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Beijing, September 1, 2026 – China’s three largest carriers,bAir China, China Eastern, and China Southern have reported steep first-half losses totaling 8.2 billion yuan (US$1.13 billion), underscoring the mounting pressures on the nation’s aviation industry.
Despite a rebound in international travel, surging fuel costs and severe weather disruptions have eroded profitability, leaving the sector in a precarious position.
Air China posted a net loss of 2.3 billion yuan, widening from 1.81 billion yuan a year earlier.
China Eastern recorded a 2.2 billion yuan deficit, compared with 1.43 billion yuan in 2025.
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The largest setback came from China Southern, which reported a 3.7 billion yuan loss, more than double its previous year’s figure.
Paradoxically, revenues rose between 9 and 11 percent across the airlines, buoyed by strong demand for international routes.
European destinations saw increased traffic as travelers avoided Middle Eastern hubs disrupted by the Iran war.
Yet the gains were insufficient to offset the sharp rise in operating costs.
Fuel prices surged by 35 to 38 percent in the first half, with Chinese carriers particularly vulnerable due to limited hedging strategies.
Unlike many global rivals, they hedge little of their fuel purchases, leaving them exposed to market volatility.
China Southern acknowledged that “no effective means” were available to manage the shock.
Even after easing from second-quarter peaks, prices remain 50 percent above pre war levels, squeezing margins further.
The third quarter, traditionally the most profitable season, has also been undermined by an unusually active typhoon season.
Twenty one typhoons have formed in the Pacific and South China Sea so far this year, nine more than average.
Passenger traffic is projected to decline 3.6 percent year on year in July and August, marking the first contraction in peak travel since 2022.
Market sentiment has soured. HSBC analysts now forecast combined losses of 16.8 billion yuan for 2026, a sharp reversal from earlier expectations of a modest profit.
Shares of all three carriers have plunged at least 36 percent this year, and none declared interim dividends.
Despite the turbulence, China continues to push forward with the expansion of domestically produced COMAC C919 jets.
Deliveries, however, remain slower than anticipated, limiting the fleet renewal that could help reduce fuel costs.
The broader implications are stark. China’s aviation industry, once seen as a pillar of pos pandemic recovery, is now caught between volatile energy markets, climate disruptions, and weak domestic demand.
Unlike U.S. carriers that raised fares aggressively, Chinese airlines face stiff competition from high speed rail and driving holidays, constraining their ability to pass costs onto consumers.
The first half results reveal an industry struggling to regain altitude.
With fuel prices elevated and weather risks intensifying, China’s airlines face a long, uncertain flight path toward profitability.
