Key facts
- China's three largest state-owned airlines reported combined first-half net losses of 8.2 billion yuan ($1.22 billion).
- The losses were driven by a 35%-38% increase in jet fuel prices.
- Revenue growth was recorded, but airlines could not pass on costs due to economic conditions and competition.
- An active typhoon season impacted peak summer travel.
- Analysts forecast combined losses of approximately 16.8 billion yuan for 2026.
China's three largest state-owned airlines, Air China, China Eastern Airlines, and China Southern Airlines, reported substantial net losses for the first half of the year, totaling approximately 8.2 billion yuan ($1.22 billion). The primary driver for these deficits was a significant surge in jet fuel prices, which rose between 35% and 38% for the carriers, exacerbated by the Middle East conflict. Unlike many international competitors, Chinese airlines engage in minimal fuel hedging, leaving them highly exposed to oil price volatility.
Despite robust revenue growth, with Air China up 10.5%, China Eastern up 11.1%, and China Southern up 9.7%, driven by international travel demand, the airlines struggled to translate this into profits. They faced challenges in raising domestic fares due to weaker economic conditions and competition from high-speed rail. Jet fuel prices remain over 50% higher than pre-war levels.
The third quarter, typically the most profitable, has also been challenging due to an unusually active typhoon season disrupting domestic routes during the peak summer travel period. Aviation data firm Flight Master projected a 3.6% year-on-year decrease in passenger traffic for July and August.
Analysts anticipate that the three carriers will collectively lose around 16.8 billion yuan in 2026. The Shanghai-listed shares of all three airlines have fallen by at least 36% in 2026.