China Eastern 0670

[winston]

China Eastern Parks 10% of Planes as Demand Declines (Update1)
By Irene Shen

Nov. 11 (Bloomberg) -- China Eastern Airlines Corp., the country's third-largest carrier, is taking about a tenth of its fleet out of service as the global economic slowdown crimps travel in the world's most populous nation.

The airline has grounded more than 20 planes as it cuts unprofitable routes, Board Secretary Luo Zhuping said by phone yesterday. The Shanghai-based carrier has also formed a management team to study further cost cuts and the effects of the financial crisis.

China Eastern joins AMR Corp.'s American Airlines and UAL Corp.'s United Airlines in grounding planes as the global economic slowdown spreads to Asia, damping demand for business and leisure flights. The airline, which has 15 times more debt than equity, slumped to a record third-quarter loss after carrying fewer passengers and paying more for fuel.

``China Eastern has to try everything it can to stave off bankruptcy,'' said Jack Xu, an analyst at Sinopac Securities Co. in Shanghai. ``It's undoubtedly the weakest among Chinese carriers.''

The airline fell 6.9 percent, the biggest drop in two weeks, to 94 Hong Kong cents on the city's stock market. The shares have lost 88 percent this year.

China Eastern had a fleet of 225 planes at end of June. The airline operated 398 routes then, 15 percent less than it had six months earlier. The airline has the highest debt-to-equity ratio among major Asian carriers.

The parked planes are at small airports in secondary cities, Luo said.

Slowing Travel

Chinese carriers flew 141.4 million passengers this year through September. The 1.7 percent increase trailed the aviation regulator's forecast of 14 percent growth for 2008.

Domestic air travel won't recover until the second half of next year, Liu Shaoyong, chairman of China Southern Airlines Co., the nation's largest carrier, said on Nov. 4. Global air traffic will recover in 2010, he added. China Southern trimmed executives' pay by 10 percent in July to cut costs.

The biggest U.S. airlines are parking more than 460 planes and slashing capacity at least 10 percent to pare costs after jet fuel reached a record $4.36 a gallon in July. Global air travel also fell for the first time in five years in September, as companies including Merrill Lynch & Co. and UBS AG pare flying in Asia to curb costs.

Airlines worldwide may report combined losses of as much as $6.1 billion in 2008, according to an estimate by the International Air Transport Association, whose members account for 93 percent of the world's air traffic. That would be the biggest industry loss since 2003 and compares with a $5.6 billion profit in 2007.

[millionairemind]

ONe by one, they all go down. Next in line - SIA

China Eastern reports fuel-hedging losses of $906 million
By Chris Oliver
Last update: 9:34 p.m. EST Jan. 11, 2009
Comments: 7
HONG KONG (MarketWatch) -- China Eastern Airlines said Sunday it suffered a fair value loss of 6.2 billion yuan ($906 million) on fuel hedges last year and that operations have been affected by deteriorating business conditions since the second half, warning it would report a "significant loss" for 2008. The Shanghai-based airline said losses were accumulated under an "industry-wide crisis." It said its aviation-fuel hedges ballooned into losses after crude oil prices fell sharply. China Eastern added that it booked an actual cash loss of $14.5 million on fuel hedges in December and that all of its fuel-hedging related losses were unaudited "A pronounced global recession since the second half of 2008 led to a drastic decrease in air transportation demand," the airline said in a statement to the Hong Kong Stock Exchange Sunday. The airline said it recorded a loss of 2.29 billion yuan in the first three quarters of last year. End of Story

[winston]

DJ MARKET TALK: CEA Injection To Only Cover 2008 Losses -UBS

0958 [Dow Jones] STOCK CALL: UBS says it now believes China Eastern Air's (0670.HK) CNY7 billion capital injection will only cover losses incurred in 2008, rather than strengthening the balance sheet going forward. Follows company saying it expects significant operating losses for the year, further compounded by massive mark-to-market losses on fuel-hedging contracts, totaling CNY6.2 billion at end-December.

"We continue to believe that the China Eastern investment case is wholly dependent on the uncertain process of industry restructuring in China." Notes merger with Shanghai Airlines (600591.SH) appears to be "the most likely first step" and will require further capital injection into the merged group. Keeps Sell call, with target at HK$0.80. Stock flat at pre-open at HK$1.04. (

[millionairemind]

Jan 16, 2009
China Eastern gets $1.2b loan

SHANGHAI - CHINA Eastern Airlines, which is struggling with dwindling passenger numbers, said Friday it had received a 5.6 billion yuan (S$1.2 billion) short-term loan from its state-run parent.

