CHINESE carrier China Eastern Airlines Corp (stock code: 600115) reported late yesterday that it trimmed its first-half net loss by three-quarters from a year earlier, as exchange rate gains helped outweigh rising jet fuel costs.

The Shanghai-based airline's net loss for January-June was 383.9 million yuan (US$50.8 million), down from its 1.7 billion yuan shortfall in the first half of 2006.

Revenues for the first half were 19 billion yuan, 12 percent higher than the 16.9 billion yuan recorded in the first half of last year.

The country's third-biggest carrier recorded a similar increase in passenger traffic, to 26.5 million.

The company reported exchange rate gains, due to the Chinese yuan's rising value, of 726 million yuan.

But the windfall was not enough to make up for high fuel costs, which accounted for 35 percent of the company's operating costs.

"The price of international crude oil and aviation fuel has experienced lengthy high-level fluctuations, which have resulted in prolonged high fuel costs and brought about substantial pressure on the air transport industry," the airline said.

Strapped by high fuel prices and fierce competition, China Eastern reported net losses in 2005 and 2006.

China Eastern is currently in negotiations for selling a stake to Singapore Airlines, a deal that would bring welcome cash and managerial help for the financially troubled carrier. The airline plans a news conference for Sunday when it is expected to announce a deal.

Both China Eastern and Singapore Airlines have refused comment on details of the discussions.

China Eastern's interim report made no reference to the talks, apart from saying that, "We will continue to prepare for the introduction of strategic investors as soon as possible."

It also said the company's board of directors believed that despite the repeated losses, the airline will be able to get enough financing to continue operations and meet its liabilities.