China airlines face turbulence from two-way yuan swings

[BEIJING] Chinese airlines, already grappling with half-empty premier cabins due to Beijing's austerity drive, will be tested next in their ability to hedge against currency risks as China looks set to allow greater two-way swings in the yuan.

The yuan has gained some 30 per cent against the US dollar since 2005 as China slowly loosens its grip on the currency. In recent weeks, however, Beijing allowed the yuan to slide sharply to punish speculators, adding more volatility in the market.

With the end of the yuan's consistent appreciation against the US dollar, carriers including Air China Ltd, China Southern Airlines Co Ltd and China Eastern Airlines Corp Ltd will be challenged on two fronts: operating costs and foreign currency-denominat…