Rising jet fuel prices could derail the recovery of China’s airline sector, according to a new report by Parash Jain at HSBC.
Jain said jet fuel prices have surged following the Middle East conflict, with Singapore jet fuel averaging about $175 per barrel since February 27, more than double the average seen in January and February. Fuel accounted for 35–38% of operating costs for China’s “Big Three” airlines in the first half of 2025, meaning the spike could significantly erode margins.
While airlines can apply fuel surcharges, Jain noted that the mechanism in China typically lags cost increases and does not fully offset higher fuel prices, leading to direct pressure on profitability.
HSBC also warned that aggressive surcharge increases could dampen demand, as travellers shift to China’s extensive high-speed rail network, which offers a lower-cost alternative to domestic flights.
Despite record travel during the recent Spring Festival period – when Chinese airlines carried 94 million passengers over the 40-day travel rush, up 4.7% year-on-year – HSBC has cut earnings forecasts for the sector.
The bank now expects China’s major airlines to post deeper losses in 2026 before returning to profitability in 2027, and has maintained Reduce ratings on several listed carriers including Air China, China Eastern Airlines, and China Southern Airlines shares.
HSBC warns rising fuel prices threaten China airline recovery
