China’s Big Three Airlines Face Annual Losses as Fuel Costs Rise

BEIJING — Air China (CA), China Eastern Airlines (MU) and China Southern Airlines (CZ) face full-year losses in 2026 after higher fuel costs, weak domestic fares and typhoon disruptions weighed on their third-quarter results, Reuters reported on November 2.

Analyst estimates compiled by London Stock Exchange Group point to a seventh consecutive annual net loss for Air China and China Eastern. China Southern is also forecast to lose money after returning to annual profit in 2025 for the first time since 2019.

Profits Shrink During Peak Travel Season

According to Reuters, Air China’s third-quarter net profit fell 92.6% from a year earlier to 270.6m yuan. China Eastern earned 64m yuan, down 98.2% from the same quarter in 2025.

China Southern posted a quarterly net loss of 609m yuan, compared with a 3.84bn yuan profit a year earlier. All three carriers lost money over the first nine months of 2026, having been profitable in the corresponding period of 2025, Reuters reported.

The third quarter includes the peak summer travel season and is usually the strongest period for Chinese airlines. This year, even the small quarterly profits at Air China and China Eastern were insufficient to offset earlier losses.

The carriers entered 2026 after a prolonged recovery. Airways previously covered their first-half 2025 loss warnings, before China Southern’s return to annual profit.

Fuel Costs Limit Relief From Fares

Reuters reported that Chinese airlines hedge less of their fuel purchases than many Asian and European carriers, leaving them more exposed to price increases. Fuel hedging can limit the effect of price increases on an airline’s fuel bill.

Competition, including from high-speed rail, also weighed on domestic fares. In its April 8 research on the carriers, DBS said price-sensitive consumers constrained their ability to pass on higher fuel costs.

Using 2025 figures, DBS estimated that a 5% change in average jet fuel prices would change Air China’s fuel costs by about 2.5bn yuan and China Southern’s by 2.6bn yuan. Those sensitivities illustrate the scale of fuel exposure; they are not actual 2026 expenses.

Nathan Gee, head of Asia-Pacific transport research at BofA Global Research, told Reuters he expected Chinese airlines to remain loss-making in the seasonally weaker fourth quarter.

Gee said third-quarter earnings were slightly better than very low expectations. His checks suggested domestic fares were rising at double-digit rates year over year after the October Golden Week holiday as airlines restrained capacity. However, fuel remained a major pressure on earnings. He also said carriers were trying to increase flying hours per aircraft to control costs, but substantial cost reductions would be difficult.