China's three biggest airlines face RMB 8.5 billion losses
China's three biggest airlines are poised to report losses totaling RMB 8.5 billion from currency swings this year as a weaker yuan proves a drag.
China's three biggest airlines are poised to report losses totaling RMB 8.5 billion from currency swings this year as a weaker yuan proves a drag amid rising traffic and cheaper fuel. The silver lining: The losses are narrowing.
Flagship carrier Air China may face RMB 3 billion in foreign-exchange losses, while China Southern Airlines, Asia's biggest by passengers, is looking at a potential hit of RMB 4 billion and China Eastern Airlines may lose about RMB 1.5 billion, according to Taipei-based Capital Securities Corp. That compares with a combined loss of RMB 16.2 billion in 2015.
A weaker local currency typically hurts companies that borrow in dollars to pay for imports such as aircraft. An unexpected devaluation of the yuan last year led to an 18-fold surge in currency losses in 2015 for the three carriers.
Shares of Air China and China Eastern have declined about 0.7% and 5% this year in Hong Kong, compared with a 12% slide in the Bloomberg Asia Pacific Airlines Index, according to data compiled by Bloomberg.
Cathay Pacific Airways, the marquee Hong Kong-based airline that is facing competition from its mainland peers, has slumped 15%.
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