Recently, China Eastern Airlines (600115.SH), which has been grappling with 'six consecutive years of losses,' once again released a financial report laden with losses. Affected by escalating oil prices due to geopolitical tensions in the Middle East, the company's losses are anticipated to deepen further year-on-year in the first half of this year.

Securities Star observed that in recent years, China Eastern Airlines' financial performance has been consistently hindered by factors such as soaring operational costs. From 2020 to 2025, the company's cumulative net profit, after excluding non-recurring items, has exceeded 80 billion yuan in losses. Despite a relatively robust performance in indicators like passenger traffic volume and load factor in the first half of this year, the company was unable to avert a loss-making scenario. This, from a certain perspective, underscores that the company still faces substantial pressure in cost management. More alarmingly, China Eastern Airlines' asset-liability ratio has skyrocketed in recent years. As of the end of the first quarter this year, the company's total liabilities had ballooned to a staggering 256.9 billion yuan, with a short-term debt shortfall exceeding 44.7 billion yuan. Under liquidity strain, the company has resorted to frequent asset sales to raise funds while simultaneously incurring substantial expenditures on new aircraft acquisitions. The dichotomy between the insufficient profitability of its core business and the presence of significant capital outlays poses formidable challenges to the prospects of China Eastern Airlines' performance enhancement.

01. Escalating Oil Prices Drive Significant Q2 Losses, Hampering Overall Performance

China Eastern Airlines, listed in 1997, is one of China's three major state-controlled airlines. Its primary operations encompass domestic and international, regional passenger, cargo, mail, and baggage transportation services, along with ancillary services.

The performance forecast reveals that China Eastern Airlines' net profit attributable to shareholders for the first half of 2026 is projected to range from -2.4 billion yuan to -1.8 billion yuan, compared to -1.431 billion yuan in the same period last year. Net profit after excluding non-recurring items is expected to range from -3.3 billion yuan to -2.7 billion yuan, versus -1.759 billion yuan in the same period last year.

Regarding the performance fluctuations in the first half of this year, China Eastern Airlines stated that during the reporting period, the company continued to refine its route network layout and strengthen its grip on core hub markets, laying a solid foundation for its development. However, since March, geopolitical conflicts in the Middle East have triggered a surge in oil prices, posing significant operational challenges to the aviation industry. Despite implementing measures such as adjusting and optimizing flight schedules, increasing the utilization of fuel-efficient aircraft models, and comprehensively curbing costs and expenses to stabilize the development foundation, the company still anticipates incurring losses in its operating performance for the first half of this year due to substantially increased costs.

Securities Star noted that in recent years, China Eastern Airlines has been under considerable performance strain. Prior to the pandemic, the company was profitable for several consecutive years. However, since 2020, its performance has shifted to a loss-making trajectory. Despite several private airlines successfully rebounding to profitability post-pandemic, China Eastern Airlines has continued to languish in losses. As of last year, the company has endured losses for six consecutive years. From 2020 to 2025, the company's cumulative net profit, after excluding non-recurring items, has surpassed 80 billion yuan in losses.

High costs are the primary factor dragging down China Eastern Airlines' performance. Post-pandemic, competition in the domestic civil aviation market has intensified. Although China Eastern Airlines' revenue has rebounded to pre-pandemic levels, major costs such as aviation fuel, depreciation, and employee salaries have soared, driving up the company's overall operational expenses. In recent years, China Eastern Airlines' gross profit margin has been under significant duress, declining from 11.3% in 2019 to 5.21% last year.

In the first half of this year, China Eastern Airlines' passenger capacity investment (available seat kilometers) increased by 1.74% year-on-year, primarily driven by international routes. The company's passenger traffic volume rose by 4.29% year-on-year. The load factor stood at 86.94%, up 2.13% year-on-year. Despite decent performance across various operational indicators, the company was unable to reverse the loss-making trend.

In fact, in the first quarter of this year, China Eastern Airlines was still profitable. It achieved revenue of 37.06 billion yuan, a year-on-year increase of 10.94%. Net profit attributable to shareholders was 1.633 billion yuan, a year-on-year surge of 264.12%. Net profit after excluding non-recurring items was 1.327 billion yuan, a year-on-year rise of 219.33%. Based on this, in the second quarter of this year, the company's net profit attributable to shareholders is projected to range from -4.033 billion yuan to -3.433 billion yuan, a year-on-year decline of over 687%. Net profit after excluding non-recurring items is expected to range from -4.627 billion yuan to -4.027 billion yuan, a year-on-year decrease of over 522%.

