Chinese Airlines news

[Pieter C. 5]

Okay crisis results in one-month shutdown

 

Thursday December 4, 2008

Tianjin-based Okay Airways will shut down for one month owing to conflicts between airline management and controlling stakeholder Juneyao Group, which sent a letter to CAAC claiming it no longer is able to guarantee Okay's operational safety.

 

The carrier will suspend operations from Dec. 15 to Jan. 15, as instructed by CAAC, which will send staff to audit Okay's safety standards. It has delayed taking delivery of its second MA60.

 

Juneyao, which controls 63% of Okay, said the airline will earn a profit from its cargo business this year but will continue to suffer losses on its passenger operation as the Chinese market continues to decline. Okay had hoped to introduce a third-party strategic investor, but Juneyao rejected the strategy and plans to merge Okay with its Shanghai-based Juneyao Airlines subsidiary.

 

China's privately run carriers are struggling in the current environment. Spring Airlines, the most profitable domestic LCC, announced that its 2008 profit is expected to drop 70% from the CNY70 million ($10.2 million) earned last year.

 

China's Okay Airways To Stop Passenger Service

 

December 4, 2008

China's first private airline Okay Airways will indefinitely halt its passenger services beginning in mid-December, an executive of the company said on Thursday, confirming a local newspaper report.

 

The Juneyao Group, controlling shareholder of Okay Airways, filed an application in November to the authority to suspend Okay's passenger service, the China Business News reported earlier on Thursday.

 

Okay Airways received verbal approval on Wednesday from the Civil Aviation Administration of China (CAAC), allowing it to halt passenger operations on December 15, said Han Jing, the company's spokesman.

 

"We have no idea why Juneyao filed the application to suspend our operation," Han said.

 

Okay Airways' cargo business would remain unchanged, Han added.

 

The newspaper quoted Juneyao's chairman, Wang Junjin, as saying that Okay Airways needed to increase profitability and make a turnaround in passenger services in the face of the global financial crisis.

 

Beijing-based Okay Air was established in 2005 and now operates cargo and passenger flights across the country. As a partner to US package-delivery company FedEx, the carrier has 3 cargo planes and operates 6 planes for passenger service.

 

(Reuters)

 

[Pieter C. 5]

Okay aims to relaunch 'as soon as possible'

 

Monday December 8, 2008

The chairman of Okay Airways' controlling shareholder Juneyao Group, Wang Junjin, promised Friday that the troubled airline will resume flying "as soon as possible" following a one-month shutdown imposed by CAAC.

 

China's first privately run carrier, launched in 2005, Okay announced last week that it will suspend passenger transport for one month starting Dec. 15 owing to conflicts between Juneyao and airline management. Okay's cargo cooperation with FedEx will continue to operate as usual.

 

Wang admitted in a statement that Okay has been suffering operating losses owing to "its unclear management focus to operate trunk routes and regional routes at the same time, as well as to explore not only the passenger transport market but also the cargo transport market." In response, Juneyao fired Okay Chairman Liu Jieyin. It said it has no plan to lay off Okay's general staff.

 

The Tianjin-based carrier currently operates three 737 passenger aircraft, three 737-300 freighters, one MA60 and two Y-8s on nearly 20 domestic routes.

 

Owing to difficulties in securing profitable routes and pilots, smaller privately run Chinese carriers are struggling to survive, especially in the current difficult environment. Wang said he plans to optimize Okay's route network, improve efficiency and reduce operating costs in order to boost performance. LCC Spring Airlines plans to charge for checked luggage to increase its operating revenue.

 

 

[Pieter C. 5]

Hainan Air Says Parent May Seek Cash Injection

 

December 9, 2008

China's Hainan Airlines said on Tuesday its parent was considering seeking financial help from the government, playing down a local media report about an imminent cash injection.

 

Beijing News reported that the Hainan provincial government was considering injecting cash to the listed carrier as air traffic demand slows.

 

But Hainan Air said it remained uncertain whether its parent would get financial support from the government.

 

In a statement, the carrier also said it had not held discussions with any potential investors on other issues that might affect its share price.

 

Last week, Hainan A shares, traded in Shanghai, jumped roughly 14 percent to 3.48 yuan (USD$0.506) by December 5 when it last traded, amid speculation the government would supply cash to the carrier.

 

(Reuters)

 

[Pieter C. 5]

China Encourages Airlines To Shelve Plane Orders

 

December 10, 2008

China's aviation regulator is encouraging airlines to cancel or postpone aircraft deliveries due in 2009 as a slowing economy curbs demand for air travel.

 

The Civil Aviation Administration of China (CAAC) also encouraged carriers to retire old aircraft and will not approve new airlines before 2010, CAAC said in a statement.

 

The move may hurt Boeing and Airbus which are turning to emerging markets, including China, for growth as demand weakens in their home markets.

 

CAAC will not raise aircraft take-off and landing fees in the first half of next year and will continue to subsidize airlines flying less profitable regional routes, it said.

 

The regulator also supports further alliance and consolidation of the country's airlines to help boost their overall competitiveness, it added.

