Australian, Chinese airline stocks jump as oil prices plunge more than 7%

Airline stocks in Australia and China rallied on Tuesday as a sharp overnight decline in oil prices eased concerns over aviation fuel costs, offering relief to carriers that have faced mounting pressure from elevated energy prices.

In Australia, Qantas Airways shares climbed 6.36% to A$9.36, their highest level since early September, while Virgin Australia surged 7.66% to A$2.67, touching their highest level since October 13.

Chinese airlines also advanced, with China Eastern Airlines rising 3.31% to 3.43 yuan, its highest level since September 24. Air China gained 2.52% to 6.10 yuan, reaching its highest since August 6, while China Southern Airlines added 2.23% to 5.04 yuan, its highest since September 9.

The gains followed a plunge in crude prices on Monday, with Brent futures settling 7.63% lower at $104.77 a barrel and U.S. West Texas Intermediate crude falling 7.36% to $96.46. Prices retreated as signs of progress in U.S.-Iran peace negotiations, including Qatar-mediated discussions, eased concerns over Middle East supply disruptions.

Lower crude prices can eventually translate into cheaper jet fuel, one of airlines' largest operating expenses, potentially supporting margins if the decline is sustained and passed through to refined fuel prices.

The relief is particularly significant for Chinese airlines, which have limited fuel hedging compared with many international peers, leaving them more exposed to price swings.

Air China reported a 92.6% year-on-year drop in third-quarter net profit, while China Eastern's profit fell 98.2% and China Southern swung to a 609 million yuan loss. All three cited surging jet fuel costs, alongside weak domestic fares and intense competition, as pressures on profitability.

A sustained decline in crude prices could ease fuel-cost pressure and improve airline profitability, particularly if ticket prices remain resilient. Chinese broker Guotai Haitong has also highlighted improving airline pricing trends following the October Golden Week holiday, alongside tighter capacity management.