Air China propped up by subsidies and fuel hedging gains, outlook bleak

Air China's headline net profit result for the six months ended 30-Jun-2009 looks impressive - a 155% leap to CNY2.88 billion, according to international accounting standards. But remove the significant fuel hedging gains (CNY1.5 billion), government subsidies and grants (CNY971 million) and its share in profits from affiliates, including Cathay Pacific (CNY316 million), this is an airline that is barely turning a profit, after deep losses last year.