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Air China net profit up despite rising fuel costs

[SHANGHAI] Flag carrier Air China said its first-half net profit grew only slightly as surging jet fuel costs cut into higher revenue earned from growing Chinese travel demand.

The state-owned airline earned 3.92 billion yuan (S$807 million) in the January to June period, up 3.3 per cent from 3.79 billion yuan over the same stretch last year, it said late Wednesday in a statement to the Hong Kong stock exchange, where it is listed.

"Despite the influences of unfavourable factors including the oil price rebound, the group still achieved satisfactory results," the Beijing-based airline said.

Chinese carriers have benefitted from a boom in domestic and international air travel as the country's middle class spends more on leisure, but the recent bounce in fuel costs has pressured the bottom lines of the country's "big three" airlines.

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Jet fuel costs surged 40.1 per cent in the first half, Air China said, eroding revenue gains of 8.8 per cent.

Asia's biggest carrier China Southern Airlines said this week net profit was down 11 per cent in the first half compare with the same period last year, also citing jet fuel costs. China Eastern earnings jumped 34.4 per cent but only because of a one-off gain from the sale of a logistics subsidiary.

On Thursday morning, Air China shares fell 3.18 per cent in Hong Kong and 1.91 per cent in Shanghai, where it is also listed.