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

Three major Chinese state-owned airlines have reported heavy first-half losses due to soaring jet fuel prices, highlighting the challenges faced by the country's aviation sector. The combined net losses for Air China, China Eastern Airlines, and China Southern Airlines totaled approximately 8.2 billion yuan (US$1.22 billion) during the first half, marking the seventh consecutive year of losses.

This sharp reversal from their combined first-quarter profit of 4.82 billion yuan, driven by strong Lunar New Year demand, underscores the post-pandemic fragility of China's aviation industry. The carriers blamed disrupted international routes and persistently high jet fuel prices, driven by the Middle East conflict, for the significant rise in fuel costs.

Fuel costs at the airlines increased between 35% and 38% during the first half. While revenue growth was strong, with international demand driving increases of 10.5%, 11.1%, and 9.7% for Air China, China Eastern, and China Southern respectively, weaker economic conditions and competition from high-speed rail and domestic holidays have hindered substantial domestic fare hikes.

The third quarter, typically the most profitable for Chinese carriers, has been negatively impacted by an unusually strong typhoon season, which disrupted domestic routes during the peak summer travel period. Aviation data projections suggest a 3.6% year-on-year decline in traffic carried by Chinese airlines on domestic and international routes during July and August, marking the first contraction in the peak season since 2022.

Experts anticipate the three carriers to post combined losses of about 16.8 billion yuan in 2026, contrasting with the market expectation of a combined profit of 1.3 billion yuan. Despite expanding their fleets of domestically made COMAC jets, the airlines' shares have fallen at least 36% so far in 2026, as weaker domestic travel demand continues to pressure their profit outlooks.