China's three largest state-owned airlines have issued warnings regarding their financial forecasts for the current year, acknowledging that the ongoing conflict in the Middle East involving Iran has driven jet fuel prices to unsustainable levels. According to Operative Information Center-OMM, citing foreign media, the Chinese aviation industry—already struggling with domestic oversupply and price wars—is now facing the macroeconomic consequences of the regional crisis.
Major carriers including Air China, China Eastern, and China Southern Airlines reported profits in the third quarter of 2025 due to strong domestic summer travel demand; however, they have been unable to sustain this momentum. Analysts suggest that aggressive capacity expansion by these carriers has created a market glut. This, combined with fierce competition from China's extensive high-speed rail network, has forced airlines to slash ticket prices to maintain passenger volumes.
"China Southern reported a loss of 1.3 billion yuan in the fourth quarter. China Eastern announced a loss of 3.7 billion yuan, while Air China saw a loss of 3.64 billion yuan during the same period."
According to the Flight Master aviation data platform, Chinese airlines carried a record 94 million passengers during the Spring Festival in the first quarter of this year. However, high passenger volume no longer guarantees profitability. While the International Air Transport Association (IATA) initially projected a $41 billion profit for the global aviation industry in 2026, the doubling of jet fuel prices has upended these forecasts. HSBC analysts report that fuel costs accounted for 35-38% of the operating expenses for these three companies in the first half of 2025, and this figure is expected to rise further.
Despite these financial challenges, the airlines are continuing to modernize their fleets. A key focus remains the delivery of the COMAC C919, China's domestically produced aircraft designed to challenge the market dominance of the Airbus A320 and Boeing 737 families. This strategic move aligns with China's broader industrial goals to reduce reliance on Western aerospace technology amid shifting global economic dynamics.
