China Southern Reports $6.3 Million Fuel-Hedging Gain
China Southern Airlines Co., Asia’s biggest carrier by passenger numbers, made $6.3 million from fuel-hedging last year as prices surged to a record and then tumbled 70 percent.
The carrier closed all of its fuel-hedging positions in September, a spokesman, who declined to be identified because of a company policy, said today by phone. The airline’s passenger numbers rose 5.1 percent last year, the least in five years, it said in a statement last night.
The fuel-hedging gain contrasts with China Eastern Airlines Corp. and Air China Ltd., which have both reported possible losses from such contracts. China Southern’s hedging profit, a 3 billion yuan ($440 million) government bailout and its focus on domestic flights may also help the carrier withstand waning travel demand caused by the nation’s slowing growth.
“China Southern may be able to post a profit this year,” said Li Lei, an analyst at China Securities Co. in Beijing. “It would see the least impact from a global economic slowdown and oil price fluctuations.”
More than 80 percent of Guangzhou-based China Southern’s passenger traffic was on domestic routes last year, according to company statistics. Chinese airlines are only able to hedge fuel purchase for international flights. The government controls prices on domestic routes.
China Southern was unchanged at HK$1.32 at the 12:30 p.m. trading break in Hong Kong. The airline’s Shanghai shares were little changed at 3.20 yuan as of 2:05 p.m.
Passenger Numbers
The carrier flew 59.8 million passengers last year. That’s 37 percent of the nation’s total air travelers, according to the statement. Cargo volume was little changed at 872,000 tons. Passenger volume rose 16 percent in 2007, while freight traffic climbed 6.5 percent.
China Eastern posted a $420,000 cash loss from settling hedging contracts in November. Air China, the nation’s largest international carrier, made a $5.9 million paper loss from hedging contracts in November, it said on Dec. 19.
Airlines use hedging to guard against increases in fuel prices. The cost of jet fuel more than doubled in a year to a record $181.85 a barrel in July. It ended the year at $54.15.
Tags: China Southern Airlines, Fuel