China's Biggest Airlines Post Over $1 Billion Loss in First Half as Fuel Shock Bites

By Kimberley Kao

China's three largest state-owned airlines posted deeper losses in the first half, dragged by weak domestic pricing and high fuel costs spurred by the Middle East conflict.

Air China, China Southern Airlines and China Eastern Airlines recently posted combined first-half net losses of about 8.17 billion yuan, equivalent to $1.21 billion, after warning in July that the total figure could be close to 9 billion yuan.

The losses were a sharp contrast to the state-owned airlines' first-quarter profits, which were boosted by strong demand, particularly on international routes.

Shares of China Southern fell more than 5% in Hong Kong trading Monday, while those of Air China and China Eastern shed more than 4% each.

The Chinese airlines' latest results underscored a troubled industry, as the outbreak of the Iran war in late February disrupted air travel and heightened macroeconomic uncertainty, driving fuel prices sharply higher.

Aircraft fuel costs for the three carriers rose between 35% and 38% in the first half compared with a year earlier.

Flag carrier Air China reported a net loss of 2.29 billion ​yuan, widening from a loss of 1.80 billion yuan a year earlier.

China Eastern posted a loss of 2.18 billion yuan, versus a ⁠1.43 billion yuan loss a year earlier, while China Southern reported a loss of 3.70 billion yuan, compared with a loss of 1.53 billion yuan a ​year earlier.

China Eastern described the aviation industry's profitability environment as "severely undermined" by the disruption of international routes and persistently elevated aviation fuel prices.

Still, China Eastern's results were stronger than its peers', with the highest operating margin thanks to lower domestic exposure, stronger international load factors and relatively better cost controls despite challenges from a sharp decline in flight capacity between China and Japan amid geopolitical tensions, DBS Group Research said in a note.

China's civil aviation industry reported a 1.0% increase in passenger traffic volume for the first half to 380 million, according to the Civil Aviation Administration of China.

Despite the losses, all three carriers posted resilient revenue growth for the period, with Air China's rising 10.5%, China Eastern's gaining 11% and China Southern's increasing 9.7%, driven by ​international traffic demand.

However, weak domestic pricing in a cost-sensitive market remains a key concern, as modest passenger-yield increases suggest limited scope for carriers to raise fares further without hurting demand, DBS added.

Competition from China's high-speed rail has weighed on the domestic aviation industry in recent years due to cheaper fares.

Meanwhile, all three airlines are shifting more capacity toward international routes, which will potentially limit further increases in international yields as supply grows in the market, DBS said.

Write to Kimberley Kao at kimberley.kao@wsj.com

(END) Dow Jones Newswires

August 31, 2026 01:14 ET (05:14 GMT)