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Air China books 6.8b yuan fuel-hedging loss

By Lu Haoting (chinadaily.com.cn)
Updated: 2009-01-20 11:49

Air China said its losses in fair value of fuel hedging contracts totaled 6.8 billion yuan ($994 million) as of Dec 31, 2008, the largest among the country's three leading airline groups.

Related readings:  Chinese airlines face downturn  Shanghai Airlines estimates losses of 870m yuan for 2008  China Eastern books huge fuel-hedging loss  Southern Airlines forecasts loss for 2008

The actual loss from the settlement of the fuel hedging contracts in December 2008 was $52.8 million, the airline said in a statement to the Hong Kong stock exchange on Jan 16.

Air China's fuel hedging contracts were signed in July 2008 when international crude prices were hovering at above the $147 per barrel level. These contracts are effective until 2011.

"If the international crude prices stay at a low level, we will try to offset the losses through the purchase of cheaper spot fuel," Huang Bin, board secretary of Air China, was quoted as saying by Securities Daily on Jan 19.

Huang said fuel costs account for over 40 percent of Air China's total operating costs.

The Beijing-based carrier is China's first airline to adopt fuel hedging contracts.

China Eastern Airlines said earlier that its fuel hedging losses amounted to 6.2 billion yuan during the period.