It is a big ask. China Eastern Airlines, the most indebted of China’s big three airlines, aims to raise at least RMB15 billion ($2.1 billion) for new planes and training to help it compete with Air China and Cathay Pacific.

China Eastern Chairman Li Fenghua said in an interview, ‘If we can get more, it’ll be even better.’

Li plans to reach his target by reviving the sale of a stake to Singapore Airlines, by tapping capital markets and through subsidies from the government, which owns part of the carrier. It all seems a trifle difficult to envisage.

China Eastern’s minority shareholders vetoed a tie-up with Singapore Air in January after the parent of Air China pledged to make a higher offer.

But Jack Xu, an analyst at Sinopac Securities, said, ‘The government won’t sit and watch its own company go bankrupt. China Eastern will have an opportunity to resubmit the Singapore deal this year.’

He rates the carrier ‘outperform’ which seems a tad optimistic given the recorded losses
Shanghai-based China Eastern still aims to raise $1.5 billion selling shares to Singapore Air, Temasek Holdings, the city-state’s sovereign wealth fund, and to its own state-controlled parent, China Eastern Air Holding.

China Eastern Chairman Li Fenghua, seen in this illustration said, ‘There’s no change in our plan to tie up with Singapore Airlines.’

Chew Choon Seng, chief executive officer of Singapore Airlines, said the two carriers are currently discussing commercial cooperation such as cross-selling tickets rather than an equity link. He wisely declined to say whether a tie-up is still being actively pursued.

China Eastern will spend 80% of the RMB15 billion on aircraft, with most of the rest going toward staff training.

The airline plans to add 17 Airbus SAS and two Boeing aircraft this year. It added 20 aircraft in 2007, expanding its fleet to 223. China Southern added 23 aircraft last year and Air China got 29.

The carrier filled 73.6% of its available seats in 2007. Passenger numbers rose 11% to 39.2 million, while cargo volume climbed 6.7% to 939,700 metric tons. This year, freight may jump 14% to 1.07 million tons.
Source: Bloomberg

China Eastern Airlines, the nation’s third-largest carrier, said it may lose RMB405 million ($58 million) of sales this year after being ordered to scrap flights that were disrupted by a labor dispute.

The Shanghai-based airline said in a statement to the city’s stock exchange that two routes in the southern Chinese province of Yunnan will be halted May 4. The number of its flights on six Yunnan routes were cut by between two and six daily.

The government took away routes from the carrier after its pilots aborted flights to protest working conditions. This will do nothing to add to their popularity with the management.

The pilots were able to take such cavalier action because the country is facing a shortage of pilots which will only increase.

Yu Jianjun, an analyst at Huatai Securities Co. in Nanjing said, ‘Aggressive fleet expansion is the reason for all these problems. The nation’s civil aviation industry is running at high risk and debts because everyone is regarding market share as first priority.”

China Eastern’s routes in the southern province will be given to four rivals including Air China.

Board Secretary Luo Zhuping said in a Shanghai interview the airline will seek government permission to resume as soon as possible the routes that were taken away after pilots aborted flights to protest working conditions.

The country’s passenger numbers may increase 14% this year, helped by leisure travel and demand for flights to attend the Beijing Olympic Games.

According to the General Administration of Civil Aviation China’s airlines may fly 210 million passengers in 2008.
Source: Bloomberg

According to the Wall Street Journal China Eastern Airlines, the least solvent of China’s three major state-owned carriers, plans to take out US$337 million in new loans to pay for additional aircraft for its fleet. Which seems likely as it is massively extending its fleet.

It then goes on that China Eastern’s financial difficulties have continued as strategic investment bids from both Singapore Airlines and Air China parent China National Aviation Holding Co have stalled.

In February the Shanghai-based carrier reportedly missed debt payments totaling US$535 million, according to a person familiar with the situation.

It depends how familiar that person is.

China Eastern Airline officially reports it netted a $83.71 million (RMB586 million) profit in 2007. So missing debt payments, on the face of it, seems unlikely.

