Air China H1 Net Profit Surges

Air China reported a surge in first-half earnings on lower oil prices and robust outbound demand for leisure travel.

In January-June, Air China's net profit came to CNY3.9 billion yuan (USD$609 million), from CNY474 million yuan a year earlier.

Fuel, which accounts for about 30 percent of its operating cost, fell 29.8 percent to CNY12.1 billion yuan in the six-month period.

Chinese carriers have stayed away from fuel hedging after suffering a big loss in 2008-2009. That allows them to reap the full benefit when oil prices drop.

A bigger contribution from partner Cathay Pacific Airways also helped to push up its earnings.

Air China has been expanding its global network, with passenger capacity up 8.9 percent for domestic routes in the six-month period.

Earlier in the month, Beijing announced a 2 percent depreciation of the yuan to help shore up its weakening exports, a move industry insiders say will have limited impact on airline earnings.

"It's not that dramatic in terms of the magnitude," said Andrew Herdman, director general of the Association of Asia Pacific Airlines. "The biggest factor is the sharp fall in oil prices."