China Eastern Air Quickens Growth to 10% on Overseas Travel

China Eastern Airlines Corp. (670), the
nation’s second-largest carrier by passengers, will accelerate
capacity growth in the second half to 10 percent as it adds new
planes and boosts international services.

Expansion will focus on overseas routes after a 19 percent
increase in nationwide outbound passenger numbers in the first
half, Zeng Yongchao, an executive vice president, said in an
interview yesterday in Hong Kong. The Shanghai-based airline
expanded passenger capacity 4.6 percent through June.

“We did pretty well in the traditional peak July and
August,” Zeng said. He didn’t elaborate. The carrier rose as
much as 2.2 percent in Hong Kong, the most in three weeks.

The airline has boosted international load factors 5
percentage points this year, compared with flat figures at Air
China Ltd. (601111) and China Southern Airlines Co. (1055), because of a
recovery in demand on Japan flights following last year’s
earthquake, rising international leisure travel and an upgraded
long-haul fleet, according to Jefferies Group Inc. The rise also
helped the carrier post the smallest drop in first-half profit
among the nation’s big three airlines.

“They can absorb the extra capacity,” said Kelvin Lau, a
Hong Kong-based Daiwa Securities Group Inc. analyst. “Doing
well in the peak summer is a positive sign.”

A320s, 737s

China Eastern will receive 21 new planes in the second
half, Zeng said, which will include narrow-body Airbus SAS
A320s, Boeing Co. 737, as well as twin-aisle A330s. Its growth
plans in the period are “slightly higher” than Air China’s and
China Southern’s, Lau said.

China Eastern was up 1.3 percent at HK$2.36 as of 10:35
a.m., the second-biggest gain among the 17 stocks in the
Bloomberg Asia-Pacific Airlines Index. (BPRAIRL) Air China rose 0.9
percent and China Southern climbed 0.6 percent. All three
Chinese carriers have fallen more than 30 percent in the past

The planes arriving in the second half of this year will
help boost China Eastern’s capital expenditure to 12.6 billion
yuan ($2 billion) from about 8 billion yuan in the first half,
according to a company presentation.

The company will add another 47 planes next year and it is
confident of absorbing the capacity because of rising overseas
travel and increasing demand in western part of China, Zeng

China’s nationwide domestic market expanded 9 percent in
July, compared with a 7.8 percent increase in June, according to
the International Air Transportation Association.

China Eastern also plans to reduce the number of freighter
type at its cargo unit to pare losses, said Company Secretary
James Wang. The freight operations’ losses widened to 400
million yuan in the first half from 250 million yuan a year
earlier. Net income fell 65 percent to 806.9 million because of
higher fuel costs and currency losses.

The airline hasn’t seen any obvious rebound in air-cargo
demand, Wang said.

To contact the reporter on this story:
Jasmine Wang in Hong Kong at

To contact the editor responsible for this story:
Neil Denslow at

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