China Eastern completes merger, looking for new investors
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China Eastern Airlines, the nation's second largest carrier by fleet size, said it has rolled out the red carpet for potential strategic investors after completing a merger with former local rival Shanghai Airlines.
The restructuring between China Eastern and Shanghai Airlines was officially wrapped up yesterday for a total of more than 150 billion yuan. The consolidated new carrier has a fleet size of 331 aircraft and will operate flights to 151 cities across the world, including New York, Los Angeles, Paris and Frankfurt.
"The completion of the transfer of capital assets only marks the first phase of restructuring and we expect China Eastern to further enhance its international competitiveness through, for example, strategic cooperation," said Meng Jianmin, deputy chief of the State-owned Assets Supervision and Administration Commission.
Ma Xulun, general manager of China Eastern, said the carrier has been actively looking for strategic partners. "We welcome all strategic partners who are committed to investing and developing the new China Eastern," said Ma.
Ma refused to give any details or a timetable for the introduction of future strategic partners, but both he and Meng referred to the high debt-asset ratio of the carrier, which saw falling revenues and recorded high fuel-hedging losses last year.
The carrier has lowered its debt-asset ratio to 95 percent, 20 percent down from 2009 figures, according to Meng, but still higher than Air China's 76.41 percent and China Southern Airlines' 85.73 percent.
Liu Shaoyong, chairman of China Eastern, said the eight-month restructuring has been well received so far. The airline successfully turned its balance sheet black in 2009 with a cash injection from the central government and an increased fuel tax on passengers. It reported a net loss of 13.93 billion yuan in 2008.
"The completion of the merger is a very important step for China's aviation industry to become a world aviation leader," said Xia Xinghua, deputy head of the Civil Aviation Administration of China.
Market observers still regard Singapore Airlines as an appropriate candidate to be a strategic investor, despite its abortive cooperation with China Eastern in August 2008. Singapore Airlines and its majority owner Temasek Holdings agreed in November 2007 to buy a 24 percent stake in China Eastern for $920 million, but the deal was rejected by China Eastern's minority shareholders because the price was too low.