 

Last month, China started to provide financial aid for its airlines hit badly by weak air traffic demand and hefty losses in fuel price hedging.

 

(Reuters)

 

[Pieter C. 5]

China Eastern, Southern Plan Share Placement

 

December 11, 2008

Two of China's three biggest airlines said on Thursday they would place shares to raise CNY3 billion yuan (USD$437 million) each, as part of the government's cash injection into major airlines to ease their operational difficulties.

 

China Eastern said it would issue both domestic A shares and Hong Kong-listed H shares to its parent to obtain the CNY3 billion the government injected into its parent.

 

China Southern said it would issue A shares to its parent to obtain CNY2.28 billion. It would also issue H shares to the parent's overseas unit.

 

(Reuters)

 

[Pieter C. 5]

China Eastern Trims Losses On Reshuffle Report

 

December 12, 2008

Shares of China Eastern Airlines trimmed losses on Friday afternoon after a report that chairman of rival China Southern Airlines had been appointed chairman of China Eastern by the central government.

 

Shares of China Eastern, which fell 5.7 percent in the morning, trimmed losses to 4.7 percent. While shares of China Southern, which dropped 6.8 percent on Friday morning, were down 7.5 percent in the afternoon.

 

The benchmark Hang Seng Index was down 6.9 percent in early afternoon trade.

 

Liu Shaoyong, chairman of China Southern Airlines, had been appointed chairman of rival China Eastern Airlines by the central government, two sources familiar with the situation said on Friday.

 

The sources were confirming a report by the online edition of major Chinese financial magazine Caijing as saying the management reshuffle was part of preparations for a possible takeover of smaller Shanghai Airlines by China Eastern.

 

(Reuters)

 

[Pieter C. 5]

Hainan Air To Buy USD$344 Mln Of Group Assets

 

December 14, 2008

Hainan Airlines, a mid-sized carrier based in the south of China, said on Saturday it would spend CNY2.35 billion yuan (USD$344 million) to buy assets from its parent group as part of a drive to expand in the north.

 

The airline will purchase 45 percent of Beijing Yanjing Hotel, and 95 percent of another group company with substantial real estate investments in the capital, from parent HNA Group.

 

There have been signs in recent weeks that Chinese airlines may be gearing up for merger and acquisition activity as they try to strengthen themselves amid a slump in air travel.

 

On Friday China Southern Airlines, the country's biggest carrier by fleet size, announced the resignation of its chairman Liu Shaoyong.

 

China Eastern Airlines, another big carrier, simultaneously said its chairman Li Fenghua was resigning and that Liu had been nominated to its board. Industry sources said Liu would become chairman of China Eastern.

 

Analysts believe the management reshuffle may be part of preparations for a merger between China Eastern and smaller Shanghai Airlines, a possibility which the government has been studying.

 

Both China Eastern and China Southern said this week that they would issue new shares to their parents in exchange for CNY3 billion yuan cash injections that each parent received from the government.

 

Hainan Airlines said its own parent was considering whether to seek financial help from the government.

 

(Reuters)

 

[Pieter C. 5]

Taiwan, China Ties Grow With Direct Trade Links

 

December 15, 2008

Taiwan and China launched direct daily passenger flights, new shipping routes and postal links on Monday for the first time since 1949 in a further thaw of once icy relations between the two political rivals.

 

The new links underscore how quickly ties have warmed under the island's pro-China President Ma Ying-jeou, who took office in May on a pledge to improve cooperation with Beijing.

 

"The direct routes to China can mean two things," Ma said at a ceremony at Taiwan's Kaohsiung port.

 

"One is that the two sides are reconciling and not going back to the animosity and conflicts of the past. The other is the economy -- sea and air cargo links can greatly reduce time and expenses."

 

Flights between Taiwan and China, which are just 160 km (100 miles) apart, were previously routed via a third region, usually Hong Kong or Macau, because of a ban on regular direct links.

 

Cargo shipments also detoured through third countries or regions, raising costs for Taiwan firms doing business in China.

 

"(The links) should make the economies of both sides more competitive," said Alex Chiang, an associate politics professor at National Chengchi University in Taipei.

 

Taiwan and China agreed in November to the new links, which include up to 108 direct daily flights a week, 60 new cargo flights a month and a raft of new sea cargo routes.

 

Monday's daily charter flights, an increase from the Friday-through-Monday routine that began in July, will become scheduled daily flights next year, Ma has said.

 

China-Taiwan trade was worth USD$90 billion in 2007, according to official Taiwanese data, while there are 750,000 Taiwanese investors in the mainland.

 

China has claimed sovereignty over self-ruled Taiwan since the end of the Chinese civil war in 1949 and vowed to bring the island under its rule, by force if necessary.

 

Tensions brought the two sides intermittently to the brink of war over the last six decades in what is considered potentially one of the most dangerous flash points in Asia.

 

But attention has turned to cementing ties since Ma took office. China's Xinhua News agency said in a commentary the new links would inject energy into cross-strait economic relations.

