Annual Report Insights | Just as performance shows signs of improvement, oil prices suddenly surge—will the three major airlines keep “recovering” in 2026?

Ask AI · How are the three major airlines responding to cost pressures under high oil prices?

As of April 1, Air China, China Eastern Airlines, and China Southern Airlines have all disclosed their 2025 annual reports. Data shows that in 2025, the three airlines collectively achieved revenue of 493.68B yuan, a year-on-year increase of 4.36%; net profit attributable to the parent was -2.55B yuan, up 58.66%.

As the “national team” of domestic air transportation, the performance of the three major airlines has always been regarded as a “barometer” of industry prosperity. In 2025, the civil aviation industry continued its steady growth trend, with total passenger transport volume increasing by 5.5% year-on-year to 770 million passengers. However, against the backdrop of overall industry recovery, the performance of the three airlines in 2025 showed significant divergence: China Southern Airlines was the first to turn losses into profits, while Air China and others fell into the awkward situation of “book losses” due to accounting standards.

In 2025, the strong recovery of international routes provided a key growth engine for the three airlines. However, entering 2026, the risk of soaring oil prices has sharply increased, becoming a “Damocles sword” hanging over the airlines. With profits and losses fluctuating, whether the three airlines can continue to reduce losses and achieve full profitability in 2026 remains a severe test.

Southern Airlines “turns losses,” Air China “book losses”

In 2025, the operating income of the three airlines all hit record highs. China Southern Airlines led with 182.26B yuan in revenue, continuing to top the list, a 4.61% increase; Air China achieved 171.49B yuan, up 2.87%; China Eastern Airlines’ revenue was 139.94B yuan, up 5.92%.

Performance of the three airlines in 2025. Photo / Beijing News Shell Finance Reporter Wang Zhenzhen, infographic

However, in terms of profitability, the three airlines took very different paths. In 2025, China Southern Airlines’ net profit attributable to the parent was 857 million yuan, successfully turning from a loss of 1.7B yuan in 2024, becoming the first among the three to break through losses. The turnaround was attributed to precise capacity deployment for passenger transport and cost optimization. From non-recurring gains and losses, in 2025, its total non-recurring gains and losses amounted to 712 million yuan, with other non-operating income and expenses excluding government subsidies contributing 842 million yuan, which was an important support for its profit turnaround.

Meanwhile, China Eastern Airlines continued its trend of reducing losses, with losses narrowing significantly by 61.36% compared to 2024. In contrast, Air China’s performance was somewhat dull. In 2025, net loss was 1.77 billion yuan, a 646.04% increase from 237 million yuan in the same period last year. It was also the sixth consecutive year of losses since 2020, with total accumulated losses reaching 72.72B yuan.

Notably, both China Eastern and Air China achieved a turnaround or significant improvement at the level of total profit—China Eastern’s profit before tax in 2025 is expected to be 274 million yuan, turning profitable; Air China’s profit before tax was -1.6B yuan, with losses slightly narrowed year-on-year.

Beijing News Shell Finance reporter noted that both Air China and China Eastern explicitly stated in their annual reports that during the reporting period, they reversed some deferred tax assets formed from previous deductible losses, leading to a significant increase in income tax expenses. Specifically, China Air China’s income tax expense increased by 1.08 billion yuan year-on-year, and China Eastern also recorded higher income tax expenses for the same reason. This adjustment is a financial accounting behavior under accounting standards and does not represent a substantive deterioration in operations. In fact, excluding tax factors, both companies achieved operational profitability—by the end of Q3 2025, the three airlines collectively turned losses into profits, with Air China, China Eastern, and China Southern Airlines’ net profits attributable to the parent reaching 1.87 billion yuan, 2.1B yuan, and 2.31B yuan, respectively.

Whether it is the first to turn losses around like China Southern Airlines or the continued losses of Air China, the fourth quarter’s traditional off-season weighed on their performance. In Q4, China Air China’s net loss was 3.64 billion yuan, and China Southern Airlines’ net loss was 1.45 billion yuan. This seasonal characteristic has been reflected in annual financial reports over the years, and 2025 was no exception.

Performance of the three airlines’ quarterly net profits in 2025. Photo / Beijing News Shell Finance Reporter Wang Zhenzhen, infographic

International routes as growth engine, passenger load factor rises but ticket prices under pressure

Looking at the annual reports, the strong recovery of international routes has become a key driver of performance. As international flights recovered to over 90% of 2019 levels, international passenger transport volume in 2025 increased by 21.6% year-on-year.

China Eastern Airlines’ international business performed particularly well, with full-year international revenue of 45.73B yuan, a substantial increase of 20.82%, while domestic revenue was 90.42B yuan, a slight decrease of 0.28%. China Air China’s international passenger revenue grew by 14.13% year-on-year, and China Southern Airlines’ international revenue increased by 15.15% to 57.6B yuan.

However, despite increased capacity input and passenger turnover, ticket prices declined. In 2025, the three airlines sought a balance between “volume” and “price,” but overall, the trend was “volume up, price down.”

In terms of passenger load factor, all three airlines saw significant improvements: China Air China, China Eastern, and China Southern’s overall load factors were 81.88%, 85.86%, and 85.74%, respectively. But from the perspective of unit revenue, price competition pressures remain. China Air China’s revenue per passenger-kilometer decreased by 3.6% year-on-year, mainly due to a 4.9% decline on domestic routes, though the decline narrowed compared to the first half. China Southern Airlines’ revenue per paid passenger-kilometer fell by 4.17% year-on-year, with domestic routes dropping from 0.48 yuan to 0.46 yuan. China Eastern’s international routes became the growth core, with international revenue up 20.82%, but ticket prices also faced pressure.

