Two of China’s Big 3 airlines are expected to deliver a full-year profit at the end of 2025, while one is expected to deliver a “marginal” loss, analysts say.
Air China and China Southern Airlines are expected to return to annual profitability at year-end, while China Eastern Airlines is expected to deliver another annual loss.
In its latest China Aviation report, analysts at HSBC note that the Big 3 delivered a collective third-quarter profit of RMB 11bn, up from 10bn during the same period last year.
The third quarter was characterised by higher load factors, reduced fuel costs, and stronger RMB, the report notes, but also by weaknesses in passenger yield.
China Eastern Airlines delivered the highest profit growth of 34% to RMB3.5bn, while China Southern Airlines delivered a profit growth of 20% to RMB 3.8bn.
Air China, in contrast, saw its third-quarter profit fall 11% to RMB 3.7bn.
Parash Jain, global head of transport and logistics research at HSBC, said the quarter was marked by a “leisure-led, price-sensitive” recovery.
“We previously underestimated the airlines’ third-quarter demand recovery, which drove up utilisation and profitability, despite persistent yield softness,” he said.
“The divergence between robust demand and weak prices confirms that the demand surge was largely fuelled by price-sensitive leisure travellers, likely without a meaningful rebound in higher-yielding business travel.”
As such, HSBC sees the three airlines’ earnings momentum reversing into the end of the year, as leisure demand normalises during the weaker winter quarter.
The bank is expecting the Big 3 to suffer a collective profit-to-loss swing of RMB 5bn from this year’s third quarter to the fourth (from RMB 11bn to RMB 5bn).
Though significant a reversal, this would still represent a narrowing of the profit-to-loss swing during the same period last year, which came in at RMB 19bn.
For full-year 2026 and 2027, HSBC has raised its earnings forecasts across the Big 3, mainly due to reduced fuel prices and strong RMB.
In full-year 2024, none of the Big 3 delivered an annual profit. China Eastern reported the worst net loss of the group at RMB 4.2bn for the year, followed by China Southern at RMB 1.7bn.
Air China, the top performer of the group, posted a net loss of RMB 232.6 million, narrowed significantly from RMB 1.04bn the prior year.
A full year of profitability would mark an important turning point for the Big 3, none of which have delivered an annual profit since prior to the COVID-19 pandemic.
Chinese airlines continue to suffer the impact of pandemic-driven changes in travel patterns, most prominently the continued weakness of business and international travel.
They also face lower average fares and intense domestic competition, including from high-speed rail.
A full year of profitability would mark an important turning point for the Big 3, none of which have delivered an annual profit since prior to the pandemic.