The new loan is in addition to the seven billion yuan capital injection promised by the government to China's third largest airline last month.

The airline closed the loan deal with its parent, China Eastern Air Holding Company, on Thursday, according to a statement filed with the Shanghai Stock Exchange before the market opened on Friday.

'The purpose of the loan is to reduce the company's burden of inadequate working capital over a short term and to reduce financial cost of the company,' it said in the statement.

China Eastern said the six-month loan would have an interest rate of 4.374 per cent, which is below the central bank's benchmark lending rate for commercial banks.

China Eastern said this week it expected to post a 'significant loss' for 2008 due to fewer passengers and bad bets on fuel hedging contracts.

The company is also taking a series of measures to strengthen itself.

The official Shanghai Securities News reported this week it intends to sell up to a 35 per cent stake in regional carrier Joy Air to its joint venture partner, Aviation Industry Corp of China.

Shanghai-listed shares of China Eastern were up 4.23 per cent at 4.93 yuan in the mid-morning session after jumping by the daily trading limit of 10 per cent on Thursday. -- AFP

[winston]

China Eastern open to merger as loss looms

The new chairman of China Eastern said the struggling airline, the country's third-largest, is open to a merger with another airline.

Liu Shaoyong would not confirm reports of possible merger talks with Shanghai Airlines but said they are ''not a bad thing'' and that his company is ''open to tie-ups and mergers.''

Liu spoke after a shareholders' meeting to approve his appointment as board chairman.

The airline warned last month it expected to post a ''significant loss'' for last year due to fewer passengers and bad bets on fuel hedging contracts.

( No problem. Just ask parent for more money.. )

It faces an unaudited loss of about 6.2 billion yuan (HK$7.05 billion) alone due to fuel hedging contracts, the carrier said in a statement to the Shanghai Stock Exchange.

AGENCE FRANCE-PRESSE

[winston]

Their service has improved alot and the planes are much newer ..

China Eastern hit with record loss

China Eastern Airlines (0670), the nation's third-biggest carrier, slumped to a record 15.3 billion yuan (HK$17.3 billion) annual loss after making wrong- way bets on fuel prices and carrying fewer passengers.
The carrier's third loss in four years compared with a 379 million yuan net income a year earlier, the Shanghai- based company said in a statement to the city's stock exchange yesterday, citing international accounting standards.

The airline made unrealized hedging losses of 6.26 billion yuan after fuel prices tumbled 70 percent in less than six months. Passenger numbers also fell for the first time in at least nine years after disruptions caused by natural disasters and the Beijing Olympics and because of slower demand caused by the global recession.

Air China (0753) expects to post a loss for the period as well, it has said. China Eastern has cut management salaries and plans to curb plane deliveries as it strives to pare losses this year and break even next year.

The government has also injected 7 billion yuan into the airline's parent, while state-controlled lenders have given the carrier credit lines totaling at least 76 billion yuan since late last year.

China Eastern, Air China and Cathay Pacific Airways (0293) made paper fuel- hedging losses last year after locking in future prices. The carriers may recoup some of the losses as oil prices have climbed 13 percent since the end of 2008.

China Eastern's passenger numbers fell 4.9 percent to 37.2 million last year. Cargo fell 5.4 percent to 889,480 tons. BLOOMBERG

[millionairemind]

May 4, 2009
China Eastern sells off planes
SHANGHAI - CHINA Eastern Airlines said on Monday it had agreed to sell two Airbus A340 jets for 590 million yuan (S$128 million) to improve its cash flow, but added it would lease the planes back.

The nation's third largest carrier by fleet size said it sold the two planes to China's Bank of Communications Financial Leasing Co Ltd, in a statement filed with the Shanghai Stock Exchange.

China Eastern said last month it hoped to receive more financial support from Beijing after receiving seven billion yuan in aid, but that the government had not yet made any commitments.

The airline said it intended to channel the proceeds from the sale of the aircraft into its operations.

It will pay about 17 million yuan for each aircraft per quarter to lease them back over the next five years, the carrier said.

China Eastern suffered a net loss of 15.3 billion yuan last year due to falling passenger numbers, rising fuel costs and bad bets on fuel hedging contracts.

The airline has said it aims to cut new plane deliveries to 13 in 2009 - less than half of 29 originally planned. -- AFP

[winston]

Nice to have a parent with deep pockets. So maybe it's time to buy the airline stocks. The parent will not allow them to go bankrupt...

