<p>Oil prices have corrected more than 8% from its recent high to 66.4. This is after Saudi Arabia raised the possibility of ramping up oil production in the June OPEC meeting. Russia has also expressed the support of increasing oil production.</p><p> </p><p class="justifyleft">Key beneficiaries of falling oil prices are the Asia Airlines:</p><p class="justifyleft"><b>1.       </b><b>Air China (753 HK)</b></p><p class="justifyleft"><b>2.       </b><b>China Southern Airlines (1055 HK)</b></p><p class="justifyleft"><b>                                                                                         3.       </b><b>China Eastern Airlines (670 HK)</b></p><p class="justifyleft"><b><b>                                                                                         </b>4.      </b><b>Cathay Pacific Airways (293 HK)</b></p><p class="justifyleft"><b><b>                                                                                         </b>5.       </b><b>Singapore Airlines (SIA SP)</b></p><p class="justifyleft"> </p><p>Chinese airlines are beneficiaries of increasing outbound travel with more than 130m Chinese travelling outside China in 2017. Despite the huge number of Chinese travellers, the outbound penetration in China is only at 10% in 2017. This is expected to rise to over 14% in 2020.</p><p> </p><p>Chinese airlines have over 50% market share in the outbound transport market in China, with the big three airlines in Air China, China Southern and China Eastern expected to be the key beneficiary of this trend. Apart from the domestic Chinese airlines, Cathay Pacific and Singapore Airlines are major beneficiaries with their leading presence in the international markets in Asia.</p><p> </p><p><strong><em><span style="text-decoration: underline;">Air China (753 HK)</span></em></strong></p><p>Air China is the largest airline company in China in terms of market cap. It serves more than 150 destinations with hubs in Beijing, Chengdu and Shanghai. It is also a member of the Star Alliance which include airlines such as United Airlines and Lufthansa. It has an aircraft maintenance joint venture with Lufthansa. Air China owns stakes in other airlines such as 29.99% stake in Cathay Pacific, 51% stake in Shenzhen Airlines.</p><p> </p><p><em><strong><span style="text-decoration: underline;">China Southern Airlines (1055 HK)</span></strong></em><span style="text-decoration: underline;"></span></p><p>China Southern is the largest airline company in China in terms of capacity. Based in Guangzhou, it serves 210 destinations in almost 40 countries. It is a partner with SkyTeam alliance which include airlines such as Delta, Air France and KLM. It is state-owned company with the Government controlling just over 40% of China Southern Airlines.</p><p> </p><p><em><strong><span style="text-decoration: underline;">China Eastern Airlines (670 HK)</span></strong></em><span style="text-decoration: underline;"></span></p><p>China Eastern is one of the top three airlines in China. Based in Shanghai, it serves about 150 destinations. It owns stakes in Shanghai Hongqiao International Airport and Shanghai Pudong International Airport, as well as China Cargo Airlines, the largest cargo carrier in China.</p><p> </p><p><strong><em><span style="text-decoration: underline;">Cathay Pacific Airways (293 HK)</span></em></strong></p><p>Cathay Pacific is the leading airline in Hong Kong. It serves about 200 destinations in 49 countries. It is a member of the Oneworld alliance which include American Airlines and British Airways. Its regional subsidiary Dragonair provides scheduled services in China and elsewhere in Asia. It is also a major shareholder in Air Hong Kong, the cargo carrier in Hong Kong.</p><p> </p><p><em><strong><span style="text-decoration: underline;">Singapore Airlines (SIA SP)</span></strong></em></p><p>Singapore Airlines is one of the leading airline in Asia and boast an iconic brand in Singapore Girl. It is a member of the Star Alliance which include airlines such as United Airlines and Lufthansa. It provide cargo carrier services via SIA Cargo and offers maintenance services with SIA Engineering. IT also manages regional services such as SilkAir and Scoot.</p><p> </p><p> </p><p><b>Edmund Chan, CFA</b></p>