Airlines face hedge-related losses
SHANGHAI – Not long ago airlines were boasting how well they had done by hedging their fuel bills as the price headed into orbit.
Now some may feel they were not quite so smart after all. As the price of fuel plummets, airlines that hedged are now paying above the spot price.
Air China has revealed a US$276.5 million loss in the September quarter owing to weak domestic market demand and fuel hedge write-downs,
CA chairman Kong Dong said that “market demand has become one of the major factors affecting profitability as international oil prices have substantially declined recentlyâ€.
The carrier also said in a Shanghai Stock Exchange statement that the sharp drop in fuel prices during the quarter resulted in hedge-related losses.
Meanwhile, Lufthansa airline reported a 75% fall in net profit in the third quarter due to high fuel costs and weakened sales arising from the credit crunch.
The airline posted 149 million euros in net profit between July and September, after saying yesterday that it would cut its 2008 operating profit target to 1.1 billion euros from 1.38 billion euros, the same figure it posted last year.
Operating profit in the third quarter plunged by 53.4% to 279 million euros , the company said in a statement.
In the first nine months of the year, operating profit fell by 9.3% to 984 million euros. Net profit during the same period plummeted by 65.1% to 551 million euros.
Ian Jarrett
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