Air China is expecting to post its first annual loss in eight years due to slumping demand and wrong-way bets on fuel prices, state media reported. The company said in a statement filed with the Hong Kong stock exchange on Friday that it lost US$994.5 million on fuel hedging in 2008. Chinese carriers are banned from hedging purchases on fuel used for domestic flights, which in the past made Air China less vulnerable than its competitors to rising fuel prices. But jet-fuel prices have fallen more than 70% in less than six months and analysts said Air China is more exposed to the global financial crisis than rivals China Eastern Airlines and China Southern Airlines, which are also forcasting losses for 2008. Air China saw its passenger volume drop by 1.7% in 2008 to 34.2 million people. Cargo and mail volume fell by 3.8% to 898,962 tons. Air China posted a profit of US$567.5 million in 2007.