at 1:39 p.m. local time, extending the year’s gains as New York-traded oil neared a six-year low. Their Hong Kong-traded stocks were also stronger, each rising at least 5 percent.
While some airlines such as Cathay Pacific Airways Ltd. have hedged their jet-fuel requirements to guard against sudden oil price spikes, Chinese airlines have not. Shanghai-based China Eastern said 2014 profit rose as much as 60 percent due partly to a decline in aviation fuel.
“The decline in oil price helps their profitability quite a lot because these airlines aren’t hedging the oil price,” said Steven Leung, director of institutional sales at UOB Kay Hian Ltd. in Hong Kong.
The Shanghai Airport Authority, which manages both the city’s Pudong and Hongqiao airports, yesterday reported that February air cargo volumes jumped 23.5 percent from a year ago, and passenger numbers climbed 22.5 percent.
Chinese airlines carried almost 49.2 million passengers over the annual 40-day Spring Festival travel period, which concluded March 15, the official Xinhua news agency reported yesterday. That was an increase of 11.7 percent over the previous year.
Guangzhou-based China Southern, which is due to release earnings March 30, is now up 52 percent in Shanghai this year. Shanghai-based China Eastern, due to release earnings March 27, is up 36 percent, while Beijing-based Air China is up 23 percent ahead of earnings expected March 26.
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