CHINESE airlines ordered more than US$100 billion in planes from Airbus SE and Boeing Co. in the past decade, but paying those bills is getting harder with the trade war pushing the local currency to its weakest level in six months.

Air China Ltd., China Southern Airlines Co. and other carriers will need to pay more for new aircraft, which are always priced in U.S. dollars. The airlines also need to spend in foreign currency for fuel purchased overseas, which is somewhat cushioned by international ticket sales. All told, the carriers are bracing for more expenses and fewer passengers as trade tensions build up between the world’s two biggest economies.

Investors have pummeled the shares of the country’s three biggest carriers on concern the weaker yuan will result in a dip in earnings. Shares of Air China Ltd., China Southern Airlines Co. and China Eastern Airlines Corp. have slid sharply since June 14, losing a combined market value of about US$11.5 billion.

“Trade concern is the one that’s pushing the yuan down,” said Mohshin Aziz, an aviation analyst at Maybank Investment Bank Bhd. in Kuala Lumpur. “That’s the root cause of all the branches of troubles we’re going through.”

A weaker yuan also means higher interest payments on the dollar-denominated debt. Air China had about US$21 billion in dollar-denominated debt, China Southern had US$18 billion and China Eastern US$11 billion.

The yuan has declined almost 5 percent since touching its strongest level in late March amid trade tensions with the United States and this week’s decision by the People’s Bank of China to cut the reserve requirement ratio — a move set to unlock 700 billion yuan (US$107 billion) in liquidity effective July 5.

Every 1 percent fluctuation in the U.S. dollar would translate to a loss or gain of 280 million yuan annually for Air China, 278 million yuan for China Southern and 260 million yuan for China Eastern, according to K. Ajith, a Singapore-based analyst at UOB Kay Hian Pte. (SD-Agencies)