(Yicai Global) Sept. 2 -- Net profit at China's three biggest airlines, including flagship carrier Air China Ltd. [SHA:601111], fell 10 percent in the first half as a weaker yuan offset lower oil prices.
Combined exchange rate losses at Air China, China Southern Airlines Ltd. [SHA:600029] and China Eastern Airlines Ltd. [SHA:600115] increased CNY4.5 billion (USD674 million) in the six months through June from a year earlier, according to earnings reports from the companies.
Aircraft purchases are typically made in dollars, increasing the dollar-denominated debts of the carriers. A decline in the yuan since last year has led to currency losses equal to almost half of their total net profit. Major airlines need to accelerate debt repayment and take measures to adjust the structure of liabilities.
China's currency may continue to depreciate against the dollar in the near-term, said Mr. Su Baoliang, an analyst of Sinolink Securities Ltd.
Growth in exchange rate losses in the second half is expected to be less than last year because the yuan's depreciation mainly happened in the second half of 2015, Mr. Xiao Feng, Air China's general accountant, told Yicai Global.