 

The links aim to boost two-way trade and build political trust, but are not expected to immediately lift Taiwan's moribund economy from the grip of the global financial crisis.

 

The financial crisis has raised the stakes for Ma, with Taiwan's export-driven economy contracting in the third quarter. But few short-term gains are expected from the new links, which could end up denting the image of the island's president, who some critics accuse of getting too cozy with Beijing.

 

The five Taiwan airlines and nine from China face low demand for their direct flights because of the economic downturn. Analysts also say legal curbs to investment remain in China.

 

Between 1991 and 2007, Taiwan approved investments of USD$65 billion in China, according to official data, although experts say the total could exceed USD$100 billion because of capital routed to China through third-party locations such as Hong Kong.

 

(Reuters)

 

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China Eastern inaugurates truly direct scheduled cross-strait flights

 

Tuesday December 16, 2008

Truly direct scheduled flights across the Taiwan Strait finally began yesterday when China Eastern Airlines inaugurated its Shanghai-Taipei service.

 

Cross-strait flights have occurred intermittently and infrequently since 2003, typically during peak leisure travel periods such as the Chinese New Year. Weekend cross-strait flights began in July, but yesterday's was the first that was not required to fly through Hong Kong airspace rather than directly across the Taiwan Strait. CAAC Minister Li Jiaxiang noted a direct routing can save approximately 1 hr. 20 min. and some 8 tonnes of fuel on a Beijing/Shanghai-Taipei flight.

 

Last month, CAAC selected CEA, Air China, China Southern Airlines, Hainan Airlines, Xiamen Airlines, Shanghai Airlines, Sichuan Airlines, Shandong Airlines and Shenzhen Airlines to operate 54 weekday flights between 16 mainland cities and Taiwan.

 

CA is scheduled to conduct 10 cross-strait flights per week (four Shanghai-Taipei frequencies and a combined six from Beijing, Tianjin, Hangzhou, Chengdu and Chongqing). CZ also will operate 10--four each from Guangzhou and Shanghai and two from Shenzhen. Yesterday it operated the first direct cargo flight from Guangzhou.

 

CEA will fly 12-times-weekly--seven from Shanghai, two from Nanjing and one each from Xi'an, Kunming and Wuhan. Hainan, Xiamen, Sichuan and Shenzhen airlines will operate from Haikou, Fuzhou, Chengdu and Shenzhen respectively.

[Pieter C. 5]

Shanghai Air Says Needs Capital From Shareholders

 

December 18, 2008

Shanghai Airlines, a regional carrier more than 35 percent owned by the Shanghai city government, said on Thursday that it needed to raise capital from its shareholders.

 

But the company is still studying the matter and has no concrete plan to raise funds, it said in a brief statement, adding that it had not held detailed talks with investors. It did not elaborate.

 

Shanghai Airlines was commenting on local media reports that it had sought a cash injection from the Shanghai government to help cut its debt ratio, which now stands at between 85 and 90 percent, according to the official China Securities News.

 

Much of China's airline industry is turning to the government for help as air traffic slumps.

 

Two of the top carriers, China Southern Airlines and China Eastern Airlines, this month said they would each receive a CNY3 billion yuan (USD$439 million) cash injection provided by the central government through their parent firms.

 

Hainan Airlines has also said its parent was considering seeking financial help from the government.

 

(Reuters)

 

[Pieter C. 5]

Chinese Airline Group HNA Gets Govt. Aid

 

December 23, 2008

HNA Group, a shareholder of Hainan Airlines, said it had received a CNY500 million yuan (USD$73 million) cash injection from the Tianjin municipal government, becoming the third airline group that has received aid from the government as the economy slows.

 

HNA's Grand China Express, a regional carrier based in the northern Chinese city of Tianjin, got CNY200 million in aid from the government, while its leasing unit got CNY300 million, HNA said in a statement.

 

The parent groups of China Eastern Airlines and China Southern Airlines, each received CNY3 billion aid from the central government recently to help ease their financial difficulties.

 

China Eastern and China Southern, two of the country's three biggest airlines, subsequently unveiled detailed share placement plans to their parents in exchange for the aid.

 

(Reuters)

 

[Pieter C. 5]

China Eastern Unveils USD$1 Bln Capital Increase

 

December 29, 2008

China Eastern Airlines said on Monday it would receive a capital injection from the government totaling CNY7 billion yuan (USD$1.02 billion), more than double its previous plan.

 

In exchange for the capital, the airline would issue 1.44 billion new Shanghai-listed A shares to its state-owned parent group at 3.87 yuan each, as well as 1.44 billion Hong Kong-listed H shares at 1.00 yuan each.

 

In its original plan, announced earlier in the month, China Eastern had said it would obtain CNY3 billion through a share placement to its parent.

 

The funds will be used to improve the airline's balance sheet and strengthen its ability to continue operations, China Eastern said in a statement on the Shanghai Stock Exchange's web site.

 

Earlier this month, rival China Southern Airlines also announced a share placement to its parent in exchange for a CNY3 billion cash injection from the government.

