HONG KONG: Airline stocks tumbled across the region on Tuesday, Feb 22 after turmoil in the Middle East lifted crude oil prices, triggering concerns over rising costs for the industry.
Korean Air Line Co Ltd <003490.KS> led losers, dropping more than 9 percent, with its regional rivals falling between 2 and 7 percent as of 0430 GMT.
Brent crude futures rose sharply on fears that violence in Libya could cut more of the OPEC-member's output and that a similar story could play out in other top oil producers in North Africa and the Middle East. [ID:nL3E7DM04U]
"The oil price hit airline stocks quite dramatically," said Andrew Orchard, a regional airliner analyst at RBS.
Analysts say a recovery on transportation demand last year helped airlines return to the black, with some heading for record profits, but steadily rising oil prices could stall the recovery pace.
Fuel accounts for around 30 precent of airlines' total costs, and other costs, such as labour and airport handling charges, are also on the rise, Orchard added.
Hong Kong's dominant airline Cathay Pacific Airways Ltd <0293.HK> fell 4.6 percent to a six-month low and Chinese flag carrier Air China Ltd <0753.HK> plunged nearly 7 percent, the biggest daily drop in 10 months.
Taiwan's China Airlines <2610.TW> fell 6.25 percent and rival Eva Airways <2618.TW> fell 7 percent, pulling the Taiwan bourse's <.TWII> transport sub index <.TTPI> down 4.4 percent.
"High oil prices are causing people to worry about transport shares," said Patrick Yiu, a director at CASH Asset Management. "This will likely have an effect on airlines and carmakers for the time being." - Reuters
Korean Air Line Co Ltd <003490.KS> led losers, dropping more than 9 percent, with its regional rivals falling between 2 and 7 percent as of 0430 GMT.
Brent crude futures rose sharply on fears that violence in Libya could cut more of the OPEC-member's output and that a similar story could play out in other top oil producers in North Africa and the Middle East. [ID:nL3E7DM04U]
"The oil price hit airline stocks quite dramatically," said Andrew Orchard, a regional airliner analyst at RBS.
Analysts say a recovery on transportation demand last year helped airlines return to the black, with some heading for record profits, but steadily rising oil prices could stall the recovery pace.
Fuel accounts for around 30 precent of airlines' total costs, and other costs, such as labour and airport handling charges, are also on the rise, Orchard added.
Hong Kong's dominant airline Cathay Pacific Airways Ltd <0293.HK> fell 4.6 percent to a six-month low and Chinese flag carrier Air China Ltd <0753.HK> plunged nearly 7 percent, the biggest daily drop in 10 months.
Taiwan's China Airlines <2610.TW> fell 6.25 percent and rival Eva Airways <2618.TW> fell 7 percent, pulling the Taiwan bourse's <.TWII> transport sub index <.TTPI> down 4.4 percent.
"High oil prices are causing people to worry about transport shares," said Patrick Yiu, a director at CASH Asset Management. "This will likely have an effect on airlines and carmakers for the time being." - Reuters
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