Notably, the fourth quarter showed signs of recovery in industry revenue levels. Huatai Securities’ research report indicated that China Air China’s fourth-quarter unit passenger-kilometer revenue increased slightly by about 0.2% year-on-year, reflecting initial effects of “industry de-involution.” However, with international oil prices soaring in 2026, airlines’ ability to pass on fuel surcharges to costs will be tested, and ticket price trends remain uncertain.

Beyond core operations, the performance contributions of affiliated and holding subsidiaries also significantly impact the three airlines’ results.

Performance of major holding and affiliated companies of the three airlines in 2025. Photo / Beijing News Shell Finance Reporter Wang Zhenzhen, infographic

China Southern Airlines’ net profit turning positive in 2025 owes much to the stable contribution of Nanjing Airlines Logistics. Among its 10 disclosed subsidiaries, four achieved profitability, with Nanjing Airlines Logistics posting a net profit of 3.58B yuan. Xiamen Airlines, one of the seven airlines held by China Southern, was the only profitable one, with net profit up about 11.76% to 779 million yuan.

In contrast, among the nine disclosed subsidiaries of Air China, only three were profitable. Cathay Pacific, a stake of Air China, posted a net profit of 8.75B yuan in 2025, becoming a key support for Air China’s performance. The other two are Ameco (Beijing Aircraft Maintenance Engineering Co., Ltd.) and AVIC Financial. Among China Eastern’s seven subsidiaries, four were profitable, including Eastern Yunnan, Shanghai Airlines, Eastern Aircraft Technology, and STARCO (Shanghai Aerospace Technology Co., Ltd.).

The biggest risk in 2026: oil prices

In 2025, the decline in jet fuel prices provided some relief for the cost side of the three airlines. China Air China’s fuel costs decreased by 6.85% to 50.04B yuan; China Southern Airlines’ fuel costs fell by 4.48% to 52.53B yuan; China Eastern’s fuel costs decreased by 3.98% to 43.69B yuan.

However, this favorable factor may reverse in 2026. Recently, due to Middle East geopolitical conflicts, international oil prices and jet fuel costs have surged sharply, with many domestic airlines raising fuel surcharges on international routes. On April 1, Xiamen Airlines and China United Airlines announced that fuel surcharges for domestic routes would be increased starting April 5, with routes under 800 km (including) charged 60 yuan, and routes over 800 km charged 120 yuan. This increase means domestic route fuel surcharges will rise by 50 yuan and 100 yuan respectively in April, a fivefold increase.

According to the annual reports of the three airlines, if the average jet fuel price rises by 5%, China Air China’s fuel costs will increase by about 2.5B yuan; if it rises by 10%, China Southern Airlines’ fuel costs will increase by about 5.25B yuan.

To hedge against oil price volatility, the three airlines have taken corresponding measures. China Eastern Airlines stated in its annual report that the company can lock in fuel costs through crude oil swaps, call options, collar options, and futures contracts, reducing adverse effects from fuel price fluctuations. In 2025, the company engaged in fuel hedging transactions, holding 500k barrels of open positions at year-end. Additionally, China Eastern Airlines indicated that it can also optimize fleet renewal, route planning, single-engine taxiing, and aircraft weight reduction to manage fuel savings, and improve capacity deployment and marketing to enhance passenger load factors and unit revenue to cope with rising fuel costs. The company will actively assess oil price trends and cautiously conduct fuel hedging. China Southern Airlines announced after its annual report that it plans to engage in fuel futures trading of no more than 1.59 million tons in 2026.

In 2026, to cope with fierce market competition, the three airlines will continue to focus on restoring and expanding international routes as a key way to increase profitability. China Air China plans to increase flights on more than ten routes including Beijing—Warsaw, Milan, Budapest; China Eastern’s international and regional routes will have an average of 1,400 weekly departures, with European routes exceeding 160 weekly departures, a 24% increase; China Southern Airlines’ new season launched Beijing-Denmark routes with high seat utilization of 98%.

In the domestic market, the three airlines are accelerating the deployment of domestically produced large aircraft. It is estimated that over the next three years, the three airlines plan to introduce 110 C919 aircraft. By the end of 2025, as the world’s largest operator of C919, Eastern Airlines has 14 in operation. China Eastern plans to introduce 35 more from 2026 to 2028; China Air China has 9 C919s and plans to add 35 more in the next three years; China Southern has 8 and plans to introduce 40 more. Notably, Air China also disclosed participation in the development of the wide-body C929 aircraft in its annual report.

The Civil Aviation Administration previously forecasted that in 2026, China’s civil aviation will coordinate domestic and international markets, with an expected total transport turnover of 500k ton-kilometers, passenger volume of 810 million, and cargo and mail volume of 10.7 million tons. For the three airlines still fluctuating on the profit-loss line, whether they can continue to reduce losses or turn profitable in 2026 will depend on the recovery of international routes, cost control capabilities, and ticket price levels.

Beijing News Shell Finance Reporter Wang Zhenzhen

Editor: Yue Caizhou

Proofreader: Yang Xuli