Air China Won't Increase Fuel Hedging - Report

February 19, 2009

Air China will not add to its jet fuel hedging positions but will adjust them to try and cut last year's huge losses, official media quoted a senior executive as saying in a report on Thursday.

The airline is also considering issuing medium-term corporate bills in the near future, the China Securities Journal quoted Fan Cheng, Air China vice president and chief accountant, as saying.

Air China will raise up to CNY6 billion yuan (USD$877.6 million), as it has not proceeded with a planned issuance of 400 million new A shares, Fan said.

Hedging losses were a key factor behind the airline's expectation that it will post a significant loss for 2008.

Reflecting a plunge in oil prices late last year, fair value losses on its fuel hedging contracts had increased to CNY6.8 billion at the end of last year from CNY3.1 billion in late November, the airline estimates.

Fan did not give guidance for Air China's financial performance this year, but said it will be better than 2008.

China Eastern Airlines, which estimated a loss of about CNY6.2 billion last year through marking down the value of its fuel-hedging contracts, will also adjust its hedging positions to cut losses, executives had said.