China Eastern 0670

[winston]

BROKER CALL - China Eastern Airlines kept 'sell'; SIA deal unlikely - Nomura

BEIJING (XFN-ASIA) - Nomura said it is maintaining its "sell" recommendation on China Eastern Airlines (CEA) as delays in introducing a strategic investor have put the Shanghai-based carrier under financial difficulties.

In a note, Nomura said it has forecast CEA's 2008 net gearing at 1,275 pct, adding that it expects the company to fund capital expenditure needs through bank loans.

Nomura also said it does not rule out the possibility that CEA will seek equity financing at some point, although such a move seems unlikely in the current operating environment.

In January, CEA's minority shareholders voted against selling a 24 pct stake to Singapore Airlines and Temasek for about 7.2 bln hkd.

Nomura noted that SIA's chairman said he would not be surprised if CEA does not resubmit the joint SIA-CEA proposal to shareholders by the deadline of Aug 9.

The chairman also said high oil prices may prompt SIA to change its investment strategy and consider keeping more cash to cover any unexpected developments, according to Nomura.

"The chairman's comments are in line with our expectations, and we think the proposal is unlikely to resurface for some time [if at all]," the brokerage said.

"Recall that it took two years to agree on the current proposal, so its lapsing and the current high oil price mean a renegotiation would take time," it added.

Nomura also noted that Air China and CNAC are still opposed to the deal, and that it would be difficult for CEA to win approval from minority shareholders without the go-ahead from those two.

The brokerage has a target price of 2.20 hkd on CEA.

The airline's shares in Hong Kong were down 0.03 hkd or 0.88 pct at 3.37 at 3.41 pm.

[winston]

From Dr. Check:-

China Eastern Air (0670) can be one good stock pick. Aviation fuel costs are up 50 percent to US$159 per barrel since the beginning of the year. Like many other airlines, China Eastern has hedged costs with oil futures.

China Eastern has secured four weekly flights to Taiwan and more are expected. It is also in cooperation talks with Taiwan's largest carriers, China Airlines and EVA Air.

The stock ended at HK$2.33 on Friday. The target for a rebound can be set at HK$2.80.

[winston]

China Eastern, Shanghai Air may merge

The central government and the Shanghai city government are discussing the possibility of merging Shanghai Airlines with China Eastern Airlines (0670), major business magazine Caijing reported.

The magazine quoted an unnamed, senior source in Shanghai's aviation industry.

"At present the discussion is between government agencies, and the two companies have not taken part,'' the source was quoted as saying.

REUTERS

[winston]

Not vested. From Dr. Check:-

I recommended China Eastern Air (0670) on Monday, as oil speculation eased.

Sometimes a bit of luck helps. Yesterday's news of a possible merger with Shanghai Air drove up China Eastern's share price by 11.8 percent to HK$2.65.

My short-term target of HK$2.80 may be achieved if oil was to fall further.

[winston]

China Eastern to resume Singapore Airlines talks

China Eastern Airlines (0670) will resume talks over a stuttering share sale with Singapore Airlines after the Olympics, state media reported.

"We will discuss the issue after the Olympics, and all things will become clear then,'' said Luo Zhuping, board secretary of China Eastern, told China Daily.

Singapore Airlines and Temasek Holdings, Singapore's state-linked investment firm, signed a preliminary deal last September to take a 24-percent stake in China Eastern for US$923 million (HK$7.19 billion).

But the deal was voted down by minority shareholders in January after China National Aviation Corp, the parent company of Air China, indicated it would make a higher offer.

China Eastern management then rejected the CNAC offer.

AGENCE FRANCE-PRESSE

[winston]

DEALTALK-Share fall, govt moves stir China Eastern-SIA talk

(For more Reuters DealTalks, click [DEALTALK/]) By Fang Yan and George Chen SHANGHAI, Aug 1 (Reuters) - A steep slide in share prices has revived talk of a possible stake sale by China Eastern Airlines <600115.SS><0670.HK> to Singapore Airlines , even though China Eastern's shareholders have already rejected the deal once.

Also potentially boosting prospects for a deal are recent government moves to broker a merger between China Eastern, one of the country's three major airlines, and Shanghai Airlines <600591.SS>, which would create a dominant carrier with a 60 percent share of domestic flights in China's financial hub.

Singapore Airlines and its majority owner Temasek Holdings [TEM.UL] agreed in November 2007 to buy a 24 percent stake in China Eastern at HK$3.80 per share, or half its H-share price at the time, valuing the deal at about $920 million.

The plan was vetoed in January by China Eastern's minority shareholders, with many harshly criticising the carrier for agreeing to sell the stake too cheaply.

Its Hong Kong-traded H shares have been in a steady downtrend since then, however, dipping below the HK$3.80 mark in late March. They were trading at HK$2.59 on Friday.

A senior China Eastern executive said the share price fall may improve the chances of winning shareholders' approval for a Singapore Air deal.

"We don't want our share price to fall but that has actually taken ammunition away from our critics (over the Singapore Air deal)," said the executive, who declined to be identified due to the sensitive nature of the matter.

However, the executive said a deal was unlikely to be completed before the Aug. 9 expiry of the agreement with Singapore Airlines given government orders to focus on transport safety issues and Olympics-related matters as Beijing prepares to host the Games from Aug. 8 to 24.

Singapore Air has said its talks with China Eastern were now focused on business cooperation rather than buying shares.

