Air China doubles H1 profits on fuel hedging gains

Singapore
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Air China's profits after tax more than doubled in the first half of 2009, with fuel hedging gains helping to overcome large drops in passenger and cargo revenues amid a "cold winter for the aviation industry".

The Beijing-based carrier says that it made 2.82 billion yuan ($412.8 million) in the six months to 30 June, up 169% from the 1.05 billion yuan profit it reported in the first half of 2008.

Turnover, however, fell by 2.44 billion yuan to 23.11 billon yuan at the Star Alliance member. This came as air passenger revenues fell by 1.48 billion yuan to 19.24 billion yuan, and air cargo revenues decreased by 1.69 billion yuan to 1.97 billion yuan.

This was overcome by a 42.51% drop in jet fuel costs to 6.1 billion yuan, and Air China also made a 1.45 billion yuan gain from fuel hedging. This helped the carrier to report an operating profit of 2.82 billion yuan, reversing an 83,715 yuan net loss from a year before.

"The profitwas primarily due to the Chinese government's policy of boosting China's domestic demand, the implementation of relevant measures by the civil aviation industry to cope with the financial crisis, the drop in international fuel prices and the group's effective cost control," says Air China.

"These factors partially offset the adverse impact of the global economic crisis, pandemic Influenza A (H1N1), and decrease of net gains from foreign exchange."

Looking ahead, the airline warned that passenger and cargo numbers would continue to be soft. It adds that increased competition in the Chinese domestic market could affect yields. Exchange rate fluctuations and rising fuel prices were also likely have an impact on its bottom line, it pointed out.

"The group will continue to operate steadily, take good advantage of the relatively rapid growth of the domestic market, bring into play the competitive edges of its hub network, cement its industry-leading cost advantages, continually improve its ability to respond to crisis, and to develop sustainably and strive to create greater value for its shareholders and society in this cold winter for the aviation industry," says Air China.