 

After years of robust growth on the back of a soaring domestic economy, China's airlines are facing falling passenger demand, intensifying competition and more cost pressures as the world's fourth-largest economy slows amid the global recession.

 

The government has also been discussing the possibility of a merger of Shanghai-based China Eastern and its smaller rival Shanghai Airlines to create a dominant player with a 60 percent share of domestic flights in China's financial hub.

 

(Reuters)

 

[Pieter C. 5]

Chinese Airlines Seek 11 Percent Rise In Passenger Volume

 

January 7, 2009

Chinese airlines will strive for 11 percent growth in passenger volume this year in compliance with a guideline endorsed by the country's industry regulator.

 

Air China and other Chinese carriers carried 176.24 million passengers from January to November 2008, up merely 2.9 percent from the previous year, official data showed, as a slowing economy curbed air travel. Cargo volume climbed 1.6 percent to 3.71 million tonnes over the same period.

 

The Civil Aviation Administration of China (CAAC) in a statement set 2009's passenger volume target at 220 million and cargo throughput at 4.37 million tonnes, up 8 percent.

 

It did not provide any basis for the guidelines but said they could be adjusted in accordance with the macroeconomic situation.

 

Fixed asset investment, mostly allocated to bolster the country's airport facilities, will be around CNY80 billion yuan (USD$11.71 billion) to CNY100 billion, CAAC said.

 

(Reuters)

 

[Pieter C. 5]

Chinese carriers posted CNY7.7 billion net loss in first 11 months of 2008

 

Friday January 9, 2009

Hit hard by the deepening global financial crisis, Chinese airlines posted a net loss of CNY7.7 billion ($1.13 billion) in the first 11 months of 2008, according to CAAC Vice Minister Yang Guoqing.

 

Yang noted in a conference this week that the carriers suffered from a sharp decline in demand last year, especially on international routes. Even Hong Kong and Macau slipped.

 

Based on the regulators' rough estimate, Chinese airlines transported 192 million passengers in 2008, down 13% from 2007. Cargo volume plummeted 14.8% to 4 million tonnes.

 

Yang predicted that the carriers will face a "tougher" 2009 as the global financial crisis is expected to exert a deeper impact on the airline industry. But he expressed optimism about the growth of China's economy owing to the fact that Beijing has set a goal of maintaining 8% GDP growth this year, which will "boost air transport demand, especially for a domestic market that has a big potential." For this reason, CAAC set a 2009 target of 220 million passenger boardings and 4.4 million tonnes of freight, up 11% and 8% respectively.

 

Meantime, Yang reiterated the regulator's strong commitment to controlling capacity increases and market access for domestic carriers. Last month CAAC encouraged airlines to return leased aircraft and ground or sell older planes, in addition to capacity adjustments, in order to reduce deliveries of foreign-made aircraft (ATWOnline, Dec. 19, 2008). It also is sticking to its policy of suspending approval of new airlines until 2010.

 

[Pieter C. 5]

China Eastern 2008 Traffic Drops As Economy Slows

 

January 9, 2009

China Eastern Airlines, one of the country's three biggest carriers, said passenger volume fell 5.4 percent last year, the first drop in at least nine years as the economic slowdown curbed air travel.

 

China Eastern carried 37.05 million passengers last year, halting four years of double-digit growth fueled by a booming economy.

 

Cargo volume fell 5.6 percent to 887,000 tonnes during the period, it said.

 

China's air traffic began to slide in May as a series of natural disasters and a slowing economy dented demand for air travel.

 

The country's top airlines, which include Air China and China Southern Airlines, posted net losses in their third quarter results.

 

China's airlines lost CNY7.07 billion yuan (USD$1.04 billion) in the first 11 months of 2008, the official Shanghai Securities News said on Friday, citing data from the Civil Aviation Administration of China (CAAC).

 

Beijing has unveiled a raft of support measures to help the ailing industry, including combined cash injections of CNY10 billion into China Eastern and China Southern.

 

The State Council, or cabinet, has also approved a three-year exemption from the operations tax on airlines' fuel surcharges, retroactive to January 1, 2008.

 

Taxes previously paid would be deducted from the companies' future payments, the Finance Ministry said late on Thursday.

 

Industry analysts said the support measures, particularly the cash injections, would help to ease the carriers' debt burden and showed the state's commitment to supporting the sector.

 

"It seems that the government is determined to save its airline industry as it is a key sector and of strategic importance to the whole country," said Li Lei, an analyst with China Securities.

 

The fuel surcharge tax exemption alone will help Chinese airlines save a combined CNY2.5 billion over the three years to December 31, 2010, state media said, citing CAAC data.

 

(Reuters)

 

[Pieter C. 5]

China Southern Appoints New Chairman

 

January 12, 2009

China Southern Airlines, the country's biggest airline by fleet size, said its directors approved the appointment of Si Xian Min as board chairman at an extraordinary meeting on Monday.

 

The airline's directors also approved at the meeting Si's resignation as general manager, the company said in statement released through the Hong Kong exchange.

