Air China Earnings Fall 8.8% on Weak Chinese Currency

(WSJ) Air China Ltd. said Tuesday its third-quarter net profit fell 8.8% from a year earlier, weighted by a weak Chinese currency despite continuous recovery in international air travel.

The Chinese flagship carrier’s net profit for the three months ended Sept. 30 totaled 2.68 billion yuan ($437 million), under Chinese accounting standards, down from 2.94 billion yuan a year earlier.

Revenue rose 6.7% to 29.79 billion yuan from 27.93 billion, on increased demand for air travel, Air China added.

The carriers’ net profit for the first nine months totaled 3.16 billion yuan, down 22% from 4.06 billion a year earlier as the Chinese currency depreciated against the greenback.

The airline said it recorded a 3.02 billion yuan finance cost in the first nine months due to the Chinese yuan’s depreciation against the U.S. dollar during the period. It booked a 498.9 million yuan finance cost a year earlier. It didn’t give a quarterly breakdown for its finance cost.

The dollar-yuan exchange rate plays a key role in determining profitability of Chinese airlines, due to their high financial leverage and large proportion of U.S. dollar-denominated loans.

Source: Wall Street Journal by Joanne Chiu