China’s three largest airlines—Air China, China Eastern Airlines, and China Southern Airlines—reported widening net losses in the first half of 2026 amid rising fuel costs and subdued domestic travel demand, according to their mid-year financial disclosures. Despite the mounting losses, analysts say these carriers are unlikely to raise fares significantly, as regulators focus on boosting passenger numbers and ensuring safety through to 2030.

The net losses attributable to shareholders totaled approximately 2.3 billion yuan (HK$26.8 billion) for Air China, 2.2 billion yuan for China Eastern, and 3.7 billion yuan for China Southern during the first six months of the year. These figures represent a deterioration compared with the corresponding period in 2025. China Southern Airlines’ financial filings highlighted ongoing challenges, including volatile interest rates, currency exchange fluctuations, and fuel price volatility.

Fuel prices have surged notably due to geopolitical tensions stemming from the ongoing US-Israel conflict involving Iran, which has also dampened traveler confidence regarding routes near the Middle East. The International Air Transport Association (IATA) reported a 0.1% decline in international air passenger demand globally for July 2026 compared to July 2025. However, when excluding the Middle East, demand actually rose by 1.5%.

Within China, airlines continue to face strong competition from the nation’s extensive high-speed rail network. This competition, paired with weaker-than-expected passenger turnout, has prevented carriers from filling their available seat capacity, further exerting pressure on profitability.

Despite these headwinds, China’s Civil Aviation Administration has emphasized that substantial airfare increases are unlikely in the near term. In August, the administration released a five-year plan aiming to foster a “dynamic and high-quality air transport service system” that supports an expansion of domestic demand and a more open aviation market. The plan prioritizes flight safety and passenger demand stimulation, with a focus on lowering prices to encourage greater use of air travel.

Aviation analysts, including Li Hanming, note that keeping fares affordable aligns with the broader objective of developing China into the world’s largest travel and tourism market. Observations from industry experts like Patel emphasize that excessive fare hikes could deter potential travelers, undermining recovery and growth prospects.

Currently, ticket prices on popular domestic routes have dipped to as low as 200 yuan (approximately HK$323) following the peak summer travel season, reflecting efforts to stimulate demand despite financial pressures. The three major carriers are expected to continue this strategy as they navigate the uncertain global environment and increasing operational costs.