Air China is expecting to post its first annual loss in eight years due to slumping demand and bad bets on fuel prices, state media reported. The company said in a statement filed with the Hong Kong stock exchange on Friday that it lost US$994.5 million on fuel hedging in 2008. Chinese carriers are banned from hedging purchases on fuel used for domestic flights, which in the past made Air China less vulnerable than its competitors to rising fuel prices. But jet-fuel prices have fallen more than 70 per cent in less than six months and analysts said Air China is more exposed to the global financial crisis than rivals China Eastern Airlines and China Southern Airlines, which are also forecasting losses for 2008. Air China saw its cargo and mail volume fall by 3.8 per cent to 815,524 tonnes while passenger volume dropped by 1.7 per cent in 2008 to 34.2 million passengers. Air China posted a profit of US$567.5 million in 2007.