October 30, 2018 / 11:28 AM / 21 days ago

UPDATE 1-Profits fall at China Southern Airlines, Air China on weaker yuan, higher fuel costs

(Adds Air China quarterly results)

BEIJING, Oct 30 (Reuters) - China Southern Airlines Co Ltd and Air China on Tuesday both reported a fall in quarterly net profit, as weakness in the yuan and higher fuel and debt costs weighed on their performance.

Chinese airlines have been hit by rebounding oil prices and a volatile currency, putting earnings under pressure even as they enjoy strong travel demand.

China Southern Airlines, the country’s largest carrier by passenger numbers, reported profit attributable to shareholders of 2.0 billion yuan ($287 million) for the third quarter, down from 4.3 billion yuan in the same period last year.

Net profit was down 41 percent for the first nine months of the year at 4.2 billion yuan, although revenue rose 13 percent to 108.9 billion yuan in the period.

Air China, the country’s flag carrier, said profit attributable to shareholders for the third quarter fell to 3.5 billion yuan from 5 billion yuan over the same period last year. Net profit was down 16.2 percent for the first nine months.

China Southern incurred foreign exchange losses of 2.0 billion yuan due to a drop in yuan against the U.S. dollar in the nine-month period, compared with a gain of 1.2 billion yuan a year earlier.

The yuan has fallen by about 6 percent against the dollar since the start of the year, raising financing costs for airlines as their fleet expansion plans have been mostly financed by U.S. dollar-denominated loans.

China Eastern Airlines Corp Ltd, the country’s second-largest airline by passenger numbers, on Friday posted a 38 percent fall in third-quarter net profit.

($1 = 6.9584 Chinese yuan)

Reporting by Stella Qiu and Brenda Goh; Editing by Christopher Cushing and Edmund Blair

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