(Yicai) March 9 -- Shares in Chinese airlines fell sharply on the mainland markets today after international oil prices surged past USD110 per barrel during the Asia-Pacific trading session for the first time since 2022 amid escalating tensions in the Middle East.

China Eastern Airlines suffered the biggest decline with its share price [SHA:601115] plunging 5.6 percent to close at CNY4.83 (USD0.70) apiece. Air China [SHA:601111] ended the day down 4.9 percent at CNY7.31, while China Southern Airlines [SHA:600029] closed down 4.6 percent at CNY6.32.

Fuel is the largest expense for airlines, accounting for more than 30 percent of operating costs. In 2024, the fuel costs for Air China, China Eastern and China Southern reached CNY53.7 billion (USD7.7 billion), CNY45.5 billion and CNY55 billion, respectively, accounting for as much as 36 percent of their total expenses.

Air China, for example, said in its 2024 annual report that, assuming other variables remained unchanged, a 5 percent increase or decrease in jet fuel prices would cause the Beijing-based company’s fuel costs to rise or fall by approximately CNY2.7 billion (USD390.2 million).

To deal with rising oil prices, airlines typically raise fuel surcharges or use hedging strategies. Although some carriers have resumed fuel hedging in recent years, the scale remains relatively conservative and the impact is limited, Yicai learned.

Meanwhile, the widespread suspension of flights to the Middle East is also constraining airline operations.

Following military strikes on Iran by the US and Israel, countries across the region, including Iran, Israel, Iraq, Qatar, Bahrain and the United Arab Emirates, closed their airspace one after another. Flights were temporarily suspended at Dubai International Airport, Abu Dhabi International Airport and Doha International Airport causing widespread disruption.

The Middle East was a key region for Chinese airlines’ expansion after the pandemic and they used to operate a large number of flights each day to these three airports. The UAE ranked first last month in terms of the number of flights from mainland China to the Middle East, followed by Qatar and Turkey, according to data from aviation data platform Flight Manager.

Editor: Kim Taylor