China Eastern: Fuel Hedging Loss $900 Million

China Eastern Airlines, one of the country's largest carriers, said it faces a "significant loss" for 2008 after fuel price hedges turned bad to the tune of 6.2 billion yuan ($906 million).

The costs associated with the wrong way bets on jet fuel prices will be somewhat offset by lower fuel costs, the airline said in a statement to the Hong Kong Stock Exchange late Sunday. Crude oil prices plunged from about $147 a barrel in July to about $45 a barrel at the end of last year.
State-run China Eastern's actual cash loss from fuel hedging was $14.15 million as of the end of last month, it said.

"The civil aviation industry is facing an industrywide crisis. In addition, the fourth quarter is the traditional offseason for the aviation industry. It is anticipated that the Company will suffer significant operating losses in 2008," it said.
The carrier, based in Shanghai, reported fuel hedging losses of 1.8 billion yuan in October. The latest figures are about double analysts' estimates, the Hong Kong newspaper South China Morning Post reported.

Many airlines have been caught out by the reversal in oil prices in the second half of last year.
Hong Kong-based carrier Cathay Pacific Airways reported last week that it could lose nearly $1 billion from hedging its jet fuel costs. Air China earlier reported potential hedging losses of 3.1 billion yuan.

Financially troubled China Eastern reported an overall net loss of about 2.3 billion yuan in the first three quarters of 2008. It carried 5.4 percent fewer passengers in 2008 than in the year before.
The government is injecting 7 billion yuan into the carrier, and billions more into other carriers, to help tide them through the crisis.

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