Air China , the country's flag carrier, said on Monday that it had won regulatory approval to engage in fuel hedging, adding it will enter contracts when oil price volatility decreases.

High jet fuel prices have made the operating environment for the company and the whole industry difficult, Fan Cheng, vice president and chief financial officer told reporters.

The country's airlines had suspended fuel hedging contracts in 2008 as regulators sought to shape new regulations to better manage risks. Beijing recently gave a green light in principal to Air China.

We can resume oil hedging anytime now, but we haven't signed any new contracts yet as oil prices are very volatile, said Fan.

He said the company will do oil hedging contracts, likely to be one year in duration, when the oil price stabilises to hedge a portion of the fuel expenses.

Rival China Eastern Airlines is also pending regulatory approval to get back into the hedging business, according to an industry source.

Air China reported a 12 percent fall in first half net profit to 4.06 billion yuan, partly due to high fuel costs, which rose 53 percent to 16.3 billion yuan.

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Global airlines have adopted different strategies to protect against wild price swings in jet fuel but they may be less inclined to ramp up hedging for fuel purchases this year.

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