China's Big Three Airlines Post Combined H1 Loss of ¥8.2 Billion as Fuel Costs Surge 35%-38%
nashnova research
Air China, China Eastern and China Southern reported a combined net loss of ¥8.2 billion (~$1.22 billion) in the first half — the seventh straight year of H1 losses — as fuel costs surged 35%–38% and the carriers' near-zero hedging left profits fully exposed to oil-price swings.
How much did each airline lose?
China Southern bore the heaviest loss: a net deficit of ¥3.7 billion, more than doubling from ¥1.53 billion a year earlier.
Air China posted a ¥2.3 billion net loss (vs. ¥1.81 billion), China Eastern ¥2.2 billion (vs. ¥1.43 billion).
This means → all three gaps widened, but Southern's more-than-doubled loss stands out.
In Q1 the trio had earned a combined ¥4.82 billion on Lunar New Year travel demand. Q2 wiped out the entire gain and then some.
Why is fuel so devastating?
Fuel costs rose 35%–38% year-on-year across all three carriers, cutting directly into margins.
In plain terms = jet fuel is an airline's single largest expense. When fuel spikes and fares can't follow, profit gets squeezed from both sides.
The Middle East conflict has kept global jet-fuel prices elevated; even after retreating from Q2 peaks, prices remain over 50% above pre-conflict levels.
The critical difference: most Asian and European peers hedge fuel purchases to lock in prices. China's Big Three do almost none. China Southern stated outright it has "no effective means" to manage fuel-price volatility.
Revenue is growing — so why the loss?
Top lines were solid: Air China revenue rose 10.5% YoY, China Eastern 11.1%, China Southern 9.7%, driven mainly by international traffic.
This means → European routes provided the uplift — some passengers rerouted via Chinese carriers as Middle East hubs were disrupted by the conflict.
But a sluggish domestic economy, plus competition from high-speed rail and road trips, capped the airlines' ability to raise fares at home — revenue growth simply couldn't outrun cost inflation.
Can the Q3 peak season still deliver?
Typhoon activity has been abnormally high: 21 typhoons have formed in the western Pacific and South China Sea so far, 9 more than the historical average, severely disrupting summer domestic operations.
Aviation-data provider VariFlight forecasts July–August passenger volume will fall 3.6% YoY to 142 million — the first peak-season contraction since the 2022 Covid lockdowns.
In plain terms = the most profitable quarter of the year is being derailed by extreme weather, turning peak season into a soft one.
How big is the full-year gap?
HSBC analysts project a combined full-year loss of roughly ¥16.8 billion for the Big Three, against a prior market consensus of about ¥1.3 billion in profit.
This means → the expectation gap is around ¥18.1 billion, and share prices have not yet fully absorbed the downside.
All three carriers' Shanghai-listed A-shares have fallen more than 36% year-to-date, and none declared an interim dividend.
What does slower C919 delivery mean?
China Eastern now operates 17 COMAC C919 narrowbodies; Air China and China Southern each fly 11, with a combined 8 jets received in H1.
However, China Eastern disclosed that C919 deliveries for 2026–2028 will be 13 fewer than previously planned.
This reflects a potential slowdown in domestic-fleet expansion relative to capacity plans, meaning the carriers still rely on Boeing and Airbus models to fill the gap in the near term.
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