Aviation stocks retreated across the board. As of press time, China Southern Airlines Co Ltd (HKG: 01055) fell 3.96% to HK$3.035, while China Eastern Airlines Corp Ltd (HKG: 00670) dropped 3.82% to HK$2.645.

Air China Ltd (HKG: 00753) declined 3.43% to HK$3.94, and Cathay Pacific Airways Ltd (HKG: 00293) slipped 1.73% to HK$15.32.

On the news front, starting November 5, the fuel surcharge standard for domestic passenger air travel was adjusted. For segments of 800 kilometers or less, a fuel surcharge of 80 yuan is collected per adult passenger, while for segments exceeding 800 kilometers, a fuel surcharge of 140 yuan is collected per adult passenger, representing increases of 30 yuan and 50 yuan respectively compared to before.

Yangtze Securities noted that raising the surcharge helps airlines pass on jet fuel costs, but it also directly pushes up the total price of passenger travel. As of November 7, the national seven-day moving average all-in fare including fuel rose 12.1% year-on-year, while the bare fare after deducting fees declined 0.5% year-on-year, and domestic passenger volume fell 3.5% year-on-year.

The bare fare was essentially flat year-on-year, and the supply-demand relationship in the domestic market improved somewhat on a month-over-month basis. However, the main lever for airlines to improve revenue currently remains the surcharge, and domestic demand has limited capacity to absorb higher total fares.