China Eastern, China Southern Get Cash, Still Report Losses

The debt burdens of China Eastern Airlines (China Eastern) and China Southern Airlines�(China Southern) are being relieved with State-owned Assets Supervision and Administration Commission of the State Council (SASAC) injections of 7 billion yuan and 3 billion yuan, respectively, into the two airlines, though this won’t prevent losses from showing up in their annual financial reports.

China Eastern and China Southern each received 3 billion yuan from SASAC at the end of last year. Soon after, China Eastern received another 4 billion yuan, making the total capital injection into the company 7 billion yuan. Both China Eastern Group and China Southern Group, parent companies of the two airlines, decided to inject the funds received from the government into their listed sectors, and their "A+H" non-public offerings as funding injection schemes have been approved by their respective boards.

China Eastern is set to issue 1.44 billion A-shares at 3.87 yuan/share to its controlling shareholder, China Eastern Group, and issue H-shares of the same amount at HK$1/share. About 7 billion yuan is expected to be raised. After the additional issue, China Eastern Group’s stake in China Eastern will grow from 59.67% to 74.67%.

China Southern will issue 721.15 A-shares at 3.16 yuan/share and the same amount of H-shares at HK$1/share to its parent company.

After the capital injection, however, China Eastern’s liability ratio, at about 80%, is still higher than that of its international competitors.

China Southern earlier predicted losses in 2008. China Eastern, in its early declaration, predicted not only huge operations losses in 2008, but also a 6.2 billion yuan book loss from a disastrous hedge transaction on aviation fuel.