warren buffett may have made u.s. airline stocks great again , but across the pacific ocean another billionaire should keep chinese carriers grounded: donald trump. the president-elect rose to power on a protectionist platform, threatening to slap a huge tariff on goods imported from china . such policies would no doubt hurt airlines globally, and even before any trade war breaks out mr. trump<u+2019>s surprise victory has brought damage to carriers. twin rises in interest rates and the u.s. dollar since mr. trump<u+2019>s election should bring immediate pain to chinese airlines, weighed down with dollar-denominated debt but fueled by revenue in yuan. take air china , for example: nearly 60% of its debt was in dollars as of june, but 65% of its sales come from domestic customers. knowing about the currency mismatch, chinese carriers have spent the past year swapping some of their dollar debt for yuan debt, turning to the burgeoning domestic bond market to raise cash. as the yuan continues to slide , however, this will get more expensive, as it will take more borrowed yuan to pay off the same amount of dollar debt. interest rates in china have also risen since the u.s. election, with the 10-year yield up 0.13 percentage point to 2.89%. given the airlines<u+2019> high debt loads and narrow margins, a rise in interest expenses eats into profits quickly. somehow, though, shares of the three major carriers<u+2014>air china, china eastern and china southern <u+2014>haven<u+2019>t really budged since last week. but if the trump trade for bonds and the dollar continues , china<u+2019>s airlines will have to seek a different altitude. write to jacky wong at jacky.wong@wsj.com
strong dollar means weak chinese airlines - wsj
jacky wong