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High fuel costs cut into Chinese airline profits

April 27, 2012, Beijing, China - China's two biggest state-owned airlines reported sharp profit declines Friday due to high fuel costs.


April 27, 2012
By Carey Fredericks

China Southern Airlines Ltd., the country's biggest carrier by number of passengers, said its profit in the three months ended March 31 tumbled 74 per cent from a year earlier to 319 million yuan ($50.6 million).

The carrier, based in the southern business centre of Guangzhou, blamed higher jet fuel costs and lower foreign exchange gains due to a slowdown in the rise of China's yuan against the dollar.

Beijing-based Air China Ltd. said its quarterly profit dived 85 per cent to 239.1 million yuan ($37.9 million). Revenue rose 7.5 per cent from a year earlier to 22.9 billion yuan ($3.6 billion).

Chinese airlines have been hit hard by swings in fuel costs. Their ability to hedge against price swings is limited due to restrictions imposed in 2009 after they suffered big losses with misplaced bets on fuel price movements.

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