[photopress:air_chinaeastern.jpg,full,alignright]It is a big ask. China Eastern Airlines, the most indebted of China’s big three airlines, aims to raise at least RMB15 billion ($2.1 billion) for new planes and training to help it compete with Air China and Cathay Pacific.
China Eastern Chairman Li Fenghua said in an interview, ‘If we can get more, it’ll be even better.’
Li plans to reach his target by reviving the sale of a stake to Singapore Airlines, by tapping capital markets and through subsidies from the government, which owns part of the carrier. It all seems a trifle difficult to envisage.
China Eastern’s minority shareholders vetoed a tie-up with Singapore Air in January after the parent of Air China pledged to make a higher offer.
But Jack Xu, an analyst at Sinopac Securities, said, ‘The government won’t sit and watch its own company go bankrupt. China Eastern will have an opportunity to resubmit the Singapore deal this year.’
He rates the carrier ‘outperform’ which seems a tad optimistic given the recorded losses
Shanghai-based China Eastern still aims to raise $1.5 billion selling shares to Singapore Air, Temasek Holdings, the city-state’s sovereign wealth fund, and to its own state-controlled parent, China Eastern Air Holding.
[photopress:air_li_fenghua.jpg,full,alignleft]China Eastern Chairman Li Fenghua, seen in this illustration said, ‘There’s no change in our plan to tie up with Singapore Airlines.’
Chew Choon Seng, chief executive officer of Singapore Airlines, said the two carriers are currently discussing commercial cooperation such as cross-selling tickets rather than an equity link. He wisely declined to say whether a tie-up is still being actively pursued.
China Eastern will spend 80% of the RMB15 billion on aircraft, with most of the rest going toward staff training.
The airline plans to add 17 Airbus SAS and two Boeing aircraft this year. It added 20 aircraft in 2007, expanding its fleet to 223. China Southern added 23 aircraft last year and Air China got 29.
The carrier filled 73.6% of its available seats in 2007. Passenger numbers rose 11% to 39.2 million, while cargo volume climbed 6.7% to 939,700 metric tons. This year, freight may jump 14% to 1.07 million tons.