China’s aviation boom is losing altitude as its three biggest airlines head for losses

China’s aviation industry is struggling to turn the recovery in air travel into profits. Surging jet fuel prices, weak domestic ticket fares and competition from high-speed rail are pushing the country’s three biggest airlines towards another year of losses.

Air China and China Eastern Airlines are heading for a seventh consecutive annual net loss since the COVID-19 pandemic, according to analyst estimates compiled by LSEG, as reported by Reuters. China Southern Airlines, which returned to profitability in 2025 for the first time since 2019, is also expected to slip back into the red.

The financial pressure became evident in the July-September quarter, which is traditionally the strongest period for Chinese airlines because of the summer travel season. All three carriers reported a sharp deterioration in earnings compared with the same period last year.

Air China’s third-quarter net profit plunged 92.6 per cent year on year to 270.6 million yuan (around $40.62 million). China Eastern Airlines reported a net profit of just 64 million yuan, down 98.2 per cent from a year earlier.

China Southern Airlines swung to a net loss of 609 million yuan from a net profit of 3.84 billion yuan in the third quarter of 2025.

All three airlines also reported losses for the first nine months of 2026, reversing the profits they had recorded during the corresponding period last year.

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A sharp increase in aviation fuel prices has emerged as one of the biggest challenges for Chinese carriers.

Jet fuel prices have more than doubled since the United States and Israel launched a military campaign against Iran in late February, increasing operating expenses for airlines already facing pressure on ticket prices.

Fuel is among the largest operating costs for airlines. A sustained increase can quickly erode profit margins, particularly when carriers cannot pass the additional expense on to passengers through higher fares.

Chinese airlines are particularly exposed because they hedge a significantly smaller share of their fuel requirements than many of their Asian and European counterparts. This leaves them more vulnerable to sudden movements in global oil and aviation fuel prices.

The timing has added to the pressure. The third quarter usually benefits from stronger passenger traffic and seasonal travel demand. This year, however, higher fuel expenses and weak domestic fares offset much of that advantage.

Why China’s airlines are struggling despite travel demand

The financial pressure on Chinese airlines also reflects intense competition in the domestic aviation market.

Carriers have struggled to raise ticket prices despite the seasonal increase in passenger traffic. Competition from high-speed rail has added to the challenge, particularly on routes where trains offer a convenient alternative to flying.

According to Huatai Securities, Air China’s passenger yields, a measure of average revenue earned per passenger for each kilometre flown, declined 5 per cent in the third quarter.

That left the airline with limited room to absorb higher fuel costs without further damaging its margins.

The problem highlights a broader challenge for China’s aviation industry. A recovery in passenger traffic does not automatically translate into stronger airline earnings. When carriers compete aggressively on fares, higher passenger volumes may not generate enough additional revenue to compensate for rising operating expenses.

Airlines are also trying to improve aircraft utilisation by increasing flying hours per plane and spreading fixed costs across more operations. But there is limited room for major cost reductions when fuel prices are rising sharply.

Nathan Gee, head of Asia-Pacific transport research at BofA Global Research, said Chinese airlines were likely to remain loss-making in the seasonally weaker fourth quarter because of the impact of higher jet fuel prices.

Third-quarter earnings were slightly better than already low market expectations, Gee said. Industry checks also suggested that domestic airfares had started rising at double-digit rates year on year after China’s October Golden Week holiday, as airlines kept capacity under control.

But the increase in fares may not be enough to offset the fuel cost burden.

“Chinese airline margin remains under extreme pressure from spiking jet fuel and soft consumption demand,” Gee told Reuters.

China’s airline giants face another difficult year

The outlook marks a setback for an industry that had begun showing signs of financial recovery.

China Southern returned to profitability in 2025 for the first time since 2019. But its latest quarterly loss suggests that the improvement may be difficult to sustain amid higher operating costs and intense competition.

Air China and China Eastern have faced an even longer struggle, with both expected to report their seventh consecutive annual losses since the pandemic.

The pressure has also weighed on investor sentiment. Shares of Air China, China Eastern and China Southern have fallen 38 per cent, 46 per cent and 39 per cent respectively so far in 2026.

(With inputs from agencies.)