Air China says it has received approval from Beijing to resume hedging its fuel costs, a practice that was banned in 2008 after mainland carriers lost billions of yuan betting the wrong way on oil prices. The government has begun lifting the ban on fuel hedging because airlines want to mitigate the volatility of their fuel costs by locking some of their supply at certain price levels using futures contracts. Air China, based in Beijing, has the most elaborate international network among mainland carriers. 'We got approval for fuel hedging from Sasac [the State-owned Assets Supervision and Administration Commission] earlier this year,' Fan Cheng, executive director of Air China, said yesterday. 'But we are not doing it right now because oil prices are too volatile. We'll wait for better timing.' Fuel costs, which accounted for nearly 40 per cent of Air China's total costs, were up more than 50 per cent to 16.25 billion yuan (HK$19.85 billion) in the first half. China Eastern Airlines is reportedly also preparing to hedge its fuel costs. Beijing banned all state-owned companies from trading futures contracts in oil after Air China, China Eastern and other mainland carriers suffered big losses three years ago. Air China booked a 3.1 billion yuan paper loss in fuel hedging in the first three quarters in 2008, while China Eastern reported a paper loss of 6.2 billion yuan on fuel hedging contracts that year when oil prices surged to over US$130 per barrel at one point and then plunged below US$50 at the end of 2008. As the price of oil gradually rose back to more normal levels in the following years, the two carriers wrote back some of those hedging losses. China Eastern, based in Shanghai, reported a 29 per cent jump in net profit yesterday to 2.28 billion yuan for the first six months of this year from 1.76 billion yuan for the same period last year. Sales increased 16 per cent year on year to 38.78 billion yuan. Operating profit jumped 28 per cent to 2.13 billion yuan. Passenger traffic for China Eastern rose 13.6 per cent, and sales from the passenger division jumped 23 per cent to 32.4 billion yuan. Revenue from domestic routes, which accounted for 72 per cent of total passenger sales, increased 21 per cent year on year. International passenger sales rose 33 per cent year on year. Air China said yesterday that it would take delivery of 36 aircraft this year, representing more than a 10 per cent increase in capacity. The carrier will increase its capacity on international routes by 10 per cent in the second half, compared with 11 per cent in the first half. It said it had no plans to pare growth on its international routes, regardless of the poor prospects for growth in the economies of the United States and Europe. Fan said air cargo demand would continue to be weak in the second half owing to the slowing economies in the US and Europe.