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China Eastern to raise over 15b yuan

(China Daily/Agencies)
Updated: 2008-05-15 09:15

China Eastern Airlines, the most indebted of the country's big three airlines, aims to raise at least 15 billion yuan for new planes and training to help it compete with Air China and Cathay Pacific Airways.

"If we can get more, it'll be even better," China Eastern Chairman Li Fenghua said yesterday.

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. 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.

"The government won't sit and watch its own company go bankrupt," said Jack Xu, an analyst at Sinopac Securities Co. "China Eastern will have an opportunity to resubmit the Singapore deal this year."

He rates the carrier "outperform".

Shanghai-based China Eastern still aims to raise HK$11.3 billion selling shares to Singapore Air, Temasek Holdings Pte, the city-state's sovereign wealth fund, and to its own parent, China Eastern Air Holding Co.

"There's no change in our plan to tie up with Singapore Airlines," Li said.

China Eastern will spend 80 percent of the 15 billion yuan on aircraft, with most of the rest going toward staff training, Li said. The fundraising will enable the carrier to cut its debt-asset ratio to 80 percent from 94 percent as of 2007.

"We're making a lot of effort to lower our debt ratio," Li said. Air China, the country's second biggest carrier, had a ratio of 64 percent at the end of last year, while larger rival China Southern Airlines Co's stood at 82 percent.

The carrier has lost 57 percent in Hong Kong trading this year, compared with the benchmark Hang Seng Index's 9.1 percent decline.

It plans to add 17 Airbus and two Boeing planes this year, according to its annual report. It added 20 planes in 2007, expanding its fleet to 223. China Southern added 23 aircraft last year, and Air China got 29 planes.

China Eastern aims to boost passenger numbers by 10 percent per year in the long term, Li said. This year, the carrier expects to fly 43 million travelers, helped by demand from the Beijing Olympics in August. China's total passenger number may increase 14 percent to 210 million travelers, according to the Civil Aviation Administration of China.