Chinese airlines blame fuel costs on profit decline despite higher revenues
2012 05 01
- Details
PROFIT fell 86 per cent in the first quarter year on year for Air China and 74 per cent for China Southern Airlines, despite a 7.7 per cent revenue increase for Air China and a 16 per cent sales boost for China Southern, reports the Wall Street Journal.
Lower profits were attributed to high fuel costs, but hedging options are limited for Chinese airlines under restrictions imposed by the State-Owned Assets Supervision and Administration Commission.
Restrictions are due to huge losses incurred by wrong-way hedging in 2008, when all assumed jet fuel prices would rise but they fell instead, forcing hedgers to buy at suddenly inflated prices. While Chinese airlines can still hedge, new rules on the quantity and duration of futures contracts deter many.
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