Although China’s Big Three state-owned carriers do not hedge against big swings in fuel prices, they continue to suffer as a result of continued weakness in the Chinese yuan, which is making it impossible for them to fully reap the cost benefits of crude-oil prices that sank to their lowest in more than a decade. This has left the airlines laden with dollar-denominated debt that is growing increasingly burdensome.
Shares of China Southern Airlines, China Eastern Airline and Air China, plummeted by as much as 50% from August 2015 to March 2016 on concerns that a weaker yuan will increase their cost of financing aircraft lease obligations, which are largely dominated in dollars. All these are starting to affect the financial results of the conglomerates that they suffered approximately US$2.5 billion in foreign-exchange losses, following the sudden devaluation of the yuan in August 2015. #MergentInc #industryreports #aviation #china
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