China's Big Three Airlines Warn of Combined H1 Losses Exceeding RMB 9 Billion
Alina Collins
Air China, China Eastern, and China Southern flagged a combined first-half net loss of up to ¥9 billion; surging fuel costs and shrinking demand have led HSBC to flip its full-year forecast from ¥1.3 billion profit to a ¥16.8 billion loss.
They were profitable in Q1 — what went wrong in six months?
Chinese New Year travel lifted the Big Three to a combined profit in Q1, but soaring fuel costs and weakening traffic dragged the half-year result to a net loss of up to ¥9 billion (~$1.33 billion).
This means → Q2's single-quarter loss far exceeded Q1's gain, pulling the entire first half deep into the red.
Pressure is coming from both ends: costs (fuel) and demand (passengers) — squeezed simultaneously.
Why does the oil-price shock hit Chinese carriers so much harder?
The Iran conflict pushed jet-fuel prices sharply higher. Prices have retreated from Q2 peaks but remain roughly 50% above pre-conflict levels.
In plain terms = the fever broke, but the patient is still running a low-grade temperature — costs are nowhere near normal.
Unlike most Asian peers, Chinese airlines do almost no fuel hedging — locking in future prices to cushion volatility. This means → every dollar of price increase flows straight to the cost line with no buffer.
What is going wrong on the demand side?
VariFlight data: combined domestic and international passenger volume for July–August is forecast to fall 3.6% year-on-year to 142 million — if confirmed, the first peak-season contraction since 2022.
From July 1 to 14, daily flights fell 2.2% YoY; economy-class average fare was ¥831, down 1.2% YoY and 6.1% below the same period in 2019.
IATA data show China's domestic passenger demand shrank 6.2% YoY in May — the weakest among major domestic markets globally, and the first post-pandemic single-month decline not attributable to Lunar New Year timing shifts.
Raise fares or protect traffic — what is the dilemma?
HSBC's head of global transport research Parash Jain attributes the demand weakness to a "negative wealth effect" — slowing growth is reshaping consumer behavior, and any fare increase risks suppressing travel demand further.
This means → raising fares to cover fuel costs = more passenger leakage; holding fares low = airlines absorb the losses alone.
Higher fares are also pushing short-haul travelers onto high-speed rail. Weather disruptions and a shrinking school-age population are dragging on summer traffic too. Bank of America analysts note that "weak demand will be the core risk heading into the summer peak."
How long can the international-route windfall last?
About 30% of the Big Three's revenue comes from international routes. After the Iran conflict, passengers rerouted away from Middle East hubs to European connections, briefly boosting Chinese carriers' Europe demand.
But VariFlight data show Gulf carriers are steadily resuming flights and cutting fares — that incremental demand is narrowing fast.
This reflects a temporary windfall, not a structural advantage — once competitors return, the uplift dilutes quickly.
What does the full-year picture look like now?
HSBC forecasts a combined full-year loss of roughly ¥16.8 billion for the Big Three — the previous consensus was a combined profit of ¥1.3 billion, a swing of more than ¥18 billion.
Q3 has historically been the quarter when Chinese airlines earn the bulk of annual profit, but whether this summer can reverse the slide depends on both fuel prices and demand improving in tandem.
In plain terms = both conditions must turn — and right now, neither shows a clear signal of doing so.
Content is for reference only, not financial advice.