Is flying increasingly resembling taking a slow old green train? Why are airlines suffering such staggering losses?

The hard, uncomfortable seatbacks, shoddy meals, and exorbitant fuel surcharges mean every one of us is paying real, hard-earned money for this brand-new global system.

Recently, a friend who just returned from a trip ranted nonstop to me about his flight: the seatback was ultra-thin with no headrest, it was so stiff and uncomfortable to sit on that he felt like he was back on the hard plank bed in his college dorm.

I asked him if it was China Southern Airlines. He said no. After checking, I found that this type of lightweight seat has now been widely adopted by almost all major mainstream airlines across different aircraft models. Airlines usually claim that these seats are designed for energy conservation and environmental protection, and are more ergonomic. But a quick browse on Xiaohongshu will show that there are countless complaints about them.

So why did they create such a "torture device" on planes? The answer is very simple, you can find it directly in their financial reports.

At the end of August, the semi-annual reports of the three major Chinese airlines were released one after another. Air China lost more than 2.2 billion yuan, China Eastern Airlines lost over 2.1 billion yuan, and China Southern Airlines fared the worst with a loss of nearly 3.7 billion yuan. The total loss of the three airlines exceeded 8 billion yuan.

What do you do when you are losing money? Cut costs and improve efficiency, of course.

This brand-new magic weapon for cost reduction and efficiency improvement is the lightweight seat.

01

Take China Southern Airlines as an example. Last year, it retrofitted 43 aircraft with the JT220E lightweight seats produced by Avic Taihang. Netizens measured that the thickness of the seatbacks was reduced by about 30%. Although the official stated that the seat pitch was not reduced, the reduction in seatback thickness alone is enough to squeeze in an extra row of seats.

Combined with the practice of removing business class to make the entire cabin economy class, after replacing the seats, the number of seats on a Boeing 737 has increased to 186, and that on an Airbus A320 has risen to 180, which is almost close to the level of the so-called "green skin train in the sky".

No wonder many people complain and suggest that China Southern Airlines change its name directly to "China Low-cost Airlines".

Besides the extra row of seats that can be sold for tickets, the biggest advantage of lightweight seats is their light weight: one seat can be 2 kilograms lighter, and an entire aircraft can reduce its weight by nearly 400 kilograms.

What does 400 kilograms mean? For a civil aviation airliner, every 1 kilogram of weight reduction can save about 0.03 kilograms of fuel per 1000 kilometers of flight, and one aircraft can save nearly 210,000 yuan in fuel costs a year.

Considering that China Southern Airlines has a total fleet of more than 900 aircraft, as lightweight seats are gradually installed on all planes, it is possible for the company to save tens of millions of yuan every year.

After all, the rise in fuel costs caused by the US-Iraq conflict in the first half of this year is absolutely the chief culprit for the huge losses of the three major airlines.

In the first half of the year, China Southern Airlines' fuel cost reached 34.886 billion yuan. Just the fuel price alone cost 9.5 billion yuan more than the same period last year. If this 9.5 billion yuan is spread over every passenger, China Southern Airlines burns an extra 115 yuan on average for each air ticket.

But passengers don't let you burn fuel for free, right? There is the fuel surcharge after all.

At the beginning of this year, the fuel surcharge was 10 yuan and 20 yuan (for flights under and over 800 kilometers respectively). Everything was peaceful, and the airlines' profit statements were quite impressive.

But once the war broke out, the fuel surcharge surged 6 times in place. In May, it reached the highest level of the year at 90 yuan and 170 yuan. Coupled with the civil aviation development fund, these extra fees are almost as expensive as the airfare itself.

But can this sum of money cover the fuel costs of airlines?

No, it can't.

There is a levy benchmark for fuel surcharges: the surcharge is only collected when the price of aviation kerosene exceeds 5,000 yuan per ton. For the incremental cost of the excess part, airlines bear 20% and passengers bear 80%.

No matter how high the fuel surcharge is, airlines have to bear at least 20% of the extra cost.

That's not all. The fuel surcharge is set by the National Development and Reform Commission and the Civil Aviation Administration of China, and there is a fixed time window for price adjustment. For example, this year the US and Israel launched an attack at the end of February, and the price of aviation kerosene started to rise, but the adjustment of fuel surcharge did not come until April. During that one month gap, the airlines had to bear all the extra costs themselves.

In addition, the pricing design of the fuel surcharge is very conservative: there are only two tiers, which cannot match the specific flight distance of each trip, let alone different aircraft models and different load factors. If you happen to focus on long-haul routes and buy many fuel-thirsty intercontinental wide-body airliners, then congratulations, the fuel surcharge cannot cover this gap at all, and you have to bear the loss yourself.

After all the calculations, the result is that the fuel surcharge can only cover 30% to 40% of the incremental cost of airlines.

So we saw that in the first two months of the first half of the year, the airlines made huge profits, but after March, not only did they lose all the profits they made in the first two months, the three major airlines also lost a total of 8 billion yuan.

Here is another piece of supplementary information.

When oil prices rise, not only passengers feel the pinch, airlines are under pressure, even the state has taken part of the pressure for the airlines by regulating the ex-factory price of aviation fuel. Although the price still rose, the increase was suppressed by more than 1,000 yuan compared with the normal market price.

On the one hand, the regulators do not allow airlines to charge passengers more arbitrarily, on the other hand, they help airlines keep fuel prices down, making sure no single party pays for the oil price surge alone.

02

So are airlines so fragile that they can only watch oil prices rise and eat away at their profits and capital base?

Of course not. In fact, they used to have a special weapon designed for oil price fluctuations.

