Air China Ltd, the country's largest international carrier, lost its position as the world's most valuable airline to Singapore Airlines Ltd after its shares dropped 67 percent this year.

Air China fell 4.59 percent to close at 8.10 yuan (US$1.18) in Shanghai yesterday, giving it a market value of US$11.5 billion. That lagged behind SIA's US$12.8 billion.

Chinese mainland carriers including Air China have outpaced a 48-percent decline in the nation's CSI 300 index as jet fuel prices rise and fewer people fly. Airline shares will continue to suffer, said Li Lei, an analyst at China Securities Co in Beijing.

"Air China is falling back to a fair value and fair position," said Li. "Airlines, which are more volatile when fuel prices surge, are not favored by investors."

SIA lost its top spot to Air China about a year ago, according to Bloomberg News data. The carrier is valued at 9.5 times its 2007 earnings, compared with 8.6 times for the Singapore carrier.

SIA was little changed at S$14.66 (US$10.76) in Singapore. The shares have dropped 15 percent so far this year.

China raised jet fuel prices for domestic routes 25 percent on June 20, adding about 15 billion yuan to airlines' annual operating costs.

(Shanghai Daily July 2, 2008)