 

China Southern's former chairman Liu Shaoyang resigned last month after he was selected by the central government to serve as chairman of rival China Eastern Airlines, two sources familiar with the situation said.

 

The sources were confirming a report by the online edition of major Chinese financial magazine Caijing that the management reshuffle was part of preparations for a possible takeover of smaller Shanghai Airlines by China Eastern.

 

Shares in China Southern closed down 6.7 percent at HKD$1.25 on Monday.

 

China Eastern slid 7.1 percent to HKD$1.04 after the airline said it would report a large loss for 2008 because of slumping traffic and losses on fuel price hedging contracts.

 

(Reuters)

 

[Pieter C. 5]

China Eastern To Cut Back Plane Orders

 

January 15, 2009

China Eastern Airlines, the country's third-largest carrier, targets zero capacity growth this year and may cancel, delay or sell all new planes to be delivered in 2009, company sources said on Thursday.

 

"We do intend to trim down the order for this year, the more the better, but it all depends on the outcome of the negotiations with aircraft makers," an executive at China Eastern said.

 

The company does not want to add any new capacity this year given the bleak outlook and slowing traffic demand, which are hurting its yields, he added.

 

The company is scheduled to take deliveries of 29 planes from Boeing and Airbus in 2009, sources said.

 

(Reuters)

 

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China Eastern Rises 11 Percent On Restructuring Talk

 

January 15, 2009

Shares in China Eastern Airlines rose nearly 11 percent on Thursday on talk that it may sell stakes in smaller regional carriers and renewed speculation it may merge with Shanghai Airlines.

 

China Eastern is looking to sell a 30 percent stake in Joy Air to alleviate its strapped finances, company sources said on Tuesday.

 

In addition to Joy Air, market talk also pointed to stake sales in Wuhan and Yunnan airlines as China Eastern struggles with its high gearing ratio despite a recent CNY7 billion yuan capital injection.

 

The airline said earlier this week it would report a large loss for 2008 because of slumping traffic and losses on fuel price hedging contracts.

 

(Reuters)

 

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Empty Seats Show Problems With China-Taiwan Flights

 

January 15, 2009

Planes are flying with many empty seats a month after daily direct flights began between political rivals Taiwan and China, and travel officials are urging that some of the restrictions in the landmark deal be loosened.

 

Taiwan and China launched more than 100 direct daily charter flights a week on December 15, a month before the busy Lunar New Year holiday season, underscoring how quickly ties have warmed under Taiwan's pro-China President Ma Ying-jeou.

 

But restrictions on destinations and rowdy receptions to visiting Chinese envoys to Taiwan amid deepening financial gloom have thrown turbulence around the historic air links. Flights are filling to only 71 percent of capacity, while Chinese tourism arrivals reached only 10 percent of projections last month, the Taiwan government said.

 

A lack of flights to popular Chinese cities, such as Shanghai and Beijing, account for the low number of Taiwanese passengers, industry analysts say. They say too many serve secondary cities put on the map to stimulate tourism in less popular areas.

 

"You have some routes that are driving down the average," said Gary Chia, greater China co-head for Yuanta Securities.

 

Taiwan's TransAsia Airways, for example, sees "room to expand" on flights from Taipei to the northeast China industrial city of Dalian, spokeswoman Janet So said.

 

"Dalian is a gateway to the northeast, but it's new for Taiwanese so it needs time to introduce itself to tourists," she said. TransAsia passenger loads average 70 to 80 percent.

 

China Airlines and Eva Airways, both based in Taiwan, also run charter flights. Major carriers from the other side include Air China and China Southern.

 

Taiwan travellers also want the rules changed to let them buy tickets more than a month ahead of takeoff and be spared the sudden destination changes that are allowed on charter flights.

 

To fly in more Chinese tourists, boosting the local economy, Taiwan's hospitality industry wants China to let more people board direct flights by lowering a 10-person tour group minimum to five and allowing more Chinese agents to sell tickets.

 

"Opening direct flights hasn't had much effect yet," said Anthony Liao, a Taipei Association of Travel Agents official.

 

The global economic crisis, which has pushed the unemployment rate in Taiwan to a five-year high and has sent exports plunging by a record 42 percent, is also casting a pall over the travel industry.

 

Travel agents worry that Chinese tourists are also shunning Taiwan because protesters threatened China's senior negotiator on a Taipei visit in November and manhandled his deputy weeks earlier.

 

China has claimed sovereignty over Taiwan since 1949, when Mao Zedong's Communists won the Chinese civil war and Chiang Kai-shek's Nationalists fled to the island. Beijing has vowed to bring Taiwan under its rule, by force if necessary.

 

An average of 300 Chinese tourists visited Taiwan per day last month, down from November and far below the 3,000-person daily maximum billed by Taiwan officials as a way to help the ailing service sector, the island government says.

 

On a mid-January afternoon at Taipei's Songshan Airport, only four tour groups came on three flights from China, leaving a travel information kiosk idle and brochures untouched.

 

Despite potential business around the January 26 Lunar New Year holiday, a huge travel season in China and Taiwan, officials from the two sides will allow only 40 extra flights per week, for 21 days, to leave China more aircraft for heavy internal demand.

