The recent operating conditions of Chinese airlines looks far from optimistic. A negative feedback loop is taking shape: low-season discount fares are gradually disappearing, pushing up travel costs and further weakening passengers’ willingness to travel. As demand softens, airlines are forced to cancel more flights, while reduced capacity further limits the supply of low-cost tickets and ultimately accelerates passenger loss.
This is not alarmist. According to the Chinese Civil Aviation Administration’s data for week 20 (May 11–17), the sector operated around 95,000 passenger flights, down 9.0% year on year. Domestic flights accounted for 80,525, a 9.8% decrease from 2025, while passenger traffic fell 8.2%. The flight operation rate was only 74.7%, down 5.3 percentage points from the previous week.
According to Wensheng Han, General Manager of China Southern Airlines, speaking at the earnings conference, “Whether through higher ticket prices or increased fuel surcharges, travel costs have risen by over RMB 200（about USD 29）, which has a clear suppressive effect on travel demand.”
Observations over the past two days show that ticket sales for flights 7–15 days and beyond 15 days in advance (price-sensitive segments), which are more price-sensitive segments, have slowed noticeably. Based on projections, passenger traffic in week 21 is expected to drop more than 10% year on year, and flight operation rates could fall to around 70%.
A major concern arising from this issue is airline cash flow.
If airlines cannot generate enough near-term cash inflow, their balance sheets could deteriorate further. According to CADAS, the free cash flow of carriers such as Japan Airlines, United Airlines, and American Airlines, calculated as operating cash flow minus investing cash flow, either declined sharply or turned negative in the two years prior to bankruptcy or restructuring. Some airlines even reporting negative operating cash flow.
Fortunately, China’s Part 121 operating licenses have special characteristics, and many small and medium-sized domestic carriers have state-backed ownership. This suggests that the survival threshold for Chinese airlines is likely much lower than that of their overseas counterparts.
