150 Million Passengers During Summer Travel, but Airlines May Face Annual Losses of 30 Billion Yuan: The Dilemma of Civil Aviation Profitability Remains Unresolved
Summary of Key Points
This report reveals a seemingly contradictory yet stark reality: During the summer travel season of 2026, although China's civil aviation industry welcomed a peak of 151 million passengers, airlines not only failed to make a profit but may also face annual losses of over 30 billion yuan. In simple terms, there were many passengers, but airfares were too cheap, and fuel costs were too high.
The article indicates that this situation, where there is high demand but no corresponding revenue, is not accidental; it is caused by three long-standing structural problems:
1. Domestic Competition and International Growth: Domestic flight routes are embroiled in a vicious price war, leading to plummeting ticket prices, while international routes have become the only bright spot due to the increase in foreign passengers.
2. Competitive Strain Between High-Speed Rail and Civil Aviation: The two modes of transport compete fiercely for long-distance travel, resulting in mutual harm, with some airfares even being cheaper than high-speed rail fares.
3. Uncontrolled Costs and Monopoly Pressure: Rising fuel prices, increased costs for aircraft leasing and maintenance, along with the monopolistic positions of upstream companies (such as AVIC Oil and AVIC Information), have squeezed airlines, leaving them with minimal profits despite high passenger numbers.
The article concludes with four recommendations for reform: supporting the development of domestic aircraft, deregulating prices for premium services, establishing an exit mechanism for failing airlines (through mergers and reorganizations), and reforming the aviation fuel pricing system, with the aim of breaking the cycle where only the upstream companies profit while airlines suffer losses.
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Detailed Analysis
Why Do Airlines Lose Money Despite High Passenger Numbers? – The Trap of Increased Volume and Falling Prices
When ordinary people read this news, their first reaction might be, "150 million passengers? Shouldn't airlines be making huge profits?" However, the reality is the opposite. It's like a restaurant with a long queue of customers, but the owner has to reduce prices drastically to keep them coming, only to end up covering barely the expenses.
Specifically, domestic flight routes are in a vicious cycle of competition:
- Falling Ticket Prices: Despite a 2.9% increase in summer travel, the average price of domestic economy class tickets decreased by 8.4%, with some airlines seeing price cuts of 12%-16%. This means that although more people traveled, the revenue per passenger decreased, leading to overall revenue declines.
- High Seat Occupancy Rates but Low Profitability: Many routes have near-100% seat occupancy rates, but this is due to low prices attracting price-sensitive passengers. Airlines are hesitant to raise prices for fear of losing business, further reducing their profits.
- International Routes as the Only Hope: International routes, with a higher proportion of foreign passengers (up from 25% to 30%) and relatively stable prices, have seen double-digit growth in revenue. This indicates that the domestic market has reached a saturation point, and only by expanding internationally can airlines find new sources of profit.
In simple terms: Domestic airfares have been reduced to almost nothing, and although more people are flying, airlines are losing money on each ticket sold. International routes provide a slight respite, but they cannot solve the overall problem.
High-Speed Rail and Airplanes: Who Is Really “Harming” Who? – The Embarrassing Competition
In the past, we often said that high-speed rail was taking business away from airplanes, but the situation in 2026 is more complex: both modes are harming each other, creating a lose-lose situation:
- Slow Growth of High-Speed Rail: Railway passenger numbers only increased by 1.2% in July and August, the lowest since the pandemic, indicating market saturation. However, high-speed rail is more convenient, cheaper, and more reliable for long-distance travel (1000-1500 kilometers).
- Airfares Cheaper than High-Speed Rail?: This is counterintuitive. Airlines have lowered ticket prices to attract passengers, leading some high-speed rail users to switch to airplanes, while others continue to fly because airfares are not much higher and flights are faster.
- Comprehensive Impact: High-speed rail's impact on civil aviation has entered a new phase, with both modes competing fiercely. Airlines are forced to lower prices, further reducing their profits.
In simple terms: The competition has become so intense that both are struggling to make a profit, leading to a mutual decline in revenue.
Who Is “Profiting” at the Expense of Airlines? – The Double Pressure of Upstream Monopolies and Uncontrolled Costs
This is the most critical and concerning aspect of the article:
- Fuel Costs: Fuel accounts for about 40% of airlines' total costs. In 2026, fuel prices reached record highs, with the Singapore MOX fuel price difference soaring from $17 to $66 per barrel, adding tens of dollars to airlines' expenses. Although airlines can charge fuel surcharges, these only cover about 50% of the increase, with the remaining cost falling on them.
- Disparity in Profitability: Upstream companies like PetroChina reported record profits in the first half of the year, while airlines are losing money. This illustrates the disparity between the wealthy upstream and the struggling downstream.
- Other Rising Costs: Aircraft leasing and maintenance costs have also increased significantly, and the monopolistic positions of upstream companies further squeeze airlines. For example, AVIC Oil, AVIC Information, and AVIC Materials control key industries, leaving airlines with no room for cost reduction.
In simple terms: Airlines are caught in a dilemma, with rising costs from all sides and no ability to reduce expenses due to safety and regulatory constraints.
The Way Forward: Moving Beyond Survival to Structural Reform
The article proposes four solutions:
1. Support for Domestic Aircraft: The C919 and other domestic aircraft should not be judged solely by their economic efficiency. Their value lies in strategic autonomy and the potential to drive the domestic aviation industry.
2. Deregulation of Premium Services: Airlines should be allowed to set prices for premium services, such as first and business classes, and additional services like seat selection and Wi-Fi, to increase revenue.
3. Industry Consolidation: China has too many airlines (over 60), leading to overcapacity and constant price wars. Mergers and reorganizations are needed to create a few larger, more competitive companies.
4. Reform of Aviation Fuel Pricing: The current fuel price difference is unfair to airlines. A dynamic linkage between fuel prices and ticket surcharges should be established to pass on costs more effectively to consumers, with possible concessions from upstream companies in extreme situations.
Conclusion
The summer travel season of 2026 reflects the long-standing structural issues in China's civil aviation industry. Although losses of 30 billion yuan may seem dire, China's second-largest aviation market and growing international travel demand offer opportunities. With the right reforms—breaking monopolies, deregulating prices, promoting consolidation, and reforming fuel pricing—China's civil aviation industry has the potential to emerge from its financial difficulties and become stronger than ever.
For consumers, this means more reasonable airfares and a wider range of services, leading to a healthier and more sustainable industry.