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RMB appreciation helps nation's airlines
By Lu Haoting (China Daily)
Updated: 2005-07-28 06:13

Chinese airlines breathed a collective sigh of relief after China allowed its currency to appreciate by 2 per cent last week.

But whether they can return their businesses to the black by the year's end still depends on other factors, especially jet fuel prices, airlines and analysts said.

"The yuan appreciation is definitely good news for us," said Xu Junmin, secretary of the board of Shanghai Airlines.

"If the yuan strengthens by 1 per cent, our earnings per share for the year will increase by 0.03 yuan," Xu told China Daily yesterday.

Xu said the key benefit is that Chinese air carriers will face lower financing costs after the yuan appreciation because a large chunk of their borrowing is in foreign currencies.

Shanghai Airlines has liabilities of about US$400 million. "The yuan move greatly relieves our burden in this regard," Xu said.

"Another good aspect is that the cost of purchasing and leasing aircraft and aviation equipment will also be cut as these transactions are settled in the US dollar," Xu said.

Xu's words were echoed by Liu Jieyin, president of Okay Airways Co, China's first private air carrier.

Okay, which launched its maiden flight in March, leases a Boeing 737 from Korean Airlines.

"Our company will save more than 100,000 yuan every month in leasing fees after the yuan move," Liu told China Daily.

Such benefits, Liu said, are bigger at China's leading airlines, given their larger fleets.
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