China’s three biggest airlines lose US$1.22 billion in first half as jet fuel costs surge

China's three largest state-owned airlines reported a combined first-half net loss of approximately 8.2 billion yuan, or US$1.22 billion, due to surging jet fuel prices and a lackluster summer travel season. This marks the seventh consecutive year of losses for the aviation sector, contrasting sharply with their first-quarter profit of 4.82 billion yuan, which was driven by strong Lunar New Year demand.

Air China, China Eastern Airlines, and China Southern Airlines experienced losses of 2.3 billion yuan, 2.2 billion yuan, and 3.7 billion yuan respectively, compared to losses of 1.81 billion yuan, 1.43 billion yuan, and 1.53 billion yuan in the same period last year. Fuel costs rose by 35 to 38 percent in the first half for all three carriers, leaving them particularly vulnerable to oil price fluctuations due to minimal hedging.

While revenue growth was strong, with a 10.5 percent increase for Air China, an 11.1 percent increase for China Eastern, and a 9.7 percent increase for China Southern, this was largely due to international demand. European routes showed resilience as travelers sought alternatives to Middle Eastern hubs affected by the Iran conflict. However, economic challenges and heightened competition from high-speed rail and holiday driving have limited their capacity to raise domestic fares without reducing demand.

Jet fuel prices, though having fallen since their second-quarter peak, remain more than 50 percent above pre-war levels. The typically profitable third quarter has been negatively impacted by an unusually strong typhoon season, which disrupted domestic routes during the peak summer travel period. Meteorological data shows that 21 typhoons have formed in the north-western Pacific Ocean and the South China Sea so far in 2026, significantly surpassing the historical average.

Analysts predict that the three carriers will collectively report losses of around 16.8 billion yuan in 2026, in contrast to previous expectations of a combined profit of 1.3 billion yuan. China's aviation shares have declined by at least 36 percent year-to-date, as weakened domestic travel demand continues to weigh on their profit outlooks.

Despite expanding their domestic Comac jet fleet, with China Eastern adding three narrow-body planes this year and Air China and China Southern each taking deliveries of 11 C919s, the carriers are uncertain about future deliveries.