Airlines are struggling but China’s ‘Big Three’ face a tougher year than

China’s biggest airline stocks have suffered more than others since the war in Iran began, as a combination of factors weighs them down.

The country’s carriers — which swung to a quarterly profit in the beginning of 2026 — are caught in a pincer of higher fuel costs and a price-wary domestic market being eroded by high-speed rail. Jet fuel prices soared after the U.S. and Israel launched attacks on Iran in February.

And while many global peers are hedged against swings in fuel prices, Chinese airlines hedge little of their fuel purchases, making them vulnerable to a harder hit from the prolonged rise in oil prices.

The so-called “Big Three” — Air China, China Eastern and China Southern Airlines — together account for the bulk of domestic capacity and are expected to record a combined net loss of 22 billion yuan ($3.2 billion) in 2026, swinging back into the red after the profitable first quarter, according to HSBC analysts.

Their share priced have fallen around 30% since the war began, among the worst performers in the region, according to LSEG data. Singapore Airlines shares were down 9% as of Thursday over the same period, Korean Air Lines slipped 7%, Japan Airlines down 20%, and ANA Holdings 18%.

The surging costs have triggered a wave of international and domestic flight cancellations. Multiple carriers have reduced or suspended international flight services since the outbreak of the war. And during the week ending May 14, domestic passenger flights in China fell 12.7% year-on-year while cancellation rates hit nearly 30%, both sharply worse than seasonal norms, according to Goldman Sachs.

Jet fuel prices increased worldwide after the Iran war started, most of all in Asia-Pacific. Platts, a widely used jet fuel Singapore benchmark, climbed from $93 per barrel in late February to a record $242 per barrel in late March. Prices have since moderated to $163 per barrel, which is still achingly high for the notoriously thin-margined aviation industry.

The Chinese government helps to regulate jet fuel rates, though prices are still linked to international crude oil rates. The country’s ex-factory jet fuel rates surged 74% in April, according to HSBC.

Starting April 5, Chinese airlines raised domestic fuel surcharges to 60 yuan for flights under 800 kilometers and 120 yuan for longer routes — up from 10 yuan and 20 yuan previously. A further increase took effect May 16, pushing short-haul surcharges to 90 yuan and long-haul to 170 yuan — a 50% and 42% rise respectively on top of the sixfold April adjustment.

But analysts say this won’t fully absorb the fuel cost…