With the first-half reports from A-share-listed airlines now released, the performance of China’s airline industry is coming into clearer focus.
Most airlines either posted losses or saw their net profits decline in the first half of the year. The country’s three major state-owned carriers—Air China, China Southern and China Eastern—collectively recorded more than RMB 8 billion (about USD 1.19 billion) in losses. Meanwhile, Spring Airlines, China’s largest low-cost carrier, remained the industry’s most profitable airline.
In the first quarter, all listed airlines reported profits and year-on-year earnings growing, helped by lower oil prices and foreign-exchange gains.
That picture reversed in the first-half results, largely because profits plunged in the second quarter, with some airlines reporting substantial losses.
The sharp surge in oil prices since March was the immediate trigger. Jet fuel prices climbed from around RMB 5,600 (about USD 830) per ton to as high as RMB 9,800 (about USD 1,460) per ton, an increase of roughly 75%.
Fuel is the largest cost item for airlines, and several carriers noted in their interim reports that soaring fuel expenses had significantly increased operating costs, wiping out much of the profits they generated in the first quarter.
The impact was particularly severe for the Big Three, whose larger fleets and more extensive route networks make them more exposed to rising fuel costs. They also suffered the heaviest losses in the second quarter, with their combined losses exceeding RMB 10 billion (about USD 1.487 billion).
Other Chinese carriers, by contrast, operate on a relatively smaller scale and can adjust more quickly, allowing most of them to remain profitable. Still, Spring Airlines, Juneyao Airlines and China Express Airlines all saw their first-half net profits fall sharply. Hainan Airlines Holding was the only one to post a more than threefold increase in net profit year on year.
As a low-cost carrier operating a single aircraft type and relying heavily on direct sales, Spring Airlines already has a unit cost per available seat kilometer roughly 30% lower than that of the Big Three. As fuel prices surged, its ability to control costs across other aspects of operations became an important pillar supporting its performance.
