China Eastern Says Suffered Big Loss In 2008

January 11, 2009

China Eastern Airlines, one of the country's big three carriers, said on Sunday that it would report a large loss for 2008 because of slumping traffic and losses on fuel price hedging contracts.

The airline estimated it would suffer a loss of about CNY6.2 billion yuan (USD$908 million) through marking down the value of its fuel hedging contracts after the unexpectedly steep drop of global oil prices late last year.

In addition, the global economic slowdown caused a slide in air travel last year, pushing the airline into the red on an operating basis.

China Eastern said it therefore expected to record a "large" overall loss for last year, though it did not elaborate on the size. It is due to release its 2008 earnings report in mid-April.

For 2007, China Eastern posted a net profit of CNY586 million. For the first nine months of last year, it suffered a net loss of CNY2.29 billion.

Passenger volume fell 5.4 percent last year, the first drop in at least nine years.

Last month China Eastern said it would receive a CNY7 billion capital injection from the government in exchange for a placement of new shares. It estimated the injection, which still needs shareholder approval, would cut its debt-to-asset ratio to 90.13 percent from 98.49 percent at the end of September.

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