Air China 2018 profit beats forecasts on better passenger yields

BEIJING, March 27 (Reuters) - Air China Ltd posted on Wednesday a 1.3 percent increase in its annual net profit, outperforming analysts’ forecasts, as better passenger yields outpaced the impact of rising fuel costs and a softer yuan.

China’s flag carrier said its 2018 profit attributable to shareholders rose 1.3 percent from a year earlier to 7.34 billion yuan ($1.09 billion), compared with an average analysts’ estimates of 6.21 billion yuan, according to Refinitiv data.

Revenue jumped 12.7 percent to 136.77 billion yuan last year, according to the airline, in line with the growth in travel demand in the world’s fastest expanding aviation market.

Passenger yields rose 2.9 percent to 0.5461 yuan per revenue passenger as its passenger capacity grew by 10.41 percent over the year. Revenue from cargo operations jumped 11.22 percent.

Fuel costs, however, surged 35.45 percent to 38.48 billion yuan last year, and it booked 2.38 billion yuan in foreign exchange losses.

The yuan dropped by more than 5 percent against the U.S. dollar last year, pushing up financing costs at airlines, which have bought planes with mainly U.S. dollar-denominated loans.

Air China and its rivals such as China Eastern Airlines and China Southern Airlines are among carriers around the world who have grounded Boeing 737 MAX aircraft.

The jury is still out on whether they will have to bear any costs, analysts say.

The company has currently grounded 15 737 MAX 8 aircraft, according to data from flight tracking website FlightRadar24. China ordered its airlines to suspend flights on the aircraft on March 11 after the deadly crash of one of the planes in Ethiopia.

The aviation industry has been thrown into flux by a Lion Air crash in Indonesia last October that killed 189 people and an Ethiopian Airlines disaster on March 10 that killed 157, both involving Boeing’s 737 MAX single-aisle plane.

$1 = 6.7206 Chinese yuan Reporting by Stella Qiu and Brenda Goh, Editing by Sherry Jacob-Phillips