Air China's first half net profit slides 58 per cent

HONG KONG: China's flagship carrier Air China Ltd said on Tuesday first-half net profit fell 58 per cent, weighed down by a depreciating yuan that increased financial costs.

Air China said net income fell to 474.4 million yuan ($77 million), compared with 1.12 billion yuan it booked for the same period a year ago.

The Beijing-based carrier said foreign exchange net losses for the first six months of the year amounted to 721 million yuan ($117.19 million), compared with foreign exchange net earnings of 1.12 billion yuan for the same period last year.

In July, the company warned its first-half earnings would fall as much as 65 per cent year-on-year.

Chinese airlines used to have huge currency gains thanks to a strong yuan, partly because aircraft they order from Boeing Co

and Airbus Group NV are settled in dollars.

In recent months, however, Beijing allowed the yuan to slide to punish speculators, increasing volatility in the market.

With the end of the yuan's consistent appreciation against the dollar, carriers have been challenged on two fronts -- operating costs and foreign currency-denominated debt.

Air China's Hong Kong-listed shares closed down 1.8 per cent on Friday ahead of the earnings result, lagging a 0.4 per cent fall for the broader market.