Shanghai Securities News reports that China's airlines lost about RMB2.5 billion in the fist six months of 2006.

Fuel price increases are the culprit, as China's National Development and Reform Commission raised the price of aviation fuel twice this year for a total of 12%.

Local media report that operating costs for the air carriers reached RMB34.98 billion in the first quarter, rising 23.5% from the same period last year.

China's airlines carried 32.1 million passengers and 563,000 tons of freight, up 21.1% and 14.8%, respectively.