Wed, Dec 31, 2008 - Page 12 News List

China Eastern Airlines bailout raised to US$1bn

AP , SHANGHAI

China Eastern Airlines (中國東方航空) intends to raise 7 billion yuan (US$1 billion) from selling shares to its state-owned parent company — more than double the amount originally planned — to help it weather a financial crisis.

The Shanghai-based carrier’s shares, which had been suspended pending an announcement late Monday, fell 1.3 percent to 4.60 yuan yesterday morning.

The airline earlier said it would receive a 3 billion yuan capital injection from its parent company, China Eastern Air Holding Co (東航集團). The sale of 1.44 billion Shanghai-traded shares and 1.44 billion Hong Kong-traded shares in the carrier will more than double the size of the bailout.

The money raised will be used to increase cash balances.

“The outlook for China’s aviation industry due to the global recession is grim and the company’s operations and finances are under tremendous pressure,” the airline said in a statement.

The Shanghai shares would be sold at a 16.95 percent discount to their last traded price before the suspension, or 3.87 yuan a share, the airline said in notices to the Hong Kong Stock Exchange and Shanghai Stock Exchange. The Hong Kong shares would sell for 1.29 Hong Kong dollars per share — a 12.1 percent discount.

China Eastern reported a net loss of 2.34 billion yuan in the first nine months of the year.

The airline said its net cash flow of 1.66 billion yuan fell far short of the 12.8 billion yuan needed to repay its debts.

The parent company’s stake in the airline will rise to 74.64 percent from the current 59.67 percent, it said.

Several major state-run airlines have received cash injections recently. China Southern Airlines (中國南方航空), which received 3 billion yuan, saw its shares rise 2.4 percent to 3.40 yuan yesterday.

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