China Eastern raises $572M from state-owned parent
HONG KONG—China Eastern Airlines Corp. is raising $572 million by selling new shares to its state-owned parent to trim its heavy debt burden as it pursues an aggressive fleet expansion in China's booming aviation market.
The Chinese carrier said late Tuesday that it's selling nearly 1.4 billion new shares on the Hong Kong and Shanghai stock exchanges to China Eastern Air Holding Co.
The Shanghai-based airline, one of China's three major state-owned carriers, said the money raised would be used to pay off loans and added to working capital.
In June, the company said it was selling 8.8 billion yuan ($1.4 billion) worth of domestic bonds to raise money to buy planes.
China Eastern said it's under "enormous pressure" because of stiffer competition and slowing growth in China's aviation industry, higher fuel costs and a strengthening currency. It's also facing pressure from rapid development of China's high-speed railway network, which threatens to lure customers away on some routes. The airline said operations and future strategy are constrained by its high debt.
The fundraising follows a bold fleet expansion plan, with the carrier scheduled to take delivery of about 220 jets from 2012 to 2016. That includes the purchase of 20 Boeing 777 jets worth nearly $6 billion announced in April.
Despite the promise of China's aviation market, the country's airlines have struggled lately. China Eastern reported last month that first half earnings slid 65 percent because of the tougher conditions. Rivals China Southern Airlines and Air China posted similarly steep drops in profit.
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