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First loss, yet carrier remains optimistic

AIR China encountered its first annual loss last year since its listing in 2004, but is expecting a better performance this year.

The Beijing-based carrier lost 9.15 billion yuan (US$1.3 billion) last year, or 0.77 yuan a share, compared with a 3.7-billion-yuan profit in 2007, and its revenue rose 7.03 percent to 53 billion yuan, it told the Shanghai Stock Exchange yesterday.

"Air China suffered the biggest impact of all carriers from the Sichuan earthquake and 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.

Air China chairman Kong Dong said 2009 would be challenging but it was capable of tackling difficulties by seizing opportunities and controlling costs, in addition to the support it was receiving 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 only hedge fuel purchases for overseas flights as domestic prices are state-controlled.

The carrier also released its unaudited first-quarter profit yesterday, 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 reached 948 million yuan, it said in a separate statement issued yesterday.


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