True, this is after posting a $0.43 million (RMB2.992 billion) loss in 2006,

The Shanghai Securities Journal reported the airline’s passenger revenue from domestic (excluding Hong Kong) grew 19% year-on-year to $3.42 billion (RMB23.908 billion), while international passenger revenues grew 20% to $1.76 billion (RMB12.308 billion).

Revenues from its routes to and from Hong Kong fell 13% to $0.34 billion (RMB2.355 billion), due largely to increasing competition for the lucrative market.

Cargo accounted for the remainder of revenues.

Fuel costs surged 11.69% year-on-year to $2.16 billion (RMB15.117 billion), accounting for 40.9% of operating costs. The company has forecast that it will carry 42.95 million passengers and 1.07 million tons of cargo this year. It will also buy eight A320 aircraft, five A321s, one A330-200, three A330-300s, one B737-700 and one B737-800.
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Source: China Perpective

China Eastern Airlines saw its share price sink 6.8% after the Civil Aviation Administration announced it was fining the company for an incident in which its pilots intentionally disrupted flights, inconveniencing hundreds of passengers.

‘This incident exposed existing weaknesses in our management and taught us a deep lesson,’ the airline said in a statement released after the aviation regulator announced it was fining the company RMB1.5 million ($214,300) for the disruptions.

The Shanghai-based airline earlier said that 21 flights on March 31 in southwestern China’s Yunnan province were intentionally disrupted by pilots who either turned back midway through their flights or landed them and then took off again without letting passengers disembark.

The pilots were reportedly disgruntled over contract and work conditions in a country that bans unauthorized labor organizing.

Aviation regulators announced the fine, and the suspension of some of China Eastern’s flights in Yunnan, after an investigation.

Having been involved in this sort of nonsense in another country the writer has a comment to make. Pilots wrongly are treated as if they, and they alone, manage the aircraft.

This should not be the case.

It is an essential that the management of the aircraft be a team effort — the second pilot is not just along for the ride — and this is now being reflected in the way the flight simulators are set up.

The pilot is God ethos has to change.

The next point is that there just are not enough pilots so they see themselves in a special bargaining position. The answer is more and more simulators and more and more pilots. Flying a modern plane is not a great skill and an unflappable manner is of greater value than a high intelligence.

The use of the term ‘captain’ should be abandoned. They are the pilot of the plane in the same way as a bus driver is the driver of a bus and elevating them to semi-God status always brings trouble. As Qantas in Australia found to its cost. And eventually to the deep distress of a large number of pilots. Who are no longer captains.
Source: Associated Press

Pilots flying for a subsidiary of China Eastern Airlines turned back midflight to southwestern Chinese airports, in a rare strike to protest lower pay and other conditions.

Seventeen flights returned to their departure airports in Yunnan Province in a protest by pilots of China Eastern subsidiary Yunnan Airlines.

The Yunnan Info Daily quoted an unnamed pilot as saying China Eastern flights departing from Kunming airport returned to the city after takeoff on Monday and Tuesday for reasons other than ‘weather conditions’ — the explanation given by the carrier.

The pilots’ complaints seen to be that they limited to domestic routes and therefore shorter flying hours and lower pay than counterparts in the parent company. There is also a question of tax on overtime pay.

State-run television reported the strike as well as passengers’ complaints

Leading financial magazine Caijing said that pilots would not be punished, citing an air administration official.

The return of the flights left at least 1,500 passengers stranded in Kunming airport.

This is the third incident in a month related to the disputes.

More than 40 Shanghai Airlines pilots asked for ’sick leave’ on March 14, while 11 East Star Airlines pilots ‘took a holiday’ last Friday.

This week’s incidents caught the attention of the General Administration of Civil Aviation of China (CAAC).

Beijing Times reported that in an emergency meeting, the CAAC said the pilot leading the move could face a lifelong ban on piloting.

The CAAC also asked China Eastern to settle the dispute as soon as possible to guarantee flight safety.

The newspaper quoted insiders as saying the root of problem lies in a national shortage of pilots, especially captains. The CAAC estimated at least 6,500 more pilots are needed by 2010, but only 600 to 800 are trained every year.
Source: China View and Reuters