CHINA Eastern Airlines Corp, the most indebted of China's big three airlines, aims to raise at least 15 billion yuan (US$2.1 billion) for new planes and training to help it compete with Air China Ltd and Cathay Pacific Airways Ltd.
"If we can get more, it'll be even better," China Eastern Chairman Li Fenghua said in an interview broadcast yesterday on Bloomberg Television.
Li plans to reach his target by reviving the sale of a stake to Singapore Airlines Ltd, 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 SIA 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 (US$1.5 billion) selling shares to SIA, Temasek Holdings Pte, Singapore's sovereign wealth fund, and to its own state-controlled 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 fund raising will enable the carrier to cut its debt-to-asset ratio to 80 percent from 94 percent as of 2007.
Fleet expansion
"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.
China Eastern rose 0.6 percent to HK$3.34 as of 10:34am in Hong Kong trading. The carrier has lost 57 percent this year, compared with the benchmark Hang Seng Index's 9.1 percent decline.
The airline plans to add 17 Airbus and two Boeing planes this year, according to its annual report. It added 20 planes in 2007, growing its fleet to 223. China Southern added 23 aircraft last year and Air China got 29 planes.
China Eastern aims to boost passenger numbers 10 percent per year in the long-term, Li said. This year, it expects to fly 43 million travelers, helped by demand from the Beijing Olympics in August. China's total passenger numbers may rise 14 percent to 210 million travelers.