But not only did they not use it well, they once abandoned it completely after misusing it.

This weapon is called hedging.

What is hedging? Simply put, it is a futures contract used to lock in prices and ensure the certainty of future operations.

For example, if you are an airline and you need to buy aviation kerosene. But you are worried that the Middle East will be in chaos someday, the global situation will become unstable, and oil prices will skyrocket again. So you go to the futures market and make an agreement with the counterparty that at a certain time in the future, say one year later, you have the right to buy their goods at a fixed price. Even if the price goes through the roof by then, your cost is locked.

Then there are two possible outcomes. One year later, oil prices really skyrocket, and you are very happy because you have already bought the contract at a low price in the futures market, which is just enough for your use, and you successfully avoid the risk.

In the other scenario, oil prices do not rise but fall instead, and you will not be sad either. Although the futures contract does not take effect and the option premium you paid is lost for nothing, that is just a small sum of money. When oil prices fall, your operating costs are reduced, which is a huge gain.

No matter what happens, you will not end up in the worst situation. For real industry operators who actually need raw materials, they are not very afraid of expensive raw material costs. As long as the price stays stable, they can always make plans accordingly.

What they fear are extreme prices and sharp fluctuations, which are paradise (or hell) for speculators, but a nightmare for operators.

Hedging is like an insurance that helps manufacturers avoid the risk of raw material price fluctuations.

In the aviation industry, hedging used to be a commonly used weapon for all players. Especially in the United States, there are players like Southwest Airlines, which stood firm against the rising oil prices entirely relying on hedging transactions.

China's aviation industry started relatively late, and once learned from the United States, so it also learned how to use this weapon.

03

This story dates back more than 20 years.

At that time, international fuel prices experienced nearly 6 years of continuous growth. From 2002 to July 2008, international oil prices rose from 19 US dollars per barrel to 147 US dollars per barrel, an increase of more than 7 times.

At the same time, major domestic airlines were also using a series of financial means such as hedging to avoid risks, and the implementation was generally very good.

The turning point came in June 2008, when oil prices had already reached an extremely high level. The industry generally estimated that oil prices would rise to 200 US dollars per barrel in the future. In order to prevent further oil price surges from affecting profits, China Eastern Airlines and Air China both launched new rounds of hedging transactions.

Just after Air China and China Eastern signed the contracts, happily thinking they were in a stable position, the 2008 financial crisis broke out. It spread to the oil market in less than a month, and oil prices plummeted accordingly. In just five months, oil prices fell below 40 US dollars per barrel, and once dropped to just over 33 US dollars.

Things went terribly wrong. The two airlines never expected the financial crisis to happen, nor did they expect oil prices to fall that low.

In fact, the oil volume covered by hedging only accounted for 30% to 40% of the actual fuel demand of the two airlines, and they could still buy cheap oil in the market to average out the cost. But the financial crisis dragged down the economy, the business volume of the two airlines also shrank, and the expensive oil bought through hedging far exceeded their actual usage, doubling their losses.

At the peak, the losses of both companies exceeded 8 billion yuan. China Eastern Airlines was once insolvent, and only avoided bankruptcy with capital injection from the State-owned Assets Supervision and Administration Commission.

A burnt child dreads the fire.

Since 2008, domestic airlines have almost removed hedging from their weapon arsenal, preferring to bear the risk directly rather than use hedging. They only resumed a small amount of hedging operations in recent years.

They also caught a good period of time.

After 2008, the economic situation was generally stable, and oil prices stayed at a low level for a long time. It was not a big problem for airlines not to do hedging. Even the US airlines that were best at hedging did not want to pay the annual option premium for nothing, so they simply gave up hedging.

Chinese and American airlines coincidentally chose to go unhedged when it comes to oil price risks.

Then, on February 28, 2026, the United States and Israel launched an air strike on Iran, and Iran blocked the Strait of Hormuz, choking off one fifth of the global oil supply, and energy prices rose sharply accordingly.

The stock prices of the four major US airlines fell by double-digit percentages. The three major Chinese airlines all made profits collectively in the first quarter, but suffered huge losses directly in the second quarter. On the contrary, the conservative European airlines that have adhered to hedging for decades were not particularly affected.

So we see that airlines not only chose to modify their seats to cut costs, but also started to cut costs on meals, business class, and flight routes. Although they cannot control the international situation, they can still achieve cost reduction and efficiency improvement by making passengers suffer a little.

04

Today, the US and Iran have been in conflict in the Strait of Hormuz for more than half a year, the situation has not improved, and oil prices are still fluctuating repeatedly.

Maybe in the future, hedging will make a comeback, other cost reduction and efficiency improvement measures will continue, and domestic airlines may continue to move towards low-cost operations.

And all of this is for one thing: certainty.

For a long time in the past, the global situation was generally stable, and globalization was generally advancing. Everyone could focus on optimizing efficiency, cutting excess inventory, excess production capacity, and excess costs. Everything can be asset-light, and everything can rely on other enterprises and other countries.

The cost of hedging, of course, is also an excess cost that needs to be cut.

However, when everything starts to become uncertain again: a strait, a few sea mines, a tweet, a statement, can make the whole world fall into anxiety.

So those "safety belts" need to be fastened one by one again. And safety has a clear price tag, which requires all parties to pay for it.

The hard, uncomfortable seatbacks, shoddy meals, and exorbitant fuel surcharges mean every one of us is paying real, hard-earned money for this brand-new global system.

This article is from the WeChat public account "IC Lab" (ID: InsightPlusClub), author: IC Lab, published with authorization from 36Kr.