In Depth: How Sinopec’s Bid for CNAF Could Rewrite China’s Jet-Fuel Monopoly

[para. 1] China’s aviation fuel supply chain, originally separated from the military in 1980 and supporting the rapid expansion of its commercial aviation industry, is now undergoing its most significant restructuring in decades.

[para. 2][para. 3][para. 4][para. 5] The near-monopoly supplier, China National Aviation Fuel Group Ltd. (CNAF), is in advanced talks for a merger with China Petrochemical Corporation (Sinopec Group), China’s largest refining company. Overseen by the State-owned Assets Supervision and Administration Commission (SASAC), the details and timeline of the merger remain uncertain, but the process is underway. CNAF’s Singapore-listed subsidiary confirmed major restructuring activities, though no official merger announcement has been made.

[para. 5][para. 6] This overhaul of the aviation fuel supply chain—accounting for 10% of China’s refined oil consumption and serving 712 airports—reflects Beijing’s attempts to secure both energy security and efficiency. CNAF operates under an exclusive national franchise, controlling over 95% of airport fueling infrastructure, tracing its roots to reforms after the civil aviation sector was separated from the PLA Air Force.

[para. 7][para. 8] China has become the world’s second-largest civil aviation and jet fuel market. In 2024, jet-fuel consumption grew 13% to 39.28 million tons. CNAF sources its fuel from Sinopec, China National Petroleum Corp. (CNPC), China National Offshore Oil Corp. (CNOOC), as well as independent and importers, but does not refine oil itself.

[para. 9][para. 10] CNAF supplies 258 domestic transport airports, 454 general aviation airports, and serves 585 airlines globally. Industry experts see the restructuring as significant, potentially changing the market landscape and stakeholder relationships.

[para. 11][para. 12] The planned merger is in line with SASAC’s push for centralized, “professionalized restructuring” and vertical integration among state-owned enterprises (SOEs) to boost efficiency and resilience. However, critics say further consolidating the market could entrench monopolistic practices, reducing competition and risking excessive control by a single giant.

[para. 13][para. 14][para. 15] Critics, including former CNAF executives, argue that a merger would stifle market competition, concentrate power, and undermine diversified supply chains vital for energy security. Airlines worry about losing bargaining leverage if CNAF is fully absorbed by Sinopec.

[para. 16][para. 17][para. 18][para. 19] The merger constitutes vertical integration, connecting refineries, logistics, and terminals, theoretically improving efficiency, cost, and coordination. Sinopec would gain direct access to the aviation fuel market, strengthening pricing influence amid stagnant oil demand elsewhere. CNAF remains profitable, posting $33.45 billion in 2024 revenue and $382 million in net profits. Meanwhile, Sinopec’s profits are declining due to the rise of electric vehicles and chemicals overcapacity, making the more promising jet fuel sector appealing.

[para. 20][para. 21] Projections suggest annual civil aviation fuel growth will slow to 4-5% in coming years, peaking at 75-80 million tons around 2035-2040. Despite oversupply, with a surplus of 18.55 million tons in 2024, a more monopolized refueling system could reduce supplier diversity and bargaining options.

[para. 22][para. 23][para. 24][para. 25] The sustainable aviation fuel (SAF) segment is emerging, dominated (90%) by private firms, and seen as key to decarbonization. China’s SAF production remains limited, but investments and certification are increasing. Critically, whoever controls refueling infrastructure will control SAF market access and pricing, raising concerns a consolidated network could stifle private innovation.

[para. 26][para. 27][para. 28][para. 29][para. 30] Jet fuel is about 30% of a Chinese airline’s operating cost, with procurement governed by regulated pricing formulas, ensuring relative price stability—but a post-merger scenario could disadvantage airlines and weaken regulatory mediation. For example, in 2025, Air China’s jet-fuel costs formed 31.05% of operating expenses, and a 5% price change could shift costs by 1.216 billion yuan.

[para. 31][para. 32][para. 33] CNAF faces criticism for high domestic jet fuel prices versus global benchmarks, attributing costs to its nationwide service obligations, especially in serving loss-making airports.

[para. 34][para. 35][para. 36][para. 37] Efforts at liberalization since 2002 have struggled due to safety, investment requirements, and the logistical impracticality of duplicating CNAF’s infrastructure dominance. Proposals for greater competition exist, but resistance remains high. CNAF has opened up through joint ventures with foreign firms, which now serve 15.4% of the market as of 2024.

[para. 38] In summary, China’s jet fuel market stands at a crossroads—balancing energy reform, market efficiency, and competition with monopoly risks as a once-quiet logistical giant prepares for landmark change through vertical integration.