(Yicai) July 15 -- Surging international oil prices triggered by the Middle East conflict pushed China's three state-owned airlines to combined net losses of more than CNY12 billion (USD1.8 billion) in the second quarter, wiping out all of their first-quarter profits.

The three carriers had reported a combined net profit of CNY4.8 billion (USD708.9 million) in the first quarter. Based on their latest earnings forecasts, they incurred combined net losses of between CNY12.2 billion and CNY13.8 billion in the second quarter as soaring jet fuel costs outweighed steadily recovering travel demand.

According to earnings forecasts released yesterday, China Southern Airlines expects a net loss of CNY3.5 billion to CNY4 billion for the first half of the year, while China Eastern Airlines forecasts a net loss of CNY1.8 billion to CNY2.4 billion, and Air China projects a net loss of CNY2.1 billion to CNY2.6 billion. Their combined first-half losses are expected to total CNY7.4 billion to CNY9 billion.

If oil prices return to normal levels, the three airlines are likely to resume profitability in the second half of the year, Li Yanwei, a professor at the Civil Aviation University of China, told Yicai.

The three airlines said in their announcements that Chinese residents' demand for travel and tourism continued to recover in the first half, supporting steady growth in the civil aviation market. However, the outbreak of the Middle East conflict since March drove aviation kerosene prices sharply higher, placing enormous cost pressure on the entire industry.

The International Air Transport Association projected in a report released in June that the Middle East conflict would push the average price of aviation kerosene up 70 percent from a year earlier to USD152 per barrel this year. As a result, global airlines' fuel costs are expected to rise 40 percent to USD35 billion, while total industry profits are forecast to fall to USD23 billion from USD45 billion last year.

To cope with elevated fuel costs, China Southern Airlines plans to reduce inefficient routes, expand high-yield routes, and improve utilization of more fuel-efficient aircraft to maximize cost reductions and mitigate the impact of oil price volatility, the company's management said at an earnings briefing in April.

Over the medium to long term, the tighter capacity environment caused by slower-than-expected global aircraft deliveries is likely to persist, Li said. Against that backdrop, the recovery of international routes will remain the key factor determining the profitability of Chinese airlines, she added.

Editors: Dou Shicong, Emmi Laine