Just as performance starts to improve, oil prices surge dramatically. Will the three major airlines continue to "recover" by 2026?

As of April 1, Air China, China Eastern Airlines, and China Southern Airlines in China have all completed the disclosure of their 2025 annual reports. Data show that in 2025, the three major airlines combined generated total revenue of RMB 493.682 billion, up 4.36%; net profit attributable to shareholders was -RMB 2.5462 billion, up 58.66%.

As “national teams” in China’s domestic aviation transportation industry, the performance of the three major airlines has long been viewed as a “barometer” of industry business conditions. In 2025, the civil aviation industry continued a pattern of steady growth, with the total volume of passenger transportation across the whole industry rising year on year by 5.5% to 770 million passenger trips. However, against the backdrop of an overall industry rebound, the 2025 performance of the three major airlines showed a marked divergence: China Southern Airlines was the first to return to profit; Air China and others fell into the awkward situation of “book losses” due to accounting standard treatments.

In 2025, the strong recovery of international routes injected key growth momentum into the three major airlines. However, entering 2026, the risk of high fuel prices has surged, becoming the “Sword of Damocles” hanging over the airlines. With the three major airlines wavering on the line between profit and loss, whether they can sustain their momentum of reducing losses and achieve full profitability in 2026 still faces severe challenges.

China Southern “returns to profitability,” Air China “book losses”

In 2025, operating revenue for all three major airlines hit record highs. China Southern Airlines continued to lead with revenue of RMB 182.256 billion, up 4.61%; Air China achieved revenue of RMB 171.485 billion, up 2.87%; and China Eastern Airlines’ revenue was RMB 139.941 billion, up 5.92%.

Performance of the three major airlines in 2025. Figure/Designed by Wang Zhenzhen, Jiemian News’ Caijing reporter, Xinjingbao Beike Finance

However, in terms of profitability, the three major airlines followed entirely different trajectories. In 2025, net profit attributable to shareholders for China Southern Airlines was RMB 857 million. Compared with the RMB 1.696 billion loss in 2024, it successfully returned to profitability and became the “front-runner” among the three major airlines to break through first. China Southern Airlines’ return to profitability benefited from precise deployment of passenger-carrying capacity and optimization on the cost side. From non-recurring items, its total non-recurring gains and losses in 2025 were RMB 712 million; among them, other operating non-operating income and expenses excluding government subsidies contributed RMB 842 million, which was an important support for its turnaround in net profit.

China Eastern Airlines, meanwhile, continued the loss-reduction trend of recent years, with its loss amount narrowing sharply by 61.36% in 2025 compared with 2024. By contrast, Air China’s performance was somewhat less impressive. In 2025, Air China recorded a net loss of RMB 1.77 billion, compared with RMB 237 million in the same period of the previous year; the loss increase grew 646.04%. It was also the sixth consecutive year of losses since 2020, with cumulative losses reaching RMB 72.723 billion.

It is worth noting that China Eastern Airlines and Air China both achieved a turnaround or a significant improvement at the level of total profit—China Eastern Airlines’ total profit in 2025 is expected to be RMB 274 million, returning to profitability; Air China’s total profit was -RMB 1.597 billion, with the loss amount narrowing slightly year on year.

Xinjingbao Beike Finance reporter noted that in their annual reports, both Air China and China Eastern Airlines explicitly stated that, during the reporting period, they reversed part of deferred income tax assets generated from previously deductible losses, resulting in a substantial increase in income tax expense. Specifically, Air China’s income tax expense surged year on year by RMB 1.08 billion, and China Eastern Airlines also recorded higher income tax expenditures for the same reason. This adjustment is a financial accounting behavior under accounting standards, rather than a substantive deterioration on the operating side. In fact, if the income tax factor is stripped out, both companies were already profitable at the operating level—across the first three quarters of 2025, the three major airlines collectively returned to profitability. Net profit attributable to shareholders for Air China, China Eastern Airlines, and China Southern Airlines reached RMB 1.87 billion, RMB 2.103 billion, and RMB 2.307 billion, respectively.

