China’s FedEx? EAL plans am­bi­tious fu­ture

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

As the first com­pany in the avi­a­tion sec­tor to launch mixed-own­er­ship re­form, East­ern Air Lo­gis­tics Co, the freight unit un­der par­ent com­pany China East­ern Air Hold­ing Co, is now en route to go­ing pub­lic, and to reach such a goal, man­age­ment is ex­plor­ing a new busi­ness mode in­stead of re­main­ing a tra­di­tional avi­a­tion or lo­gis­tics com­pany.

In June, Shang­hai-based China East­ern Air Hold­ing Co sold a 55 per­cent stake in its wholly owned East­ern Air Lo­gis­tics to ex­ter­nal in­vestors and its core em­ploy­ees, in a bid to lower EAL’s debt ra­tio and en­hance its mar­ket com­pet­i­tive­ness with the help of the newly in­tro­duced part­ners.

Af­ter the share­hold re­struc­tur­ing, Leg­end Hold­ings Corp holds 25 per­cent, Global Lo­gis­tic Prop­er­ties Ltd holds 10 per­cent, courier com­pany China Dep­pon Lo­gis­tics Co Ltd gains 5 per­cent and Green­land Fi­nan­cial Hold­ings Group has 5 per­cent. The re­main­ing 10 per­cent was sold to EAL’s core em­ploy­ees.

Li Ji­u­peng, gen­eral manger of East­ern Air Lo­gis­tics said the com­pany will try its best to lay the ground­work for the listed plan, in­clud­ing ex­ploit­ing mar­kets, end­ing its re­liance on the par­ent com­pany, mak­ing up the op­er­at­ing loss rapidly, rais­ing its con­tin­u­ous profit-mak­ing ca­pa­bil­ity, and sat­is­fy­ing all the re­quire­ments for be­ing a listed com­pany.

Ac­cord­ing to Li, EAL made a 428 mil­lion yuan ($64.998 mil­lion) profit in 2016, and its to­tal as­set value af­ter the own­er­ship re­form was about 4.1 bil­lion yuan, which means the com­pany has to dou­ble its price-to-earn­ings ra­tio to reach the goal of 20 be­fore be­ing listed.

East­ern Air Lo­gis­tics saw its rev­enue in­crease from 5.88 bil­lion yuan in 2014 to 7.14 bil­lion yuan last year, and its net profit surged from 49 mil­lion yuan to 428 mil­lion yuan in three years.

In ad­di­tion to the four fi­nal­ists, com­pa­nies in­clud­ing e-com­merce gi­ants and China’s ma­jor courier firms all ex­pressed in­ter­est in tak­ing part in the mixed own­er­ship re­form of China East­ern.

“We talked to nearly 100 en­ter­prises in to­tal, and the fi­nal­ists were cho­sen be­cause of their spe­cial­i­ties,” Li said.

For ex­am­ple, he said, Leg­end Hold­ings Corp’s suc­cess­ful trans­for­ma­tion from a Chi­nese Academy of Sciencesin­vested en­ter­prise into a pri­vately owned listed For­tune 500 com­pany, Global Lo­gis­tic Prop­er­ties’ af­flu­ent lo­gis­tics re­sources and China Dep­pon Lo­gis­tics’ ex­per­tise in trans­porta­tion all can be of great help in the trans­for­ma­tion of East­ern Air Lo­gis­tics.

“Our goal is to be­come the Chi­nese FedEx, DHL and UPS. It will be a high-end ser­vice provider in ac­cor­dance with the lo­gis­tics in­dus­trial ecosys­tem,” Li said.

Af­ter the re­struc­tur­ing, East­ern Air Lo­gis­tics will ex­pand its air cargo-based busi­ness into more prof­itable sec­tors in­clud­ing cross-border e-com­merce, lo­gis­tics and ware­houses, lo­gis­tics so­lu­tions, high-end de­liv­ery and re­lated fields, said Liu Shaoy­ong, pres­i­dent of China East­ern Air Hold­ing Co.

Ac­cord­ing to Liu, the rapidly ex­pand­ing global e-com­merce sec­tor presents his­tor­i­cal op­por­tu­ni­ties for the lo­gis­tics in­dus­try, and the busi­ness mode with the com­bi­na­tion of big data, mod­ern ware­house and col­lect on de­liv­ery is the fu­ture trend of lo­gis­tics world­wide.

SOE RE­FORM

XIN­HUA

A tech­ni­cian of China East­ern Air Hold­ing Co checks an air­craft at Shang­hai Hongqiao In­ter­na­tional Air­port.

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