It is noteworthy that the first quarter of this year marked the first time China Eastern Airlines achieved profitability in the same period since 2020. However, dragged down by the sharp deterioration in second-quarter performance, the company's efforts to turn a profit in the first half of the year were thwarted.

In fact, in the first half of this year, affected by rising oil prices, the overall profitability of the domestic civil aviation industry was significantly squeezed. However, some private airlines, leveraging flexible fleet configurations and cost control capabilities, maintained relatively stable profitability. China Eastern Airlines, already under high cost pressure, appeared highly passive. Against the backdrop of significant uncertainty in the Middle East situation, this renders the path to its performance recovery even more arduous.

02. Significant Short-Term Debt Shortfall and Heavy Expenditure on Aircraft Acquisitions Raise Concerns

Equally noteworthy are China Eastern Airlines' high debt levels and liquidity crisis.

Securities Star observed that despite enduring consecutive years of losses, China Eastern Airlines has not ceased its expansion in recent years. As the route network becomes increasingly intricate, the company's operational fleet size continues to expand, coupled with the replacement and upgrading of existing aircraft models, collectively amplifying the company's capital expenditure pressure. Last year, the company's asset-liability ratio surged from 75.12% in 2019 to 85.69%, with total liabilities reaching a staggering 252.9 billion yuan.

High debt levels have significantly heightened China Eastern Airlines' financial burden. In 2025, the company's financial expenses reached 3.963 billion yuan, equivalent to -325% of the operating profit for the same period. As of the end of the first quarter this year, China Eastern Airlines' total liabilities amounted to 256.9 billion yuan. The company held 12.252 billion yuan in cash and cash equivalents and trading financial assets, while short-term borrowings and non-current liabilities due within one year reached 57.03 billion yuan, resulting in a short-term debt shortfall exceeding 44.7 billion yuan.

Against this backdrop, China Eastern Airlines has frequently alleviated financial pressure in the past two years by divesting assets.

In February this year, China Eastern Airlines announced that its subsidiary, China Eastern Import and Export Corporation, would transfer its entire 49% stake in China Eastern Supply Chain to the company's related party, China Eastern Logistics, for 199.8 million yuan. The announcement stated that this move would enable the company to focus on its core aviation business while enhancing the operational efficiency and synergy of China Eastern Logistics' aviation material supply chain business, providing more efficient and high-quality services to the company.

In January this year, China Eastern Airlines also disclosed that to optimize its asset-liability structure and raise funds to support the development of its core business, its wholly-owned subsidiary, Shanghai Airlines, would transfer the land use rights of its Shanghai Hongqiao base and the buildings, ancillary facilities, and equipment on it to China Cargo Airlines for a transaction price of 137.6 million yuan. Just over ten days later, Shanghai Airlines transferred its Kadick Building to China Eastern Real Estate for a transaction price of approximately 134 million yuan. China Eastern Airlines stated that this transaction aimed to revitalize existing assets and further concentrate resources on its core aviation business.

Despite the highly pressured funding situation, China Eastern Airlines continues to incur substantial expenditures on aircraft acquisitions.

In March this year, China Eastern Airlines signed a purchase agreement with Airbus for 101 A320NEO series aircraft, with a total catalog price of 15.802 billion US dollars (approximately 108.893 billion yuan). The purchased aircraft are scheduled for delivery in batches after 2028. China Eastern Airlines stated that the actual transaction price is significantly lower than the basic catalog price, and the transaction will be paid in installments. The company plans to raise funds through self-financing, commercial bank loans, and bond issuance. The aircraft procurement will be utilized for the replacement and upgrading of the company's existing aircraft models and to supplement future capacity, helping to enhance the company's per-aircraft available capacity, reduce fuel consumption and unit operating costs, and maintain the overall fleet's advanced and youthful profile.

In June this year, China Eastern Airlines announced another purchase agreement with Airbus for 25 A330NEO series aircraft, with a total catalog price of approximately 9.35 billion US dollars (approximately 63.735 billion yuan). The company stated that the actual transaction price is also significantly lower than the basic catalog price. This transaction will help optimize the company's fleet structure and route network, improve operational and service quality, and reduce unit operating costs.

Securities Star observed that although China Eastern Airlines stated that its aircraft procurement is predicated on confidence in the future development of China's civil aviation industry, the stark realities of the company's consecutive years of losses and high asset-liability ratios continue to leave many investors apprehensive about its future financial sustainability and performance improvement prospects. (This article is first published on Securities Star, author | Liu Haohao)

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