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Support boosts airline

SHANGHAI Airlines flew into a net profit in the first quarter of this year, helped by local government support, the carrier said yesterday.

Its net income fell 28.72 percent from a year earlier to 26.27 million yuan (US$3.85 million), or 0.024 yuan a share. Its revenue fell 20 percent to 2.73 billion yuan, the carrier said in a statement to the Shanghai Stock Exchange.

However, if the local government support of 153 million yuan were excluded, the carrier would post a net loss of 0.117 yuan per share, according to the statement. The carrier has secured a 1-billion-yuan cash injection from its state-owned shareholder - Jinjiang International Holdings Co - to replenish its working capital and repay loans.

But waning travel demand has taken a toll on the airline's overall performance, it said.

"Lower ticket prices, reduction of fuel surcharges and foreign exchange losses dampened the carrier's income despite the travel market starting to warm up slightly in late March," the carrier said.

Hedging loss dips

But the airline's paper loss on fuel hedging shrank to 3.57 million yuan in the first quarter, it said.

The carrier, the smaller of Shanghai's two airlines, has received special treatment - its shares are limited to a daily trading cap of 5 percent in either direction - after posting two years of losses of 1.25 billion yuan in 2008 and 435.12 million yuan in 2007.

A third-year loss will see Shanghai Airlines delisted, but Zhou Chi, the carrier's chairman, has said the airline may be profitable this year if its financial performance recovers in April and May. He warned this year will be tough and salaries and capacity will be cut to save costs, but there were no plans to lay off employees.

"Shanghai Airlines is expected to gain from the recovery in domestic demand and make a profit this year," said Tang Jianhua, an analyst of Guosen Securities Co. He raised his forecast for demand for domestic travel from 14 percent to 18 percent.


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