China Eastern aid package more than doubled to $1 billion

By Nicholas Ionides

China's Government has more than doubled the size of a financial aid package for cash-strapped China Eastern Airlines to 7 billion yuan, or $1 billion.

The Shanghai-based carrier says in a Hong Kong stock exchange filing that a 3 billion yuan, or $437 million, aid package that was announced earlier this month has been revised and it will now receive 7 billion yuan from its state-owned parent company.

It will receive the cash injection by way of a share issue to its parent, CEA Holding, and to CEA Holding's overseas arm, CES Global.

CEA Holding will subscribe for more than 1.43 billion new domestic 'A' shares at 3.87 yuan per share, amounting to 5.56 billion yuan. CES Global will at the same time buy more than 1.43 billion new international 'H' shares at 1 yuan each.

The revised plan will see CEA Holding's direct and indirect holding in China Eastern rising to 74.64% from the current 59.7%. The deal is subject to shareholder approval.

China Eastern is in the weakest financial position of China's major carriers and it has been struggling this year as costs have risen and demand has fallen.

The Government agreed earlier this month to give China Eastern and Guangzhou-based China Southern Airlines 3 billion yuan each in aid. China Southern has given no indication that its aid package will be increased as China Eastern's has.

China's fourth-largest carrier, Hainan Airlines, also announced last week that it had secured a government aid package while sixth-largest carrier Shanghai Airlines says it too is seeking government assistance.

China Eastern and Shanghai Airlines are meanwhile being prepared for a merger and a deal is expected to be announced soon.