China Eastern Airlines (中國東方航空) said yesterday it had received a government injection of 2 billion yuan (US$290 million) to overcome difficulties amid the financial crisis.
The money will reduce the financial strain faced by China’s third-largest carrier, Liu Jiangbo (劉江波), a vice president of the parent company China Eastern Air Holding Co, said in a statement.
“China Eastern has recently received an injection of 2 billion yuan from the state,” Liu said.
PHOTO: AFP
“Operations have maintained good momentum due to various reform measures and have improved from late last year,” he said.
The latest capital injection brings the total amount of government aid awarded to the airline in the past six months to 9 billion yuan.
China Eastern suffered a net loss of 15.3 billion yuan last year because of falling passenger numbers, rising fuel costs and bad bets on fuel hedging contracts.
China Eastern said last week it was selling two Airbus A340 jets for 590 million yuan to improve its cash flow.
The Shanghai-based airline said in a statement its net profit for the first three months of the year totaled 40.1 million yuan, down 81 percent from 210.8 million a year earlier.
The carrier said revaluation gains of 422.0 million yuan in its fuel hedging contracts for the first quarter on higher international oil prices help offset losses from weak travel demand.
China Eastern and its bigger rivals, China Southern Airlines (中國南方航空公司) and Air China (中國國際航空), met strong headwinds last year as a slew of natural disasters and a slowing economy hit air travel.
Passenger demand has recovered thanks to Beijing’s aggressive efforts to prop up economic growth, with volumes up 14.6 percent in the first quarter, according to the Civil Aviation Administration of China.
But analysts said improved passenger numbers and the latest cash injection were unlikely to improve China Eastern’s overall financial position given its massive debt, which exceeded its total assets by ten billion yuan at the end of March.
“It will lower its financial [debt-related] expenses but the impact is likely to be minimal for such a big company,” said Huang Jinxiang, a Beijing-based analyst with Guosen Securities.
“Even if it managed to be profitable this year, it would be insufficient to lower its debt ratio significantly,” he said.
The outlook for China Eastern and the whole aviation industry this year is now highly dependent on severity of the A(H1N1) flu epidemic, which would weakened air travel, Huang said.
“They would have swung back into profit had it not been for the flu fears,” he said.
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