ALL Nippon Airways Co, Japan's second-largest carrier, may cut its profit forecast as the company pays more than spot rates for fuel and loses passengers because of surcharges, according to Okasan Securities Co.

All Nippon may cut its net income forecast 33 percent to 18 billion yen (US$179 million) for the year ending March 31, from 27 billion yen, Yoshihisa Miyamoto, an analyst in Tokyo at Okasan Securities, told Bloomberg News. The airline's shares could drop 27 percent to 250 yen in coming months, he said.

ANA hedged 90 percent of its fuel needs for this fiscal year as of June, obligating it to buy jet kerosene at fixed prices. Jet kerosene has almost halved since its record in July. ANA may also lose passengers after raising surcharges to the United States and Europe by almost 20 percent this month to cover the cost of hedged fuel.

"The huge drop in fuel prices will have hardly any benefit for All Nippon this fiscal year," said Miyamoto, who has a "strong sell" rating on the stock. "Its international passenger numbers are sinking. Its shares have hardly even begun to take into account the global deterioration in the economy."

Hedging allows airlines to buy fuel at a fixed price in the future. ANA hedges a fixed amount of its fuel needs every quarter. It is 66 percent hedged for next fiscal year.

"ANA uses hedges to even out the cost it pays for fuel and stabilize its business. It has no intention of canceling hedges to make money," said Fumiyoshi Fukumori, an ANA spokesman. "We are preparing our mid-term earnings announcement now and have no plans at the moment to cut our forecasts."

The airline's shares tumbled 1.5 percent yesterday to a more than three-year low of 341 yen in Tokyo.