Air China Ltd, the nation's largest international carrier, said losses on hedging contracts tripled because of wrong-way bets on fuel prices.
The fair-value loss on contracts widened to 3.1 billion yuan (US$454 million), from 1 billion yuan in the third quarter, Air China said in a statement to Hong Kong's stock exchange. The Beijing-based airline signed contracts in July with terms until 2011.
Airlines lost money after jet-fuel prices plunged 61 percent from a peak on July 11, leaving them with contracts to buy fuel for more than market rates. Cathay Pacific Airways Ltd, Hong Kong's biggest carrier, said hedging losses as of October 31 are estimated to be HK$2.8 billion (US$359 million), according to Bloomberg News.
"Controlling the impact of rises in fuel price is key to sustaining the company's growth and maintaining the stability in its generation of profits," Air China Chairman Kong Dong said in the statement.
Fuel accounted for more than 40 percent of operating costs this year, the statement said. Air France-KLM Group has reported a 96-percent drop in second-quarter profit.
(Shanghai Daily November 24, 2008)
