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Air China Gains on Optimism Earnings Will Recover

2009-01-19

Air China Ltd., the nation’s largest international carrier, gained the most in a month in Hong Kong trading on speculation earnings will recover this year. The airline rose 6.4 percent to HK$2.00 at the close. The carrier said on Jan. 16 it expects to post a full-year loss after making paper losses of 6.8 billion yuan ($995 million) on fuel-hedging. “We believe 2008 was Air China’s trough year and 2009 will be one of recovery,” wrote Paul Dewberry and YingYing Hou, analysts at Bank of America Corp.’s Merrill Lynch & Co. unit. The paper losses on fuel hedging were at the “lower end” of between 5 billion yuan and 10 billion yuan the analysts had estimated. China’s airlines are poised to benefit from a rebound in travel demand, lower costs and prospects for mergers in the industry, according to Shenyin & Wanguo Securities Co. Air China has fallen 17 percent this year on concern over mounting losses from wrong-way bets on fuel and cooling demand for air travel. Asia Pacific airline shares also gained today on optimism the slide in oil prices will lower costs, the biggest expense for most carriers. Crude oil declined in New York on the expectation faltering global economic growth will drive down fuel demand for a second year. Crude oil for February delivery fell as much as 60 cents, or 1.6 percent, to $35.91 a barrel in after-hours electronic trading on the New York Mercantile Exchange, and traded at $35.99 at 3:49 p.m. in Singapore. Qantas Airways Ltd., Australia’s biggest carrier, added 4.5 percent to A$2.58 in Sydney trading, while Korean Air Lines Co. rose 1.5 percent to 36,600 won in Seoul.

(Source:Bloomberg, 2009-01-19)