Air China's first half net profit drops 77pc on soaring fuel costs

AIR CHINA has posted a 77 per cent net profit decline to CNY944.5 million (US$148.7 million) in the first half, blaming soaring fuel prices, intense competition and a foreign exchange loss of CNY341 million against a gain of CNY1.48 billion in The previous year.

Beijing-based Air China suffered a 10 per cent year-on-year increase in fuel prices which represents 50 per cent of its operating costs, resulting in a CNY17.81 billion fuel bill.

Foreign-exchange losses were a key factor for the remaining state-owned airlines with the yuan down by one per cent against the dollar compared to 2011's increase of 4.7 per cent.

China Southern posted a net profit loss of 85 per cent and a foreign-exchange loss of CNY300 million compared to CNY1.2 billion in the previous year. Another major state carrier, China Eastern Airlines, set to publish results for first half, which are likely to be in negative territory.

Air China's dire first half was dragged further by its losses at its joint venture Air China Cargo battered by CNY434 million loss during the same six month period. It's 30 per cent-owned affiliate Cathay Pacific Airways posted its biggest interim loss within the decade at HK$935 million.