China’s Big Three Airlines Are Heading for Another Year in the Red

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A Summer That Failed to Deliver

The third quarter (July to September) is usually the most profitable period for Chinese airlines, because millions of people travel during the summer holidays. This year it did not help.

Air China's net profit for the quarter fell by about 92.6 percent to 270.6 million yuan (about $40.6 million). China Eastern earned only 64 million yuan, down 98.2 percent. China Southern slid into a loss of 609 million yuan after earning 3.84 billion yuan in the same quarter of 2025.

Over the first nine months, all three carriers are in the red. A year earlier, they were profitable over the same period.

Fuel Prices Hit Hard

All three airlines named the sharp rise in jet fuel costs as the main reason. Reuters reports that jet fuel prices have more than doubled since the US and Israel launched a military campaign against Iran in late February. Fears over shipping routes in the Middle East have kept energy markets under pressure.

The problem is not unique to China, since airlines around the world are paying more for fuel. But Chinese carriers are more exposed than many rivals in Asia and Europe because they protect ("hedge") much less of their fuel purchases against price swings. China Eastern was the only one of the three to use fuel hedging in 2025, and only for a limited volume.

The trend was already visible earlier in the year. The three carriers had posted combined profits in the first quarter. By the first half, they reported combined losses of about 8.2 billion yuan, even though their revenues grew by roughly 10 percent. Fuel costs rose by 35 to 38 percent over the same period.

Weak Fares, Rail Competition and Typhoons

Fuel was not the only burden. Domestic ticket prices stayed low because of fierce competition, including from China's high-speed trains. Analysts at Huatai Securities estimate that Air China's yields (average revenue per passenger-distance, a rough measure of ticket prices) fell about 5 percent in the quarter. That left the airline unable to pass higher fuel costs on to customers.

An unusually active typhoon season also forced airlines to cancel and reroute flights during the peak travel weeks. Disrupted international routes added to the strain.

What Analysts Expect Next

Nathan Gee, head of Asia-Pacific transport research at BofA Global Research, expects the airlines to stay in the red through the seasonally weaker fourth quarter. He said the third-quarter figures were slightly better than very low expectations, and that fuel remains the biggest obstacle.

There are some signs of relief. Gee noted that domestic fares rose at double-digit rates compared with last year after the October Golden Week holiday, as airlines kept a lid on the number of flights. But big cost cuts will be hard to achieve, he said, even as carriers try to get more flying hours out of each aircraft.

Earlier in the year, HSBC analysts projected a combined full-year loss of around 16.8 billion yuan for the three carriers, far worse than the market consensus at the time. Investors have reacted: shares of Air China, China Eastern and China Southern are down 38, 46 and 39 percent this year.

Background: A Long Struggle Under State Ownership

The Big Three are controlled by the Chinese state, and their troubles go back well before this year. Air China and China Eastern are heading for a seventh straight annual loss since the pandemic. China Southern's 2025 profit was its first since 2019 and is now likely to be erased.

Industry reports note that the carriers have been under pressure to rebuild their finances and depend heavily on their state-owned parent companies, for example by selling new shares to them. In other words, when private investors are reluctant, the state steps in. Smaller, privately run Chinese airlines are expected to stay profitable this year, although with steep declines.

Whether the state-led model can deliver lasting profits is a fair question for investors and travelers alike. It will be tested again when full-year results are published in the spring.

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Sources

1. Reuters, "China's top three airlines head for full-year losses as fuel costs weigh," Nov 2, 2026 – https://www.reuters.com/world/china/chinas-top-three-airlines-head-full-year-losses-fuel-costs-weigh-2026-11-02/
2. Morningstar / Dow Jones, "Air China Quarterly Net Profit Plunges on Soaring Fuel Costs," Oct 29, 2026 – https://www.morningstar.com/news/dow-jones/2026102920931/air-china-quarterly-net-profit-plunges-on-soaring-fuel-costs
3. Caixin Global, "China's Big Three Airlines Sink Deeper Into Losses as Fuel Costs Surge," Sep 1, 2026 – https://www.caixinglobal.com/2026-09-01/chinas-big-three-airlines-sink-deeper-into-losses-as-fuel-costs-surge-102480469.html
4. KrASIA, "China's Big Three Airlines Lose Up to USD 1.3 Billion Amid Middle East War" – https://amp.kr-asia.com/chinas-big-three-airlines-lose-up-to-usd-1-3-billion-amid-middle-east-war
5. Aviación al Día, "'Big Three' Airlines Post Severe First-Half Losses Driven by Fuel Costs" – https://aviacionaldia.com/en?p=191513
6. airliners.de, "China Southern Airlines rutscht im dritten Quartal in die Verlustzone" – https://www.airliners.de/china-southern-airlines-rutscht-dritten-quartal-verlustzone/91222

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