China’s three biggest airlines post heavy first-half losses as fuel shock bites

China's three leading state-owned airlines, Air China, China Eastern Airlines, and China Southern Airlines, reported substantial first-half losses for the seventh consecutive year in August. The combined net loss amounted to approximately 8.2 billion yuan ($1.22 billion), a stark contrast to their combined first-quarter profit of 4.82 billion yuan in 2025, which was driven by strong Lunar New Year demand.

The sharp reversal in fortunes sent shares of the airlines lower in both mainland China and Hong Kong markets. The losses are primarily attributed to soaring jet fuel prices, which surged between 35% and 38% in the first half of the year, leaving the airlines increasingly exposed to volatile oil prices due to limited hedging practices.

Despite strong revenue growth driven by international demand, particularly on European routes, domestic fare hikes have been limited by economic challenges, competition from high-speed rail, and the allure of driving holidays. An unusually active typhoon season during the summer travel peak has further hampered their profitability.

The aviation sector is expected to face a prolonged downturn, with analysts projecting a combined loss of about 16.8 billion yuan for the three carriers in 2026, compared to earlier market expectations of a profit.