 

Flights between Taiwan and China, which are just 160 km (100 miles) apart, previously passed through a third region as regular direct links were banned as the two sides flirted with war.

 

Too much waiting around for smooth passage between the two sides could lead Taiwan's public to question whether links with China can lift the island economy.

 

China and Taiwan are due early this year to rehash Beijing's rules on tour group sizes and travel agents. An item on replacing charters with market-driven scheduled flights, effectively killing today's technical issues, is seen on a later agenda.

 

"There will be a point where charter flights are no longer appropriate," said Alexander Huang, a strategic studies professor at Tamkang University in Taipei.

 

(Reuters)

[Pieter C. 5]

China Eastern Gets CNY5.6 Bln Loan

 

January 16, 2009

China Eastern Airlines said on Friday that it had obtained a short-term loan of CNY5.6 billion yuan (USD$820 million) from its parent group to boost its working capital.

 

The six-month loan, with an interest rate below the central bank's benchmark lending rate for commercial banks, will ease a short-term funding squeeze and cut financial costs at the major Chinese carrier, it said in a statement.

 

China Eastern may ask to extend the loan 15 days before it matures, the airline added.

 

Earlier this week, China Eastern estimated it would post a large loss for 2008 because of slumping traffic and losses on fuel price hedging contracts.

 

Last month it announced it would receive a CNY7 billion capital injection from the government in exchange for a placement of shares to its state-owned parent group, and it has been taking a range of steps to strengthen its finances, such as trying to sell a stake in its regional unit Joy Air.

 

Company sources said on Thursday that it would aim for zero capacity growth this year and might cancel, delay or sell all new planes to be delivered in 2009.

 

Partly because of such steps, China Eastern's Shanghai-listed A shares jumped their 10 percent daily limit on Thursday.

 

(Reuters)

 

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Air China Expects To Report Loss For 2008

 

January 16, 2009

Air China said on Friday it expected to report a loss for 2008 because of slumping traffic demand and higher fuel prices during much of the year.

 

The airline, which is due to announce results in mid-April, said the loss would be "significant". In 2007 it made a net profit of CNY3.88 billion yuan (USD$568 million).

 

Air China also estimated that because of the drop in oil prices late last year, fair value losses on its fuel hedging contracts had increased to CNY6.8 billion at the end of last year from CNY3.1 billion in late November.

 

However, it noted that those losses could change during the remaining period of the contracts, and added that the drop in oil prices had also helped the company cut its spot oil purchasing costs.

 

China's two other major airlines, China Southern Airlines and China Eastern Airlines, also predicted earlier this week that they would post losses for 2008.

 

(Reuters)

 

[Pieter C. 5]

China, Taiwan Expected To Move To Scheduled Flights

 

January 20, 2009

China and Taiwan will change regular chartered flights into scheduled flights this year, a Taiwan official said on Tuesday, a move that could lift Taiwan's ailing airlines by giving them more scheduling flexibility.

 

Negotiators will at least allow regular scheduled flights between Taiwan and popular Chinese cities such as Shanghai and Beijing, but may also keep some less popular existing routes as charter flights, said Chang Jung-kung, China affairs director of the ruling Nationalist Party (KMT).

 

China has claimed sovereignty over self-ruled Taiwan since the end of the Chinese civil war in 1949 and vowed to bring the island under mainland rule, by force if necessary.

 

But ties have improved rapidly since China-friendly Taiwan President Ma Ying-jeou took office last May, fostering new trade and transit links between the two sides, which are just 160 km (100 miles) apart.

 

Daily charters, launched on December 15 as a precursor to daily scheduled flights, are running about 30 percent empty in part because the two governments rather than the carriers picked the routes and timetables to stimulate tourism.

 

A pact on scheduled flights would lift Taiwan's carriers, including China Airlines, Eva Air and TransAsia Airways, said Daniel Soh, an economist with Forecast in Singapore.

 

"It would be more competitive and more convenient," Soh said. "It will be a strong boost to Taiwan aviation in the long term."

 

The airlines had expected a second year of combined losses in 2008 with any hope for turnaround hinging on China flights.

 

Taiwan and China should reach a deal at one of the two formal talks expected to take place later in the year, Chang said.

 

"Basically there are few disputes, just some technical issues to settle," Chang said.

 

(Reuters)

 

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Shanghai Air Says 2008 Net Loss At Least Doubles

 

January 20, 2009

Shanghai Airlines said on Tuesday it expected its net loss for 2008 to have at least doubled from the previous year's CNY435 million yuan (USD$63.65 million) as the passenger travel market weakened.

 

The regional airline also blamed the expanded loss in part on volatile fuel prices, reporting CNY170 million in unrealised fuel hedging losses as of December 31 following a drop in fuel prices during the second half of the year.

 

It gave no further details. It will release full results in coming weeks.

 

The airline, more than 35 percent owned by the Shanghai government, has been the target of intense speculation of a possible merger with China Eastern Airlines.

