China’s three biggest airlines post heavy first-half losses as fuel shock bites
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Air China, China Eastern Airlines and China Southern Airlines posted combined first-half net losses of about 8.2 billion yuan (S$1.55 billion).
PHOTO: REUTERS
- China's three biggest state-owned airlines posted combined first-half net losses of about 8.2 billion yuan (S$1.55 billion) due to surging jet fuel prices and disrupted international routes.
- Fuel costs rose 35-38 per cent, with little fuel hedging, exposing airlines to high oil price volatility amid Middle East conflict and a weak domestic market.
- The peak summer season was affected by an unusually strong typhoon season and weaker travel demand, leading to a projected 3.6 per cent passenger drop and continued profit pressure in 2026.
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HONG KONG/BEIJING – China’s three biggest state-owned airlines reported first-half losses for the seventh consecutive year, battered by surging jet fuel prices, with the outlook for the rest of 2026 clouded by a lacklustre summer season.
Air China, China Eastern Airlines and China Southern Airlines posted combined first-half net losses of about 8.2 billion yuan (S$1.55 billion), having warned in July the figure could reach as high as 9 billion yuan.
The losses were a sharp reversal from their combined first-quarter profit of 4.82 billion yuan, which was boosted by strong Chinese New Year demand, and sent their shares lower in mainland China and Hong Kong trading on Aug 31.
Flag carrier Air China reported a net loss of 2.3 billion yuan, widening from a 1.81 billion yuan loss in August 2025.
China Eastern posted a loss of 2.2 billion yuan, versus a 1.43 billion yuan loss in the same period of 2025.
China Southern reported a loss of 3.7 billion yuan, compared with a loss of 1.53 billion yuan in 2025.
The weak results underscored the post-pandemic fragility of China’s aviation sector, as the trio confronted what China Eastern described as a profit environment “severely undermined” by disrupted international routes and persistently elevated jet fuel prices linked to the Middle East conflict.
Fuel costs at each of the carriers rose between 35 per cent and 38 per cent in the first half of 2026.
Unlike many Asian and European rivals, Chinese airlines hedge little of their fuel purchases, leaving them more exposed to oil price swings.
China Southern said in its filing there was currently “no effective means available” to manage its exposure to jet fuel price fluctuations.
Revenue growth was strong at the carriers, with Air China up 10.5 per cent, China Eastern up 11.1 per cent and China Southern up 9.7 per cent, driven by international demand.
European routes were particularly buoyant as some travellers avoided Middle Eastern hubs disrupted by the Iran war.
But weaker economic conditions and competition from high-speed rail and driving holidays have hindered their ability to make substantial domestic fare hikes like those seen in the US market without depressing demand.
Although jet fuel prices have fallen from their second-quarter peak, they remain more than 50 per cent above pre-war levels.
Typhoon disruptions
The third quarter, typically the most profitable for Chinese carriers, has so far offered little relief, with an unusually strong typhoon season disrupting domestic routes during the peak summer travel period.
Meteorological data shows 21 typhoons have formed in the north-western Pacific Ocean and the South China Sea so far in 2026, nine more than the historical average for the same period.
Aviation data firm Flight Master projected traffic carried by Chinese airlines on domestic and international routes would fall 3.6 per cent year on year to 142 million passengers in July and August.
That would mark the first contraction in the peak season since 2022, when much of China was locked down during the pandemic.
HSBC analysts expect China’s three biggest carriers to post combined losses of about 16.8 billion yuan in 2026, compared with the market expectation for a combined profit of 1.3 billion yuan.
Shanghai-listed shares of all three carriers have fallen at least 36 per cent so far in 2026 as weaker domestic travel demand has continued to pressure their profit outlooks, and none declared an interim dividend.
The trio did report expanding their fleets of domestically made COMAC jets.
China Eastern grew its fleet of the narrow-body planes to 17 after taking three deliveries in the first half.
Air China and China Southern each operated 11 C919s, having taken two and three deliveries respectively in the period.
China Eastern said it expected to receive 13 fewer C919 deliveries than previously forecast between 2026 and 2028.
Air China maintained its earlier forecast and China Southern did not disclose a forecast in its interim report. REUTERS
