China’s Big Three Airlines Face $2.5bn Loss, HSBC Warns

Air China, China Eastern Airlines and China Southern Airlines are on track to lose a combined 16.8 billion yuan ($2.5 billion) in 2026, HSBC analysts estimated, wiping out a market forecast that had called for a 1.3 billion yuan group profit. Analysts told the South China Morning Post on Tuesday that the "Big Three" carriers are holding fares steady rather than passing fuel costs to passengers, betting instead on a rebound in international travel to offset the damage.

The carriers posted a combined first-half net loss of about 8.2 billion yuan ($1.22 billion), reversing a 4.82 billion yuan group profit in the first quarter that had been lifted by Lunar New Year travel. It marked a seventh straight year of first-half losses for the trio.

Air China's loss widened to 2.3 billion yuan from 1.81 billion yuan a year earlier. China Eastern's loss grew to 2.2 billion yuan from 1.43 billion yuan. China Southern posted the deepest loss of the three, at 3.7 billion yuan, up from 1.53 billion yuan.

All three dual-list in Hong Kong, and their H-shares fell alongside mainland trading on Monday. Air China (HK:0753) and China Eastern (HK:0670) each dropped 5%, China Southern (HK:1055) lost 5.5% and Cathay Pacific Airways (HK:0293) slipped 2.2%.

Jet fuel costs have climbed sharply this year as the Iran war disrupted Middle East oil supply, and the carriers have limited hedging to cushion the blow. China's aviation regulator, the CAAC, signalled last month that the industry's focus through 2030 is safety and demand stimulus, not price increases, making a near-term fare hike unlikely.

Independent aviation analyst Li Hanming said that points to keeping prices low to fill more seats, with international routes doing the heavier lifting. Chinese carriers can still fly over Russian airspace on Europe routes, an advantage over Western rivals barred from it since the Ukraine war, while Beijing's expanding visa-free access is drawing more foreign travellers onto their networks.