 

Industry and government sources said last summer that government officials were discussing combining the two Shanghai-based carriers.

 

Shanghai Airlines said last month that it needed to raise capital from its shareholders but was still studying the matter and had no concrete fund-raising plans.

 

(Reuters)

 

 

[Pieter C. 5]

Hainan Airlines Expects Loss For 2008

 

January 23, 2009

Hainan Airlines, China's fourth-largest carrier said on Friday it expected to report a loss for 2008 because of slumping traffic demand and higher fuel prices during much of the year.

 

Hainan Air booked a net profit of CNY651 million yuan (USD$95.22 million) in 2007.

 

Air traffic in the country eased significantly, especially in the second half of 2008, as a slowing economy curbed air travel demand.

 

China's three biggest airlines, Air China, China Southern Airlines and China Eastern Airlines, had also predicted they would post losses for 2008.

 

The carriers will issue detailed 2008 financial reports in the coming weeks.

 

(Reuters)

 

[Pieter C. 5]

Monday January 26, 2009

 

Okay Airways, the Tianjin-based carrier that was suspended last month following a dispute between management and shareholders, was approved to resume operations Saturday.

According to CAAC, Okay is permitted to operate passenger services from Tianjin to Harbin, Chengdu, Sanya, Kunming via Changsha, Sanya via Zhuhai, Chongqing via Taiyuan and Quanzhou via Nanjing this week.

From Feb. 1 it is expected to resume operating approximately 20 routes.

It is estimated that the company has suffered a CNY100 million ($14.6 million) loss due do the suspension.

Okay noted that it would attempt to resume its cargo cooperation with FedEx soon.

 

 

[Pieter C. 5]

First China-Built Airbus Due In July

 

January 30, 2009

China's Sichuan Airlines will become the world's first carrier to receive an Airbus built outside Europe when it takes delivery in July of an A320 assembled in China, an Airbus staff memo said.

 

Details of the historic delivery, almost four decades after the plane maker was born as a four-nation European consortium, were disclosed to employees in the internal note this week.

 

It comes as Airbus prepares to sign separate deals with China over investment in its next model, the A350, which will include new carbon materials and will be assembled in France.

 

Airbus began assembling some of its A320 model of jets in Tianjin near Beijing in September from fuselage parts shipped from Europe.

 

According to the memo, the Tianjin factory is now full, with four airframes assembled and a fifth in position.

 

Airbus and rival Boeing have been turning to Asian markets, led by China, for growth as demand weakens at home.

 

However, China too is now succumbing to the global economic crisis. In December, Beijing encouraged airlines to cancel or postpone 2009 deliveries due to falling air traffic.

 

Tianjin A320s are assembled from fuselage parts shipped from factories in France, Germany, Spain and Britain. Airbus aims to reach local Chinese output of four A320s a month by end-2011.

 

Under pressure over jobs, Airbus says Tianjin will serve the Chinese market and that most construction will remain in Europe.

 

It says the move will lock in a good slice of the 3,000 new planes Airbus predicts China will need over the next 20 years.

 

But it faces criticism from European unions who say the move adds to outsourcing fears amid the recession and could result in the loss of European technology to a potential jet maker rival.

 

Airbus has suspended plans to lift total A320-family output to 40 planes a month from 36 due to the global economic crisis.

 

For now its Chinese production plans remain intact. So if the overall output freeze lingers, assembly of up to 4 planes a month could be transferred to China from Europe. However, with the industry in turmoil due to a drop in air travel, Airbus has said it cannot make firm predictions even for 2009.

 

Most analysts expect production to be hit everywhere as the recession bites before rebounding on signs of recovery.

 

Sichuan Airlines, a mid-sized carrier partly owned by China Southern Airlines, operates more than 130 routes, almost entirely within China, with a fleet of 40 jets.

 

Details of the first Airbus to be made in China emerged as EADS invited China to produce high-tech materials for its next generation of Airbus, the future mid-sized lightweight A350.

 

A deal to build a plant in Harbin was due to be signed on a visit to Spain by Chinese Premier Wen Jiabao on Friday.

 

Another deal is expected as he visits Britain on Monday, when Xi'an Aircraft International will sign a parts manufacturing agreement with Airbus, a person familiar with the transaction said.

 

Spain has a 5 percent stake in EADS, which is controlled by French and German interests with two factories also in Britain.

 

(Reuters)

 

 

Xi'an Aircraft To Sign Parts Deal With Airbus

 

January 30, 2009

China's Xi'an Aircraft International will sign a parts manufacturing agreement with European planemaker Airbus on Monday, a person familiar with the deal said on Friday.

 

The source had no further details about the deal, which is one of a number of agreements to be signed in London on Monday during Chinese Premier Wen Jiabao's visit to Britain.

 

A spokesman for Airbus declined comment.

 

Xi'an Aircraft already makes the wing-box for the Airbus A320 and Airbus was looking at having more work done on the wings in China, according to an October article in aerospace magazine Flight International.

