Air China profit drops in first quarter as oil rises, yuan weakens

SHANGHAI, April 27 (Reuters) - Air China's

net profit fell 40 percent in the first

three months of 2017, hit by rising oil prices and weakness in

the yuan.

China's flag carrier on Thursday posted profit attributable

to shareholders of 1.47 billion yuan ($213 million) for January

to March, down from 2.4 billion yuan during the same period last

year.

Its rival China Eastern Airlines said

net profit attributable to shareholders was 2.82 billion yuan

for the quarter, up from 2.6 billion yuan a year earlier.

The fortunes of China's largest airlines have risen with the

ascent of the Chinese traveller, whose demand for overseas trips

have helped make it the world's fastest growing aviation market.

However, the airlines took many U.S. dollar-denominated

loans to buy planes as part of an ambitious fleet expansion,

exposing them to the depreciation of the yuan which

lost 6.6 percent of its value against the dollar last year.

Oil prices, which plunged in recent years, have also started

to firm, causing jet fuel costs to begin to rise.

The 2016 full-year results of China's three largest airlines

missed analyst expectations last month and some analysts are

predicting that earnings have peaked.

($1 = 6.8958 Chinese yuan renminbi)

(Reporting by Brenda Goh; editing by Alexander Smith)