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Air China's first loss but stays optimistic for future

AIR China announced its first ever annual loss after its listing in 2004, but the carrier expects a better performance this year considering a warming economy and government support.

The Beijing-based carrier lost 9.15 billion yuan last year, or 0.77 yuan a share, compared with a 3.7-billion-yuan profit a year earlier, and its revenue rose 7.03 percent to 53 billion yuan, it said in a statement to the Shanghai Stock Exchange today.

"Air China received the biggest shock of all carriers with the Sichuan earthquake and the tightening visa regulations before the Olympic Games as Chengdu and Beijing are the two most important hubs for the carrier," said Tao Wei, an analyst with China International Capital Co Ltd.

"The domestic aviation market is expected to have double-digit growth in the second and third quarters, and we expect Air China will be the most profitable carrier in China in the next two years," Tao said.

Kong Dong, chairman of the carrier, said this year will be challenging but it is capable of tackling difficulties by taking opportunities and controlling costs, as well as having support from the government.

The carrier made paper losses of 7.47 billion yuan on fuel-hedging in 2008 and real losses reached 448 million yuan.

Air China hedged the most fuel among Chinese carriers because it ran the largest international network. Domestic carriers can hedge only fuel purchases for overseas flights as domestic prices are state-controlled.

The carrier also released its unaudited first-quarter profit today, which fell 5.68 percent to 981 million yuan.

Its paper fuel-hedging losses declined to 989 million yuan in the quarter thanks to rising oil prices, and its real loss hit 948 million yuan, it said in a separate statement.

As well as Air China, two other air giants – China Southern Airlines and China Eastern Airlines – have also reported losses for last year. China Eastern lost 14 billion yuan and China Southern lost 4.8 billion yuan.


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