Air­line soars on in­no­va­tion

China East­ern has trans­formed from a debt-laden air­line to profit-mak­ing group

China Daily (USA) - - BUSINESS - ByWANG YING in Shang­hai wang_y­ing@chi­nadaily.com.cn

It took one year for China East­ern Air Hold­ing Co to trans­form from a debt-laden group to a profit-mak­ing one.

And dur­ing the pe­riod from 2009 and 2015, its net as­sets surged from mi­nus 10 bil­lion yuan ($1.45 bil­lion) to 53.99 bil­lion yuan in the black.

The ex­tra­or­di­nary u-turn is cred­ited by its se­nior ex­ec­u­tives to con­sis­tent re­form and de­vel­op­ment, which they said was a con­tin­u­ing process and re­mains the key to the Shang­hai-based State-owned group’s pur­suit of loftier achieve­ments.

“We once faced an ex­tremely dif­fi­cult sit­u­a­tion,” said Wang Haitao, deputy head of the group’s strate­gic de­vel­op­ment depart­ment.

“At the end of 2008, China East­ern’s debt-to-as­set ra­tio reached 105 per­cent and the debt ra­tio of our listed arm China East­ern Air­lines hit 115 per­cent.”

Apart from the neg­a­tive ef­fects of ris­ing fuel prices and fall­ing de­mand, the core of the problem was that in­ter­nal re­form was not fully car­ried out, Wang said.

He said that af­ter deep­en­ing its re­form for seven con­sec­u­tive years, the group posted a net profit of 6.234 bil­lion yuan in 2015, up 103.7 per­cent from a year ear­lier. Its re­turn on equity, or re­turn on net worth, also posted a higher rank­ing among global air­lines groups.

The air­line re­leased its lat­est re­form plan this year and said it was ready to let re­form play a greater role dur­ing the next five-year plan.

The planned re­forms in­clude es­tab­lish­ing the group’s own man­age­ment board by the end of this year, with a guar­an­tee its role won’t over­lap with that of the listed arm.

The group, Wang said, plans to em­brace the In­ter­net Plus era, launch­ing in­no­va­tion on prod­ucts, tech­nolo­gies and busi­ness mode through in­dus­try fund and in­no­va­tion fund.

The group wants to strengthen the com­pet­i­tive­ness of its listed arm— China East­ern Air­lines, and con­sider to in­tro­duce some strate­gic in­vestors to boost the vi­tal­ity of the com­pany.

In 2015, China East­ern sold a 3.55 per­cent stake in China East­ern Air­lines to US car­rier Delta Air Lines Inc.

In the first nine months this year, China East­ern saw its ca­pac­ity in North Amer­ica soar 65 per­cent year-on-year, said Cheng Jun­hui, an of­fi­cial from the com­pany’s pas­sen­ger trans­porta­tion mar­ket com­mit­tee.

The com­pany signed an agree­ment with on­line trip plan­ning and ac­tiv­i­ties site Ctrip.com In­ter­na­tional Ltd in April to ex­pand into tourism in­dus­try.

The group also made suc­cess­ful trial in on­line re­tail­ing, with its on­line ticket sales rev­enue ex­pected to reach 8.5 bil­lion yuan by the end of 2016, ac­cord­ing toWei Zhilin, gen­eral man­ager of China East­ern’s e-com­merce unit.

China East­ern Air­lines will have a fleet of more than 820 planes by 2020, its pas­sen­ger traf­fic will reach 150 mil­lion per year and its cargo and mail vol­umes will reach 1.6 mil­lion met­ric tons per year.

YIN LIQIN / FOR CHINA DAILY

At­ten­dants from China East­ern Air­lines pro­vide ser­vices to vis­i­tors in an air­craft sim­u­la­tor in Shang­hai. The car­rier will have a fleet of more than 820 planes by 2020.

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