China: Major airlines bleed from fuel hedging losses

Air China, the nation’s largest international carrier, said its paper loss from fuel-hedging contracts in 2008 have swollen to 6.8 billion yuan due to the falling global oil prices.

Air China’s actual fuel-hedging loss in December alone was $52.8 million. Earlier the carrier reported a loss of 3.1 billion yuan by the end of October.


The airline started to use fuel-hedging contracts as a shield from the impact of possible soaring fuel prices since 2001.

However, as the oil price kept mounting in the first half of 2008, Air China built up a heavy reliance on fuel hedging contracts. “Currently, fuel hedging contracts account for 50 percent of our total jet fuel consumption,” said Rao Xinyu, board secretary, Air China.

China Daily