Chi­nese Air­lines gain as they avoid fuel hedg­ing

The Pak Banker - - COMPANIES/BOSS -

China's ma­jor air­lines look set to reap the ben­e­fits of a pol­icy not to hedge in the oil mar­ket, when they re­port re­sults over the next week.

Many air­lines across the world are suf­fer­ing fi­nan­cially, de­spite the fall­ing prices of avi­a­tion oil, af­ter be­ing locked into fuel pur­chases at prices above the cur­rent mar­ket value. But the three largest will an­nounce their an­nual finance re­ports over the next seven days, and now ex­pect net prof­its to grow at least 70 per­cent on 2014 as a re­sult of the low prices.

China South­ern Air­lines Co Ltd, the largest car­rier in Asia in terms of fleet, has forecast net profit to rise to 1.773 bil­lion yuan ($272.3 mil­lion), a 110-130 per­cent rise. Air China Ltd is fore­cast­ing net profit of 3.782 bil­lion yuan for 2015, a growth of 60-80 per­cent from the pre­vi­ous year. "The slump in fuel prices cut the com­pany's op­er­a­tional costs com- pared with the pre­vi­ous year," it said in a state­ment. Hong Kong's Cathay Pa­cific Air­ways, on the other hand, is ex­pected to an­nounce that de­spite over­all 90.48 per­cent year-on-year net profit growth, it was thumped to the tune of HK$8.475 bil­lion ($1.09 bil­lion) from hedg­ing, 8.3 times higher than in 2014.

"Main­land air­lines did not suf­fer such losses, as they have not adopted oil price hedg­ing in re­cent years," said Ge­of­frey Cheng, head of trans­porta­tion and in­dus­trial re­search at BOCOM In­ter­na­tional Hold­ings Ltd.

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