Key Takeaways:
Goldman Sachs cut price targets on three major Chinese airlines, widening projected 2026 losses as fuel costs erode profitability despite a strong summer travel season.
The broker's report, dated Aug. 9, said fuel surcharges cover only about 55 percent of the additional fuel costs for the three carriers, with Brent crude forecast to average $86 a barrel in 2026.
Goldman widened Air China's (00753.HK) projected 2026 loss to 5.39 billion yuan from 497 million yuan, cutting its H-share target to HK$6.4 from HK$7.3. China Eastern (00670.HK) now faces a projected loss of 6.009 billion yuan, up from 2.156 billion yuan, with the target trimmed to HK$4.4 from HK$5. China Southern (01055.HK) saw its projected loss widen to 4.9 billion yuan from 1.427 billion yuan, and its target cut to HK$4.6 from HK$5.3. All three kept Buy ratings.
The cuts come even as summer demand beat expectations. Cumulative passenger traffic rose 4.2 percent year over year through Aug. 9, with domestic routes up 4.3 percent and international routes up 3.1 percent. Domestic ticket prices, including fuel surcharges, narrowed their year-over-year decline to near flat, while fares on major international routes rose 9 percent.
Goldman expects fleet supply growth of just 0.4 percent for the three carriers in 2026, as continued aircraft delivery delays keep supply tight. Spring Airlines (601021.SH), whose low-cost model is less sensitive to oil prices, saw its 2026 earnings forecast lowered 11 percent to 2.095 billion yuan, with the target trimmed to 56.3 yuan from 57.1 yuan. Buy maintained.
The three H-shares traded lower on the day, with Air China down 0.857 percent, China Eastern down 0.82 percent and China Southern down 0.902 percent.
The maintained Buy ratings signal the broker expects tight supply to support pricing power even as fuel costs pressure near-term earnings. A correction in crude prices would offer the clearest upside to the revised forecasts, with the next catalyst being any shift in the oil outlook.
This article is for informational purposes only and does not constitute investment advice.