Whether it is China Southern Airlines, which returned to profitability first, or Air China, which continued to record losses, the fourth quarter’s traditional off-peak season weighed on their performance. In the fourth quarter, Air China posted a net loss of RMB 3.64 billion, while China Southern Airlines recorded a net loss of RMB 1.45 billion. This seasonal characteristic has been reflected in financial reports in past years, and 2025 was no exception.

Net profit performance of the three major airlines by quarter in 2025. Figure/Designed by Wang Zhenzhen, Xinjingbao Beike Finance reporter, Wang Zhenzhen

International routes become the growth engine; load factors rise, but ticket prices face pressure

Looking across the annual reports of the three major airlines, the strong recovery of international routes has become the key engine driving performance. As international flights resumed to more than 90% of 2019 levels, international passenger transportation volume in 2025 grew 21.6% year on year.

China Eastern Airlines’ international business performance was especially strong. Full-year international business revenue was RMB 45.733 billion, up significantly by 20.82% year on year, while domestic business revenue was RMB 90.419 billion, down slightly by 0.28% year on year. Air China’s international passenger revenue increased 14.13% year on year, and China Southern Airlines’ international business revenue increased 15.15% year on year to RMB 57.603 billion.

However, while both capacity deployment and passenger turnover volume increased at the same time, the fare level declined. In 2025, the three major airlines sought balance between “volume” and “price,” but overall the trend was “higher volume but lower fares.”

In terms of load factor, all three major airlines improved significantly. The overall load factors for Air China, China Eastern Airlines, and China Southern Airlines were 81.88%, 85.86%, and 85.74%, respectively. However, when it comes to unit revenue, pricing competition pressure still remains. Air China’s passenger-kilometer revenue in 2025 fell 3.6% year on year, mainly due to a 4.9% decline on domestic routes, though the decline narrowed compared with the first half. China Southern Airlines’ passenger-kilometer revenue per paid passenger declined 4.17% year on year; among that, its domestic routes fell from RMB 0.48 to RMB 0.46 per passenger-kilometer. China Eastern Airlines’ international routes became the core growth driver: international business revenue grew 20.82% year on year, but fare levels were also under pressure.

Of note, there are signs that industry revenue levels improved in the fourth quarter. A research report from Huatai Securities shows that Air China’s fourth-quarter unit passenger-kilometer revenue increased slightly by about 0.2% year on year, reflecting that an industry consensus against “overcrowding/price wars” is beginning to take effect. However, after entering 2026, international jet fuel prices rose sharply. Airlines will face tests regarding their ability to pass costs through via fuel surcharges, and uncertainty in fare trends will still exist.

Beyond their main airline businesses, the performance contributions of their equity-invested and controlled subsidiaries are also important factors affecting the three major airlines’ results.

2025 performance of the three major airlines’ key controlled and equity-invested subsidiaries. Figure/Designed by Wang Zhenzhen, Xinjingbao Beike Finance reporter, Wang Zhenzhen

China Southern Airlines’ return to profitability in 2025 cannot be separated from the stable contribution of its logistics unit. Among the 10 controlled and equity-invested companies disclosed, four were profitable. Of them, China Southern Cargo achieved net profit of RMB 3.575 billion. XiamenAir is the only profitable airline among the seven airlines that China Southern Airlines holds controlling or equity stakes in, with net profit up about 11.76% year on year to RMB 0.779 billion.

Meanwhile, of the nine controlled and equity-invested companies already disclosed by Air China, only three were profitable. Among them, Cathay Pacific, in which Air China holds an equity stake, achieved net profit of RMB 8.748 billion in 2025, becoming an important support for Air China’s performance. The other two are Ameco (Beijing Aircraft Maintenance Engineering Co., Ltd.) and Sinochem Finance.

Among the seven controlled and equity-invested companies of China Eastern Airlines, four were profitable: China Eastern Yunnan, Shanghai Airlines, China Eastern Technology, and STARCO (Shanghai Technology Aerospace Co., Ltd.).

