<div id="readability-page-1">BEIJING/HONG KONG, April 30 (Reuters) - China's top three state-owned airlines bounced back to profit in the first quarter, helped by robust demand during the Lunar New Year holiday and recovering global travel, although the outlook is overshadowed by higher fuel costs amid the war in Iran. The sector entered 2026 on a stronger footing, with Guangzhou-based China Southern Airlines ( CHKIF ) reporting a net profit of 1.48 billion yuan ($216 million) for the first three months, swinging from a loss of 747 million yuan in the same period last year. Flagship carrier Air China ( AICAF ) posted a 1.71 billion yuan net profit, compared with a loss of 2.04 billion yuan last year. Shanghai-headquartered China Eastern Airlines ( CHEAF ) reported a net profit of 1.63 billion yuan, versus a year-earlier loss of 995 million yuan. The Hong Kong shares of China Southern, Air China ( AICAF ) and China Eastern slipped as much as 2.7%, 2.9% and 2.3% respectively. In a sign of confidence in the sector's longer-term recovery on Wednesday, China Southern announced a major fleet expansion, with the airline and its subsidiary, Xiamen Airlines, signing agreements with Airbus to purchase 102 and 35 A320neo series aircraft, respectively. The catalogue price for the 137 aircraft stands at about $21.4 billion, with deliveries scheduled in stages from 2028 to 2032. Last month, China Eastern signed a deal with Airbus to purchase 101 A320neo aircraft in a deal worth about $15.8 billion at list prices. At a time when global travel has been upended by the Iran war, the three airlines pointed to ​a renewed focus on the international market as a growth driver as they operate some flight routes through Russia that bypass the Middle East. For March, Air China ( AICAF ) recorded a 28% rise in international passenger traffic, while China Southern posted a 23% rise and China Eastern's international traffic was up 22%. According to a recent report by Bank of America, Chinese international airline capacity is forecast to grow 13% year-on-year in the summer of 2026, reaching about 91% of 2019 levels, with Europe and Australasia emerging as the primary growth corridors. But China-North America routes remain a laggard, with China-U.S. and China-Canada capacity sitting at just 29% and 40% of 2019 levels, respectively. HSBC analysts warned in a recent note, however, that the big three are &#34;adversely positioned vs peers given a structurally more price-sensitive travel cohort in China,&#34; adding that &#34;rising fuel costs weigh more on Big 3 earnings as they struggle to pass on costs without losing customers.&#34; Before the Middle East conflict, the global airline industry had forecast record profits of $41 billion in 2026, but a doubling in jet fuel prices has put that at risk. Jet fuel prices have nearly doubled, far outpacing a roughly 65% rise in crude prices, prompting major mainland Chinese airlines to increase domestic passenger fuel surcharges six-fold. The big three have lifted surcharges on domestic routes to 60 yuan ($8.80) for flights under 800 km and 120 yuan for those over 800 km, from 10 yuan and 20 yuan, respectively. Willie Walsh, head of the International Air ​Transport Association, warned on Tuesday that the jet fuel crisis could hit Asia hardest first as a shortage during the peak northern hemisphere summer becomes a growing concern. The route-level impact has been swift. Data from Flight Master shows several Southeast Asia routes were cancelled between April 1 and 12, including Xian-Phuket, Chongqing-Phuket and Hohhot-Bangkok. On Oceania routes, the cancellation rate stood at 83.3% on Guangzhou-Darwin, 57.1% on Hangzhou-Auckland and 50% on Wuhan-Sydney. Li Hanming, an independent expert on China's aviation industry, said these routes are no longer commercially viable because of higher oil prices. &#34;Carriers can't really raise fares either, because higher ticket prices would further dampen demand,&#34; Li said. ($1 = 6.8169 Chinese yuan renminbi) (Reporting by Sophie Yu in Beijing and Julie Zhu and Donny Kwok in Hong Kong; Editing by Raju Gopalakrishnan)</div>

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China's top three state-owned airlines reported profits in Q1 2026, driven by strong demand during the Lunar New Year and recovering global travel. China Southern Airlines posted a net profit of 1.48 billion yuan, Air China 1.71 billion yuan, and China Eastern Airlines 1.63 billion yuan. However, rising fuel costs due to the Iran war cloud the outlook, with jet fuel prices nearly doubling. The airlines are expanding fleets and focusing on international markets, but face challenges in passing on costs to price-sensitive customers.

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China's top airlines swing to Q1 profit, fuel costs cloud outlook