China Eastern gets 2b yuan more in bailout

China Eastern Airlines has received a government injection of two billion yuan (HK$2.26 billion) to overcome ''difficulties'' amid the financial crisis.

The money will reduce the financial strain faced by China's third-largest carrier, said Liu Jiangbo, a vice president of the parent company China Eastern Air Holding.

''China Eastern has recently received an injection of two billion yuan from the state ... the operations have maintained good momentum due to various reform measures this year,'' Liu said.

The latest capital injection brings the total amount of government aid awarded to the airline since last year to nine billion yuan.

China Eastern suffered a net loss of 15.3 billion yuan last year due to falling passenger numbers, rising fuel costs and bad bets on fuel hedging contracts.

China Eastern said last week it is selling two A340 jets for 590 million yuan to improve its cash flow.

The Shanghai-based airline said its net profit for the first three months of the year totalled 40.1 million yuan, down 81 percent from 210.8 million a year earlier.

The carrier said revaluation gains of 422 million yuan in its fuel-hedging contracts for the first quarter on higher international oil prices help offset losses from weak travel demand.

AGENCE FRANCE-PRESSE

[millionairemind]

China Eastern buys rival for $1.3bn
ByJustine Lau in Hong Kong

Published: July 13

China Eastern Airlines shares in Hong Kong rose as much as 14.4 per cent on Monday after the weakest of the country’s big three carriers announced it was acquiring rival Shanghai Airlines for just under Rmb9bn ($1.3bn) as it battled high operating losses.

However, the shares lost much of their early gains to close just 2.9 per cent higher at HK$1.79, against a 2.6 per cent decline in the benchmark Hang Seng index.

The state-orchestrated tie-up will see China Eastern dominate the Shanghai aviation hub and become China's largest airline by market share.

China Eastern also said it would raise about Rmb7bn by issuing new shares to strengthen its balance sheet. This followed a Rmb7bn cash injection from its state-owned parent last month.

In a widely-anticipated agreement, the state-controlled carrier said the acquisition would be conducted through a share swap at 1.3 China Eastern shares for each Shanghai Airline shares.

China Eastern has been the worst performer of the country’s struggling airlines industry. Last year, the company saw its total liabilities exceed its total assets by more than Rmb12.6bn. It also made a net loss of Rmb13.9bn because of falling passenger numbers and massive hedging losses caused by plummeting oil prices.

It said it needed to raise more capital because its gearing ratio remained at a very high level and its net assets were still negative even after last month’s capital injection. “As a result, the company’s operating and financial condition is under enormous pressure,” China Eastern said.

Following the merger, China Eastern’s market share in Shanghai will increase from 35 per cent to more than 50 per cent. It will also control 30 per cent of China’s aviation market.

Fierce price war between the two Shanghai-based airlines – which had many overlapping routes – had been a major reason for China Eastern’s losses. China Eastern’s domestic yield per seat is 10 per cent and 3 per cent lower than that of Air China and China Southern — the two other major national carriers — respectively. According to Citigroup analysts, the merger should immediately boost China Eastern’s earnings by Rmb1bn to Rmb3bn. They also expected the company to return to profitability this year.

But analysts also warned that cost savings from the merger would be limited in the longer term.

“It will create a dominant airline in Shanghai and synergies will come from some cost cutting. But there won’t be massive layoffs given China Eastern is a state-owned company and it will be hard to see lots of efficiency,” said Kelvin Lau, analyst at Daiwa Institute of Research in Hong Kong.

In a prelude to an overhaul of the troubled aviation sector, China in December reshuffled top executives among its three largest state-owned airlines, paving the way for the industry to consolidate.

Source: The Financial Times

[winston]

Not vested. From Phillips:-


Risk

Economic recession would led to industry boom level significantly dropped;
RMB depreciation will bring foreign exchange loss;
Jet fuel price soars out-of-expectation;
War, terrorist attacks, global flu and other emergencies;
Irrational price war within industry.


Valuation

We believe aviation boom will continue in 2011. Kind of strong consumption cyclical sectors, China air will benefit from national policies to stimulate consumption.

CEA acquired the majority of new flight schedule in the new Hongqiao Airport from 2010. Restructuring with Shanghai Airlines, post-Expo effect and upgrading of consumption structure will continued to push forward CEA`s main business.

We lift the EPS estimate of CEA in 2010 and 2011 to be HK$0.45、0.51. CEA is trading at 8.2/7.2x FY2010/2011E EPS. Our 12-monthes target price of HK$4.59 is based on 9 x P/E FY 2011E EPS, a BUY rating.