The biggest risk facing 2026: fuel prices

In 2025, the decline in jet fuel prices gave the three major airlines some breathing space on the cost side. Air China’s aircraft fuel costs decreased 6.85% year on year to RMB 50.041 billion; China Southern Airlines’ fuel costs fell 4.48% year on year to RMB 52.526 billion; and China Eastern Airlines’ aircraft fuel costs decreased 3.98% year on year to RMB 43.69 billion.

However, this good news factor may reverse in 2026. Recently, driven by geopolitical conflicts in the Middle East, international oil prices and aircraft fuel costs have risen significantly. Several domestic airlines have already raised fuel surcharges on international routes. On April 1, XiamenAir and China United Airlines issued notices that fuel surcharges on domestic routes are planned to be increased starting April 5. For segments of 800 kilometers (inclusive) or below, the charge will be RMB 60; for segments above 800 kilometers, it will be RMB 120. This increase in fuel surcharge means that in April, the fuel charge for domestic routes will be increased by RMB 50 and RMB 100 respectively—an increase of 5 times.

According to the annual reports of the three major airlines, if the average jet fuel price rises by 5%, Air China’s fuel costs would rise by about RMB 2.502 billion; if the average jet fuel price rises by 10%, China Southern Airlines’ fuel costs would rise by about RMB 5.253 billion.

To address the risk of fluctuations in fuel prices, all three major airlines have taken corresponding measures. China Eastern Airlines said in its annual report that the company can lock in aircraft fuel costs through crude oil swap contracts, crude oil call options, a collar options combination, crude oil futures contracts, and so on, to reduce the adverse impact of fuel price volatility. In 2025, the company carried out fuel hedging transactions; by the end of the year, it held outstanding positions that had not yet been delivered of 500,000 barrels. In addition, China Eastern Airlines stated that, in response to risks from fuel price fluctuations, the company can also manage fuel efficiency more precisely through measures such as fleet upgrades and replacements, route optimization, single-engine taxiing, aircraft weight reduction, and more. It will also address pressure from rising fuel prices by optimizing capacity deployment and strengthening marketing to improve load factors and unit revenue levels. The company will actively assess fuel price trends and cautiously conduct fuel hedging business. After disclosing its annual report, China Southern Airlines announced that in 2026, it plans to carry out fuel futures business not exceeding 1.59 million tons.

In 2026, to respond to continued and intense market competition, the three major airlines will still treat the restoration and expansion of international routes as an important direction for increasing their profitability potential. Air China plans to increase the frequency and number of flights on more than 10 routes, including Beijing—Warsaw, Beijing—Milan, and Beijing—Budapest. China Eastern Airlines’ average weekly scheduled initial departures on international and regional routes will reach 1,400 flights; among them, Europe routes will have more than 160 weekly initial departures, up 24%. China Southern Airlines’ first day of the new season will open the Beijing Daxing—Helsinki route, with a load factor as high as 98%.

In the domestic market, the three major airlines are all accelerating their plans to deploy China-made large aircraft. Based on calculations, over the next three years, the three major airlines plan to introduce 110 C919 aircraft. As of the end of 2025, China Eastern Airlines, the world’s largest operator of the C919, had operated 14 C919 aircraft. China Eastern Airlines plans to introduce 35 C919 aircraft from 2026 to 2028. Air China’s C919 fleet size is 9 aircraft, with plans to introduce 35 aircraft over the next three years. China Southern Airlines’ C919 fleet is 8 aircraft, with plans to introduce 40 aircraft over the next three years. It is worth noting that in its annual report, Air China also disclosed that it has participated in the development of the C929 wide-body aircraft.

The Civil Aviation Administration of China previously predicted that in 2026, civil aviation in China will coordinate both domestic and international markets nationwide. It is expected to complete total transport turnover of 1750 billion ton-kilometers, passenger transport volume of 810 million passenger trips, and freight and mail transport volume of 10.7 million tons. For the three major airlines that are still wavering on the line between profit and loss, whether they can sustain their momentum of reducing losses or return to profitability in 2026 will depend on a comprehensive game involving the pace of international route recovery, cost management capabilities, and fare levels.

（Source: Xinjingbao）