China Eastern Airlines (600115.SH), one of the country's top three carriers, today signed to buy 20 Airbus A320 aircraft with a list price of 9.917 billion yuan (US$1.452 billion), according to China Business News.

China Eastern said the order still needs regulatory approval, but the actual amount it will pay will be less than the list price.

The carrier said funding for the order is mainly settled with loans and financing from commercial banks. It admitted that purchasing Airbus aircrafts will help reduce its asset-liability ratio in the short term but won't affect its daily cash flux or ability to sustain operation.

According to the plan, Airbus will begin delivering the aircrafts in 2011 and complete the order in 2013.

Last year, China Eastern posted a loss of 14.05 billion yuan (US$2.06 billion) and later received 7 billion yuan (US$1.02 billion) in cash aid from the government.

China Eastern revealed that it planned to cancel half of the 29 plane deliveries it had expected from Airbus and Boeing this year.

But recently, China Eastern and Shanghai Airlines have set up a seven-member team comprising senior executives of the two companies and Shanghai government officials to oversee the airline's restructuring, which could lead to a full merger. Liu Shaoyong, chairman of China Eastern, chairs the taskforce.

An outline of the merger plan will be announced in coming weeks, Liu said last weekend.

Trading in China Eastern in Hong Kong and Shanghai stock markets and those of Shanghai Airlines in Shanghai has been suspended since June 8, when the restructuring plan was announced.

Before announcing the merger, China Eastern controlled 40 percent of Shanghai's aviation market, while its rival Shanghai Airlines held around 15 percent, according to China Daily.

Liu told reporters that through the tie-up, the combined share would exceed 50 percent and offer a more comprehensive aviation network.

Backed by the World Expo next year, Shanghai's tourism market is expected to boom and also help the local aviation industry. Analysts estimate that more than 70 million passengers will come to Shanghai during the expo period and a strong China Eastern will have a greater role to play in the expo.

Chinese story link:

http://www.china-cbn.com/s/n/000004/20090618/000000118234.shtml

(China.org.cn June 18, 2009)