Air China, the country's second- largest carrier, said first-half profit increased more than 50 per cent on lower fuel costs and solid growth in travel demand, signalling a rebound in the mainland aviation market.
Earnings were also helped by a 56.7 per cent surge in oil prices between the end of last year and last month, which reduced paper losses on hedging contracts, Air China said in a statement filed with the Shanghai Stock Exchange last night.
Oil prices, which skyrocketed to US$147 a barrel in July last year, have been trading at about US$60 recently. They were quoted at as low as US$45 a barrel in late December and hit more than US$70 last month.
Air China, which had a 7.7 billion yuan (HK$8.73 billion) paper loss from fuel-hedging contracts last year, recorded a gain of about 40 million yuan in the first quarter this year. Citigroup estimates the company could book a 1.2 billion yuan hedging gain for the first half.
The Beijing-based carrier did not reveal exact first-half figures yesterday. In the first six months of last year, the company earned 1.28 billion yuan, under mainland accounting standards.
Citigroup expects Air China to report 1.57 billion yuan in profit for the first half and a full-year profit of 3.59 billion yuan, rebounding from last year's 9.27 billion yuan loss.
Profitability at the mainland's Big Three airlines, including China Eastern Airlines Corp and China Southern Airlines, is improving as domestic air traffic recovers from the swine flu scare. Citigroup said passenger numbers had surged about 20 per cent since last month, boosted by rising consumer sentiment and loosened credit.
