Key Takeaways:
Air China expects a first-half net loss of as much as RMB 2.6 billion, widening from a year ago, as jet fuel costs squeezed margins.
"The Company recorded substantial profits in 1Q26, jet fuel prices stayed elevated due to geopolitical tensions in the Middle East, drastically squeezing profit margins of airline companies," Air China said in a filing to the Hong Kong Stock Exchange.
Net loss after deducting non-recurring items was expected between RMB 2.3 billion and RMB 3.1 billion, compared with RMB 2 billion a year earlier. The company reported a net loss of RMB 1.806 billion in the same period last year.
The warning adds to pressure on Chinese carriers already facing a surge in fuel costs, with jet fuel prices averaging about $152 a barrel in 2026, up nearly 70% from last year's $90 average, according to industry estimates. HSBC has cut earnings forecasts for three major Chinese airlines by an average of 12%.
The Beijing-based carrier, which trades on the Hong Kong Stock Exchange under ticker 00753.HK, said China's aviation market maintained steady growth with a sound start in the first half. But the Middle East conflict, which began with the US and Israeli attack on Iran on Feb. 28, pushed fuel costs sharply higher as crude supplies through the Strait of Hormuz were disrupted.
Air China's shares fell 1.5% on Tuesday, with short selling accounting for 13.2% of turnover. The stock has declined this year as the prolonged conflict in the Middle East disrupted a waterway that handled about 20% of global crude and refined products before the war.
The profit warning follows a broader squeeze on Asian airlines. Russia's ban on diesel exports after Ukrainian drone attacks damaged several refineries has further tightened global fuel markets. Singapore gasoil, the building block for diesel, traded at $137.72 a barrel on Monday, 51% higher than before the conflict started.
The widened loss signals that Chinese carriers face persistent cost headwinds with no near-term relief, as a 60-day US-Iran ceasefire collapsed last week and Tehran resumed attacks on shipping in the Strait of Hormuz. Investors will watch Air China's first-half results, due in August, for updated guidance on capacity and fuel hedging positions.
This article is for informational purposes only and does not constitute investment advice.
