Chinese airlines are in trap of trade war

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Chinese airlines are in trap of trade war

June 26, 2018 - 16:19
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Chinese airlines ordered more than $100 billion airplanes from Boeing and Airbus during last ten years. However, it is getting more difficult to pay for them, since perspectives of trade war caused yuan drop to the lowest level in six months, Bloomberg reports.

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Chinese airlines ordered more than $100 billion airplanes from Boeing and Airbus during last ten years. However, it is getting more difficult to pay for them, since perspectives of trade war caused yuan drop to the lowest level in six months, Bloomberg reports.

Weaker yuan means that Air China Ltd., China Southern Airlines Co. and other air carriers shall pay more for new planes, which price is in US dollars. They also buy some fuel abroad. As a result, they will soon encounter with higher expenses and fewer passengers.

Investors already started getting rid of stocks of three biggest Chinese airlines. Shares of Air China Ltd. lost 20% since June 13, shares of China Southern Airlines Co. and China Eastern Airlines Corp. lost 23% and 17% correspondingly. In total, market value of these companies reduced by $11,5 million.

Chinese yuan lost 5% after reaching the highest level since 2015 in late March.

Recently Chinese air carriers increased its capacities and added new destinations, in order to serve market that according to IATA will bypass US as the largest market in the world by 2022. As of end 2017, all Chinese airlines had 3200 planes. Boeing forecasts, they will need more than 7200 in the next 20 years.