The mainland's most valuable airline, Air China Ltd, said yesterday its first-half earnings slipped 25 per cent as jet fuel prices climbed, but strong business travel and international traffic saved it from falling into the red.

The airline was alone among the mainland's Big Three airlines in posting a profit in the first six months of 2005. Its two main rivals, China Southern Airlines and China Eastern Airlines, reported losses for the period.

Air China, in which Hong Kong's Cathay Pacific Airways Ltd has a 10 per cent stake, earned a net profit of 591.25 million yuan (US$73 million) in the first half, down from 788.35 million yuan a year earlier.

The result lagged CSFB's profit forecast of 623 million yuan.

Turnover rose 14.7 per cent on the year to 16.94 billion yuan.

China Southern and China Eastern, which focus more on the domestic market, reported losses of 907 million yuan and 471 million yuan, respectively, in the same six-month period.

Until a policy change that started in August, mainland airlines were not allowed to pass on their increased fuel costs to domestic passengers.

Air China, whose market capitalization of HK$22 billion is the highest among the mainland's airlines, also has investments in non-cyclical aviation businesses such as aircraft maintenance, ground handling and catering.

Its 70 per cent-owned China National Aviation Co Ltd, the single largest shareholder in Hong Kong Dragon Airlines Ltd, reported a 2 per cent rise in interim net to HK$122.91 million.

(China Daily September 6, 2005)