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The state-run parent of China Eastern Airlines moved to a profit in the first half of this year after cutting costs while market conditions improved. China Eastern Air Holding cut controllable costs by 12%, or $16.5 million, after adopting measures to stem losses.
The listed unit posted a $31.1 million net loss for the first half of 2008 and a $2.2 billion loss for the full year, based on international accounting standards.The RMB40.1 million ($5.9 million) net profit in January-March compared with RMB210.8 million earnings in the first quarter of 2008.
The Shanghai-based carrier’s return to profits after last year’s heavy losses was unexpected. But gains in revalued fuel-hedging contracts helped reduce damage from wrong-way bets on fuel prices.
China Eastern said it recorded revaluation gains of RMB422 million ($61.7 million) in fuel-hedging contracts as oil prices advanced. The company’s board secretary said in April that the airline, one of the country’s top three carriers, could return to the black this year as the domestic air travel market picked up. He was right.
CargoNews Asia reported the carrier, on July 13, agreed to acquire smaller rival Shanghai Airlines for about $1.3 billion, giving the combined carrier more than half of Shanghai’s air passenger market.