China's Hainan Airlines saw its net profits fall 11.7 percent in the first quarter as higher fuel prices squeezed margins.

The Chinese carrier, based in the southern resort island of Hainan, booked a net profit of CNY12.09 million yuan (USD$1.5 million) from January to March, versus a net profit of CNY13.69 million (USD$1.7 million) a year earlier, it said in a statement carried in the official Shanghai Securities News on Saturday.

For the full year 2005, it swung to a net loss of CNY215.82 million (USD$26.9 million) from a net profit of CNY90.65 million (USD$11.3 million) a year earlier, far lagging a forecast given by the chairman of the listed company's parent earlier this year.

Chairman Chen Feng had said that he expected 2005 earnings to come at between USD$10 million and USD$12 million. If not for a soaring fuel bill, it could hit USD$40 million, he added.

Hainan Air, mainland China's number four carrier, mainly flies to domestic destinations, but has expanded its network to include Bangkok, Kuala Lumpur, Osaka and Budapest.

Other Chinese airlines, such as China Eastern Airlines, have also fallen victim to high oil prices.

Hainan, which plans to change its name to Grand China Air after absorbing three smaller rivals, expects to list its shares in Hong Kong at some point in 2007 at the latest, Chen said in February.

Grand China Air has raised USD$420 million in an initial private placement and share sale, and is hoping to raise another USD$250 million.