Eastern Airlines H1 Freight Revenue Down 45%

China Eastern Airlines Co., Ltd. (SEHK: 0670; SHSE: 600115), one of the nation's top air carriers, still lost money from its pillar business, although it turned to black in the first half of 2009.

The company witnessed an 11% slip in revenue from its passenger transport business, and total revenue from its freight operation plunged 45% from a year earlier. In the second half, the international freight market is predicted to be gloomy as before, so Eastern Airlines will pay more attention to its transport structure adjustment.

Eastern Airlines harvested net profit of CNY 985 million from January to June 2009, compared with net loss of CNY 175 million in H1 2008. However, total actual loss from the core business reached CNY 2.88 billion, ignoring its profits from fuel hedging on the changes in fair value.

The airway inched up 3.54% from a year ago in operating revenue from its domestic airlines, while that from the international airlines was on the reduction. But the transport structure adjustment cannot help Eastern Airlines solve the actual problem amid such a dim operation environment, estimated the company secretary, Luo Zhuping.

Eastern Airline adjusted the transport structure considerably in the first half, and then its available ton-kilometer and passenger-kilometer in the domestic market rose 31% and 28%, respectively. On the contrary, those of its international airlines separately sagged 16% and 13%.

In particular, the reduction of its international transport capacity was far more than 4.3%, the average calculated by the International Air Transport Association (IATA), said people with the direct knowledge of the matter.

Eastern Airline also announced that its merger with Shanghai Airlines Co., Ltd. (SHSE: 600591), another domestic airway underwent great losses from fuel hedging on the changes in fair value in 2008, would be completed before this yearend, if everything goes well.

After the trading suspension for more than one month, the two companies on July 13 came up with their merger scheme, upon which Eastern Airlines will acquire all assets, liabilities, business, and staff of Shanghai Airlines. However, the latter's brand, operation license, creditor's rights, and contractual liabilities can be retained.

Both parties should complete the related assets evaluation first of all. Ultimately, Shanghai Airlines will become the wholly-owned subsidiary of Eastern Airlines.

After the merger, the domestic civil aviation market will be dominated by the new entity consolidated from Eastern Airlines and Shanghai Airlines, Air China Limited (SHSE: 601111; SEHK: 0753), and China Southern Airlines Co. Ltd. (SEHK: 1055; SHSE: 600029) simultaneously.

(USD 1= CNY 6.84)

Source: www.nanfangdaily.com.cn (August 12, 2009)

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