Air China faces billion-dollar loss from fuel hedging
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Air China has warned it faces a “significant loss” for 2008 because of wrong-way bets on fuel prices that will cost nearly US$1 billion.
Associated Press reported that the carrier, one of China’s three major state-owned airlines, lost US$52.8 million in December from fuel contracts. In a statement through the Hong Kong Stock Exchange, it was quoted saying that total losses on fuel contracts as of 31 December was estimated at CNY6.8 billion (US$997 million).
Air China managers “made a preliminary estimate that the company will incur significant loss for the year ended 31 December 2008,” the statement was quoted saying.
The report said another state-owned carrier, China Eastern Airlines, had also warned it faced a loss for 2008 because of fuel hedging losses estimated at CNY6.2 billion (US$906 million). Cathay Pacific Airways had earlier said it could lose nearly US$1 billion from fuel hedging.
Many airlines, which had tried to protect themselves through hedging against soaring fuel costs last year, lost money when record oil prices plunged less than US$50 a barrel.
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