Falling oil prices + strong passenger and cargo traffic in Q4; aviation group operations are not optimistic

The U.S. midterm elections are over, the Democratic Party swept Congress, and the market expects the U.S.-Iran war to end sooner. Crude oil prices are expected to fall as geopolitical risks decrease. Market legal persons pointed out that falling oil prices have reduced airline operating costs, and with passenger and cargo traffic still booming in the fourth quarter, the aviation community should not be bearish.

The easing of geopolitical risks is expected to drive down aviation fuel prices, and both passenger and cargo cargo are entering the traditional peak season. Domestic airlines are optimistic about their profit momentum in the fourth quarter. (File photo)

Encouraged by lower oil prices, market funds moved into the airline group last week. China Airlines (2610) stock price rose 5.21% on the week, followed by Tiger Airways Taiwan (6757) 5.04%, EVA Air (2618) 2.11%, and StarLux Airlines (2646) fell 2.03%.

China Airlines is optimistic that the end-of-year tourist season and the year-end shopping season in Europe and the United States will continue to drive passenger load factors in the fourth quarter; EVA Air's North American passenger load factors continued to be strong in November and December, while Northeast Asia routes, European routes, New Zealand-Australia routes, and cross-strait routes, etc. The passenger load factor performance is very strong. In addition, EVA Air will launch a route to Delhi, India in December, and the first two flights are fully booked. EVA Air pointed out that benefiting from the abundant passengers from India to Taiwan or North America, the sales and booking performance is very good. The opening of the Delhi route will significantly boost EVA Air’s revenue in December and next year. Driven by the demand for festivals in Europe and the United States at the end of the year, the expansion of aircraft models at various destinations, and the development of new destinations, StarLux Airlines' fourth-quarter revenue is expected to increase by 40% year-on-year. Next year, with the continuous delivery of new aircraft, the revenue target will also increase by 40%.

In terms of freight, shipments of high-unit-price, high-time-sensitive goods such as peripheral equipment and high-end semiconductors, which benefit from the AI ​​customer base, continue to be strong. Coupled with increases in freight rates and fuel surcharges during traditional peak seasons, the freight market will increase both price and volume in the fourth quarter.

It is worth noting that the average price of aviation fuel from January to October reached US$148.6/barrel, which is an annual increase of 72% compared to the average price of US$86.4/barrel in 2025. With the end of the US mid-term election and the gradual reduction of the impact of the war in the Middle East, the legal person predicts that the average price of aviation fuel in 2027 will be slightly lower than that in 2026, which can alleviate some of the cost pressures of airlines, which will then be reflected in profits.