China Eastern Airlines suffers $2.2 billion loss

BEIJING - China Eastern Airlines Ltd., one of China's three major state-owned carriers, said it suffered a 15.3 billion yuan ($2.2 billion) loss for 2008 due to high fuel costs, fewer passengers and a wrong-way bet on fuel hedging contracts.

The loss, equivalent to 3.14 yuan per share, compared with a 2007 profit of 378.6 million yuan or 0.08 yuan per share, the Shanghai-based carrier said Thursday.

Financially struggling China Eastern received a 7 billion yuan capital injection from the government last year. The airline warned earlier it faced a significant loss for 2008 after fuel price hedges turned bad to the tune of 6.2 billion yuan.

China Eastern also blamed a decline in international travel due to the global financial crisis, record fuel prices and intense domestic competition.

"These have a greater impact on the group's results," chairman Liu Shaoyong said in a statement.

China's airlines were battered in 2008 by high fuel costs and weak demand following years of double-digit growth.

In addition to injections of government money, the major carriers have been exempted from a tax on fuel surcharges from Jan. 1, 2007, through 2010. The government says that will save them a total of 2.5 billion yuan ($360 million).

China Eastern is especially weak and tried to bring in Singapore Airlines as a strategic investor in hopes of improving operations. But shareholders rejected that last January after rival Air China Ltd. said it would offer more money in a future bid.

China Eastern's revenues fell 3 percent in 2008 to 41 billion yuan ($5.9 billion), while expenses soared 32 percent to 56.8 billion yuan ($8.3 billion), China Eastern said. Fuel costs rose 22 percent to 18.5 billion yuan ($2.7 billion).

Passenger revenues fell 5 percent to 34.2 billion yuan ($5 billion).

On Wednesday, the country's other major carrier, China Southern Airlines Ltd., reported 4.8 billion yuan ($700 million) loss for 2008 due to fuel costs and slower traffic.

China Eastern Airlines Ltd.: http://www.ce-air.com

A service of the Associated Press(AP)