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Trading limits for city airline

SHANGHAI Airlines is to have special trading limits from today after reporting a net loss for the second straight year.

It lost 1.25 billion yuan (US$183 million) last year, compared to 435 million yuan in 2007, and its revenue grew 8.63 percent to 13.37 billion yuan, the carrier said in a statement to the Shanghai Stock Exchange yesterday. The carrier attributed the loss to the Sichuan earthquake, waning demand during the financial crisis and rising fuel prices, the statement said.

"The loss is 17.9 percent higher than our expectation. Its operating costs rose 14.59 percent from a year earlier due to the earthquake, economic downturn and rising fuel costs," said Hu Wenzhou, an analyst with BOC International.

The two-year losses will lead to special trading limits - a daily trading cap of 5 percent in either direction - for the carrier, according to rules of China's Securities Regulatory Commission.

The carrier said it aims to make a profit this year to avoid being delisted from the Shanghai bourse.

"The company has mapped out a raft of measures, including delaying purchases of aircraft, developing rising markets, cutting expenses and saving costs to achieve the target," the statement said.

It has also secured a 1-billion-yuan cash injection from shareholders via private placement to replenish working capital.

Zhou Chi, chairman of Shanghai Airlines, said earlier this month that the carrier still had a chance of making a profit this year if its figures recover in April and May.

He said this year will be tough and it is cutting salaries and reducing capacity to save costs, but there were no plans to lay off employees.

Hu said investors should hold Shanghai Airlines shares as there was the possibility of a merger with China Eastern Airlines due to speculation the government will encourage the two Shanghai-based carriers to merge.

But Zhou said the carrier had no knowledge of this and the parent companies of the two airlines had not discussed the possibility with them.

The International Air Transport Association, which represents 230 airlines, has revised its forecast for the global aviation industry to report losses of US$4.7 billion this year, compared with December's forecast of US$2.5 billion.


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