China Eastern moves forward with SAL approval, financial stabilization

China Eastern Airlines' merger with Shanghai Airlines received final approval from the China Securities Regulatory Commission yesterday, giving CEA clearance to grab about 50% of the Shanghai market.

China Eastern plans to acquire SAL through a share swap in which each SAL share will be exchanged for 1.3 CEA shares. SAL will keep its brand (ATWOnline, Oct. 12).

Meantime, CEA received approval to issue additional nonpublic shares on the Hong Kong Stock Exchange worth CNY490 million ($71.8 million). CSRC already had approved the issuance of CNY6.53 billion in nonpublic shares on the Shanghai exchange. CEA Chairman Liu Shaoyong said the carrier's debt ratio will fall to 94.7% through the CNY7.02 billion capital injection and that it aims to reduce the ratio to 80% in 2010.

CEA MD Ma Xulun revealed that the carrier's operating expenses dropped 18% in the first 10 months of 2009 compared to the year-ago period, although he did not disclose the exact figure. "We are still sticking to our original goal, that is to reduce the operating loss by a big margin, achieve breakeven next year and earn a profit in 2011. But even if we have a turnaround this year, it will be partly credited to fuel hedge gains. But our mainline aviation business has improved," he said.

Beijing reportedly is urging CEA to restart talks with Singapore Airlines (ATWOnline, June 16). Liu has said he remains open to the introduction of a strategic investor.