BEIJING, Jul. 1, 2009 (Xinhua News Agency) -- China Southern Airlines (NYSE:ZNH) (GSH.NYSE; 01055.HK; 600029.SH), the largest Chinese airline company by fleet-size, will suffer most from China's recent upwards price adjustment on jet fuel oil, analysts point out.
China raised the ex-plant price of jet fuel oil by 1,030 yuan per tonne starting Tuesday, said the National Reform Commission (NDRC) in a statement on its Web site.
The price of number 3 jet fuel widely used by the aviation industry was raised from 4,020 yuan/ton to 5,050 yuan/ton, up about 26 percent.
Analysts pointed out that since China Southern purchases 80 percent of its jet fuel oil in the domestic market, it will suffer most from the price hike. The fuel cost of the Chinese airline giant will therefore increase 3.3-3.9 billion yuan.
The other two airline giants Air China (00753.HK; 601111.SH) and China Eastern Airlines (CEA.NYSE; 00670.HK; 600115.SH) are in a different position and will benefit from rise of jet fuel oil prices in the international market, since in 2008 they conducted jet fuel hedging.
Jim Wong, an analyst with Nomura Securities, noted that Air China suffered huge losses from jet fuel hedging last year due to the plunged oil prices in the international market. Therefore, the company expects to benefit most from the current oil price hike in the international market.
The fair value losses of Air China and China Eastern from jet fuel hedging in 2008 respectively totaled 7.47 billion yuan and 6.2 billion yuan.
