China Eastern gets cash help

By Winny Wang  |   2008-12-11  |     NEWSPAPER EDITION

THE state-owned parent of China Eastern Airlines Co won 3-billion-yuan (US$437 million) cash injection from the central government which is trying to shield domestic airlines from a global financial turmoil.

China Eastern, the country's third largest carrier, plans to raise 2.35 billion yuan by issuing A shares to its parent to replenish working capital. The Shanghai-based carrier will sell 652 million shares to China Eastern Airlines Group at 3.60 yuan each, the company said in a statement to the Shanghai Stock Exchange yesterday. It will also issue 652 million H shares to China Eastern International Holding Ltd, which is wholly owned by the group, at 1 yuan apiece.

The share sales are expected to raise the parent's stake from 59.67 percent to 68.19 percent.

"The raised funds will reduce China Eastern's asset-liability ratio, increase the size of net assets, enhance the carrier's anti-risk ability and ease its pressure from operational capital," the statement said.

China Eastern has an asset-liability ratio of 98.49 percent and the fund injection can cut the ratio by 3.77 percentage points.

The proposal is still awaiting approval from its shareholders and the China Securities Regulatory Commission.

Meanwhile, China Southern Airlines Co, the country's largest carrier by fleet size, said yesterday in a statement that it would issue 721 million shares to China Southern Airlines Group at 3.16 yuan apiece to raise 2.28 billion yuan.

The funds will be used to repay bank loans, which can reduce the carrier's asset-liability ratio from 83.26 percent to 80.66 percent, the statement said.

China Southern will also issue 721 million H shares to the group's wholly owned subsidiary at 1 yuan apiece. The carrier said last month that its parent will get 3 billion yuan from the central government.