EVA Airways Corp (長榮航空) on Friday last week reported NT$5.48 billion (US$162.59 million) in unrealized losses from its fuel hedging positions as of Jan. 15, an increase of NT$1.93 billion from the end of last year.
The unrealized losses are to offset benefits from falling international crude oil prices, as procurement costs have been locked in for the next two years, the nation’s second-largest carrier said in a filing with the Taiwan Stock Exchange.
EVA Airways said global oil prices have been declining at a pace that exceeded the company’s expectations, leading to unrealized losses from ongoing hedging contracts.
The company said its fuel hedging portfolio is valued at about NT$12.79 billion, according to the regulatory filing.
Hedging losses are to be booked beginning this year until 2017 as contracts end, the filing showed.
Earlier this month, EVA Airways rejected local media reports suggesting that its unrealized hedging losses had swelled to NT$50 billion. On Jan. 8, the company said in a regulatory filing that the figure should be NT$3.55 billion as of Dec. 31 last year.
Global crude oil prices have fallen about 75 percent over the past 18 months due to a mix of supply glut, weak demand, overproduction and a slowing global economy.
While airlines worldwide are facing pressure to their top lines because of reductions in fuel surcharges and potential fuel-hedging losses, falling oil prices generally benefit carriers’ bottom lines mainly due to lower fuel costs, aviation experts said.
Last year, EVA Airways posted consolidated sales of NT$137.17 billion, up by 3.06 percent from 2014. The company is likely to report earnings per share of between NT$1.9 and NT$2.1 for last year, compared with net losses of NT$0.4 per share the previous year, according to market estimates.
Shares of EVA Airways fell 0.56 percent to close at NT$17.6 on Friday. They have fallen by 27.57 percent over the past 12 months in Taipei trading, compared with the broader market’s 18.11 percent decline.
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