 

The Spanish government said on Thursday EADS would sign a deal with Chinese firm Avicopter on Friday to build a factory producing carbon-fibre composite for its new A350.

 

China has also started local assembly of some of the European planemaker's existing A320 model.

 

(Reuters

 

[Pieter C. 5]

China Spring Air To Lease Five Airbus Planes

 

February 2, 2009

Privately owned Chinese carrier Spring Airlines said it would go ahead with a plan to lease five additional Airbus planes this year, even though some other Chinese airlines were cutting back their expansion plans.

 

Spring will begin leasing one of the planes in March, increasing its fleet to 12, and four more planes will be added later this year, company spokesman Zhang Lei said on Monday. He did not name the leasing company.

 

Falling air traffic demand has pushed many Chinese carriers into deep losses in 2008, forcing some to consider scrapping plane orders.

 

China Eastern Airlines, one of China's big three carriers, targets zero capacity growth this year and may cancel, delay or sell all new planes to be delivered in 2009, sources have said. It had been scheduled to take delivery of 29 planes from Boeing and Airbus in 2009, the sources said.

 

Spring Air will postpone its stock market listing because of the global financial crisis, Zhang said without elaborating. It had planned an overseas initial public offer in 2009 or 2010 to raise at least CNY1 billion yuan (USD$146 million), chairman Wang Zhenghua said in late 2007.

 

The airline made a net profit of CNY21.04 million in 2008, thanks to CNY20 million in fee rebates that it received from the government, Zhang added.

 

(Reuters)

 

[Pieter C. 5]

China Eastern Expects Recovery In Second Half

 

February 3, 2009

China's airline market is expected to remain soft in the first half of the year but there will be signs of recovery in the second half, China Eastern Airlines' chairman said on Tuesday.

 

Liu Shaoyong, chairman of China Eastern, said the airline aimed to cut its losses significantly this year.

 

He was speaking to reporters on the sidelines of a shareholders' meeting.

 

After years of robust growth, China's airlines are facing strong headwinds from falling passenger demand, intensifying competition and more cost pressures as the economy slows from the impact of the global financial crisis.

 

China Eastern said last month it expected to report a "significant" loss for 2008 because of slumping traffic demand and higher fuel prices during much of the year.

 

The government was also discussing the possibility of brokering a merger of Shanghai-based China Eastern and its smaller rival Shanghai Airlines to create a dominant player in China's financial hub, sources familiar with the matter had said.

 

But Liu said China Eastern and Shanghai Airlines had never held talks regarding equity ties.

 

(Reuters)

 

[Pieter C. 5]

China Eastern-Shanghai merger wins shareholder approval

 

Monday October 12, 2009

 

China Eastern Airlines' acquisition of Shanghai Airlines was approved by both carriers' shareholders Friday.

 

CEA Board Secretary Luo Zhuping reiterated Friday that the merger will be completed by year end. The transaction already has been approved by CAAC and all other relevant government authorities except the China Securities Regulatory Commission, which has not yet issued a ruling but is not expected to reject the deal.

 

CEA is acquiring SAL through a share swap in which each SAL share is exchanged for 1.3 CEA shares. SAL is expected to become a wholly owned subsidiary of CEA but will keep its brand.

 

Both carriers have started the merger process, laying the groundwork to promote "Express Air Service" denoting the high number of frequencies that will be offered on the 22 routes both operate during their winter and spring schedules.

 

CEA also is continuing to push forward on internal reform. "We have gone through the most difficult time and overcome the crisis, but we are still in great difficulty as our debt ratio remains high and the international [passenger] market and cargo market have not recovered," Chairman Liu Shaoyong told reporters following Friday's shareholder conference. Liu revealed that CEA will decide which global alliance to join at year end. It is widely speculated that it will join Skyteam, though SAL is a member of Star Alliance.

[Pieter C. 5]

China's airlines swing to $897 million nine-month profit

 

Thursday October 15, 2009

 

Chinese airlines posted collective net income of CNY6.13 billion ($896.7 million) for the first nine months of this year, a big turnaround from a CNY5.55 billion deficit in the year-ago period.

 

CAAC credited "economic recovery" and "lower fuel prices" for the positive result. Total operating revenue dipped 2.2% to CNY153 billion while operating expenses fell 3.8% to CNY153.9 billion.

 

Passenger boardings climbed 20% to 170 million and load factor increased 1.7 points to 75.9%. Cargo traffic rose 0.4% to 3.1 million tones, the first positive growth reported this year, which CAAC said was mainly attributable to rapid growth in the domestic airfreight market.

 

For the month of September, Chinese airlines posted collective net income of CNY160 million, a turnaround from a CNY2.96 billion loss in the year-ago month. Operating revenue lifted 1.4% to CNY18.7 billion.

 

September passenger boardings jumped 17.3% to 19.3 million with domestic passengers carried growing 17.5% and international increasing 14.1%. Load factor was 74.2%, down 1.3 points. Cargo volume climbed 24.7% to 456,500 tonnes. Chinese carriers operated a combined fleet of 1,373 aircraft as of Sept. 30, up 24 compared to Aug. 31.