MERGER IN THE MIX China Eastern, dogged by a reputation for poor service and keen for a foreign partner with the expertise to help shore up its operations, has said it would focus once more on talks with Singapore Air after the Olympics.

Airline industry and government sources said the prospects for an equity deal seem stronger than they were a few months ago, due in part to the possibility of a merger between China Eastern and Shanghai Air.

China's central government and the Shanghai city government are discussing merging the two Shanghai-based carriers into an airline that could better compete with foreign rivals, the sources told Reuters.

If the government decides to go ahead with a merger, China Eastern would first have to move on any deal with Singapore Air, a government source said, as the government would want that matter settled before proceeding with the Shanghai Air merger.

"The possible merger with Shanghai Air should be good news to China Eastern and Singapore Airlines, as the government has now become involved and it is keen to solve relevant issues, which have been hanging out there for too long," the source said.

But many uncertainties still cloud the outlook for a deal.

After reporting a 15 percent drop in its first-quarter profit due to surging fuel prices, Singapore Air may have a harder time gaining approval from shareholders, especially in a slowing global economy that has dimmed the outlook for travel demand.

The International Air Transport Association issued a gloomy outlook in June, forecasting a $6.1 billion loss for the global industry in 2008, a sharp turnaround from the $4.5 billion profit it predicted in April, as oil prices soared.

In China, monthly air passenger volume, which had been growing at double-digit rates for years, slipped in May and June, and industry executives said the downtrend may extend into October as stricter security due to the Olympics deters travel.

Chinese flag carrier Air China <0753.HK><601111.SS> had also been opposed to the original deal. Its parent had proposed a strategic partnership with Chinese Eastern, which was rebuffed, but it is not known if it still harbours intentions to buy into the airline.

But analysts see merit in a deal for SIA.

"It is true that Singapore Air faces pressure from its shareholders amid a weak market," said Ma Ying, an industry analyst at Haitong Securities.

"But a tie-up with China Eastern gives it a foothold in China's affluent east coast, which will offer benefits from a long-term perspective."

[winston]

China Eastern passenger numbers plunge on Olympics

China Eastern Airlines (0670), the country's third-largest carrier, said passenger numbers dropped for the fourth month in a row in July as restrictions put in place for the Beijing Olympics disrupted travel.

The airline flew 3.27 million passengers, a 10.7 percent decline, last month, it said. Cargo volume rose 1.4 percent to 76,580 tonnes.

Air China (0753) and China Southern Airlines (1055), the country's biggest carriers, also flew fewer passengers last month, as the government boosted security checks, tightened visa rules and curbed flights to Beijing to smooth preparations for the Olympics.

China's surging inflation and higher ticket prices caused by rising fuel costs have also damped travel demand.

[winston]

Not vested.

Profit warning

China Eastern Airlines (0670) issued a profit warning today saying the company is expected to record substantial losses for the nine months ended September, on slowing down aviation market and a dramatic decrease in transportation demand during the third quarter.

The carrier reported a net profit of 1.03 billion yuan (HK$1.17 billion) for the first three quarters in 2007.

[winston]

China Eastern Airlines to book loss for Jan-Sept period

BEIJING (XFN-ASIA) - China Eastern Airlines Corp Ltd (SHA 600115; HK 0670; NYSE CEA), one of the country's three largest airlines, said it expects to book a net loss for the first nine months of 2008 under Chinese accounting standards.

The airline said in a statement to theShanghai Stock Exchange that its operations had deteriorated significantly in the third quarter due to a slowing aviation market and a dramatic fall in transport demand from a year earlier.

The upward adjustment in the price of jet fuel also led to a significant increase in operating costs, China Eastern said.

In late June, the National Development and Reform Commission (NDRC) announced to raise jet fuel by 1,500 yuan per ton.

In addition, there are clear signs that the global economic downturn and declining aviation demand are likely to persist in the near term, China Eastern added.

In the first nine months of 2007, the company booked a net profit 1.035 bln yuan, or 0.213 yuan per share.

China Eastern is due to release its third quarter financial results on Oct 29.

[winston]

Shanghai govt approves basic plan for China Eastern-Shanghai Air merger - report

BEIJING (XFN-ASIA) - The Shanghai municipal government has basically approved a plan to transfer about 60 pct stake in Shanghai Airlines Co Ltd (SHA 600591) to China Eastern Airlines Corp Ltd (SHA 600115; HK 0670; NYSE CEA), the China Business News reported, citing sources.

It said a timetable or detailed plan on the deal has yet to be chalked out.

The government considered the merger mainly because the two Shanghai-based airlines have too many routes overlapping, resulting in unnecessary competition, according to the report.

State media reported earlier this year that government shareholders of China Eastern Airlines and Shanghai Airlines are considering a merger of the two carriers, with plans to inject capital into China Eastern and later invite an investment in the combined entity by Singapore Airlines.

Both the Chinese airlines had rejected the reports.

China Eastern is controlled by the State-owned Assets Supervision and Administration Commission, while Shanghai Airlines is controlled by the state-owned assets regulator of the Shanghai municipal government.

China Eastern agreed last year to sell a 24 pct stake to Singapore Airlines and Temasek Holdings Pte Ltd, Singapore's state-owned investment company but the deal lapsed on Aug 9 following opposition from minority shareholders led by rival Air China.

Shanghai Airlines shares closed the morning session up 7.8 pct at 5.25 yuan while China Eastern was up 3.23 pct at 4.47 yuan.