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Beijing-based Air China said on Wednesday first-half earnings fell 23 percent as high fuel costs outstripped strong passenger and cargo growth.

But Air China, which competes with China Eastern Airlines and China Southern Airlines at home, was the only carrier among the trio to report an interim profit.

The price of Singapore-traded jet fuel rose 23 percent in the first half, hitting mainland airlines and regional carriers alike.

State-owned Air China said it earned CNY457.97 million yuan (USD$57.5 million) for the six months ended June, down from CNY591 million (USD$74.2 million) in the same period a year earlier.

Air China staged a weak trading debut in Shanghai this month amid high fuel prices and a weak overall market.

To complete the USD$575 million offer, it was forced to reduce the number of shares sold by nearly 40 percent and promise to buy back up to 600 million shares if they fell below the IPO price by the end of the year.

The airline's parent bought back 123 million of the company's A-shares from the Shanghai market after the weak performance.

China Eastern suffered a hefty net loss of CNY1.72 billion (USD$216.1 million) for the same period and China Southern posted a loss of CNY825 million (USD$103.7 million), hurt by high fuel prices.

Air China was the best performer in terms of passenger load factor, passenger yield, unit cost and aircraft utilization, said Alex Tang at Core Pacific-Yamaichi.

A move by Air China to take a 10 percent stake in Hong Kong-based Cathay Pacific was expected to deliver financial benefits in 2007, analysts said.

Air China's Hong Kong-listed shares have fallen 8 percent in the past month, underperforming a 0.9 percent rise in the index of Chinese companies listed in Hong Kong.

(Reuters)