Shares in the aviation sector are under scrutiny as China Eastern Airlines Corporation Limited (stock code: 600115.SH) delivers another disappointing financial report, marking its sixth consecutive annual loss. The company now projects a deeper first-half loss for 2025, driven by rising oil prices linked to geopolitical tensions in the Middle East. This highlights persistent challenges in cost control despite improved operational metrics like passenger turnover and load factors.
Over the past six years from 2020 to 2025, China Eastern Airlines has accumulated net losses exceeding 80 billion yuan after deducting non-recurring items. As of the end of the first quarter of 2025, total liabilities reached 256.9 billion yuan, with a short-term debt gap surpassing 44.7 billion yuan. Under liquidity pressure, the company has been selling assets to raise cash while simultaneously spending heavily on new aircraft, creating a conflict between weak core business cash generation and massive capital expenditures. This contradiction poses severe challenges to the airline's performance recovery prospects.
Oil Price Surge Drives Q2 Losses, Overwhelming Positive Q1 Results
Listed in 1997, China Eastern Airlines is one of China's three major state-controlled carriers, primarily engaged in domestic and international passenger, cargo, mail, and baggage transport services. Its latest earnings forecast indicates a net loss attributable to shareholders of 2.4 billion to 1.8 billion yuan for the first half of 2026, compared to a loss of 1.431 billion yuan in the same period last year. After deducting non-recurring items, the loss ranges from 3.3 billion to 2.7 billion yuan, versus 1.759 billion yuan previously.
The company attributes the deterioration to Middle East geopolitical conflicts since March, which drove up oil prices and significantly increased operating costs. Despite efforts to optimize flight schedules, improve fuel-efficient aircraft utilization, and reduce expenses, the cost surge is expected to result in a first-half loss. Before the pandemic, China Eastern Airlines was consistently profitable, but it has been in the red since 2020. While several private airlines have returned to profitability post-pandemic, China Eastern Airlines remains mired in losses, with cumulative net losses over 80 billion yuan from 2020 to 2025.
High operating costs are the main culprit. Although revenue has recovered to pre-pandemic levels, expenses for aviation fuel, depreciation, and employee compensation have risen sharply, compressing gross margins from 11.3% in 2019 to 5.21% last year. In the first half of 2025, passenger capacity increased 1.74% year-on-year, driven mainly by international routes, while passenger turnover rose 4.29% and load factor reached 86.94%. Yet, the company still failed to break even. In the first quarter of 2025, China Eastern Airlines was profitable for the first time since 2020, with revenue of 37.06 billion yuan and net profit of 1.633 billion yuan. However, the second quarter saw a sharp reversal, with net losses of 4.033 billion to 3.433 billion yuan, a decline of over 687% year-on-year, wiping out the first-quarter gains.
The broader domestic aviation industry also faced compressed profits due to rising oil prices, but some private carriers with flexible fleet management and cost control maintained relative stability. China Eastern Airlines, burdened by high cost pressures, appears more vulnerable. Given ongoing uncertainties in the Middle East, its recovery path looks increasingly difficult.
Massive Short-Term Debt Gap Amid Aggressive Fleet Expansion Raises Concerns
A critical issue for China Eastern Airlines is its high debt and liquidity challenges. Despite years of losses, the company has not slowed its expansion. Growing route networks and an increasing number of aircraft, along with fleet replacement and upgrades, have driven up capital expenditures. The debt-to-asset ratio rose from 75.12% in 2019 to 85.69% last year, with total liabilities reaching 252.9 billion yuan. This heavy debt burden increased financial costs to 3.963 billion yuan in 2025, equivalent to -325% of operating profit.
As of the end of the first quarter of 2025, total liabilities stood at 256.9 billion yuan. The company held 12.252 billion yuan in cash and financial assets, but short-term borrowings and current non-current liabilities totaled 57.03 billion yuan, creating a short-term debt gap of over 44.7 billion yuan. To ease the strain, China Eastern Airlines has been selling assets. In February 2025, its subsidiary transferred 49% of Donghang Supply Chain to Donghang Logistics for 199.8 million yuan, aiming to focus on its core aviation business. In January 2025, another subsidiary sold Shanghai Hongqiao base land and buildings for 137.6 million yuan, and later sold the Kaidike Building for 134 million yuan. These moves are designed to optimize the asset structure and concentrate resources on aviation.
Yet, despite these liquidity pressures, China Eastern Airlines continues to invest heavily in new aircraft. In March 2025, it signed an agreement to purchase 101 A320NEO series aircraft from Airbus, with a total catalog price of approximately 15.802 billion U.S. dollars (about 108.893 billion yuan). The deliveries are scheduled after 2028. The company stated that the actual price is significantly lower than the catalog price, and payment will be made in installments, funded through internal resources, bank loans, or bond issues. These aircraft are intended to replace older models and improve fuel efficiency and operating costs.
In June 2025, China Eastern Airlines announced another agreement to purchase 25 A330NEO series aircraft from Airbus, with a catalog price of about 9.35 billion U.S. dollars (approximately 63.735 billion yuan). Again, the actual price is reported to be much lower. The company believes these purchases will optimize its fleet structure and network, enhance service quality, and reduce unit operating costs. However, given the persistent losses and high debt levels, many investors remain concerned about the company's financial sustainability and prospects for performance improvement.
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