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7JetSet7 Code: CEA
Status: Operational
Region: CHINA
Country: CHINA
Employees 45938
Web: ce-air.com
Email: ir@ce-air.com
Telephone: +86 21 6268 6268
Fax: +86 21 6268 6116

Click below for data links:
CEA-2003-06-A340-642 DELIVERY
CEA-2004-09 NEWS A330-300
CEA-2004-10 A321 1ST DLVRY
CEA-2005-01 2004 STATS
CEA-2005-02 NEWS-A
CEA-2005-10 ERJ-145 1ST DLVRY
CEA-2006-03 NEWS
CEA-2011-08-1ST HOT AND HIGH 737-79Y
CEA-2014-06-737 ORDER-A
CEA-2014-06-NEW 737 ORDER
CEA-2014-09 - 777-300ER BUSINESS CLASS-A
CEA-2014-09 - 777-300ER BUSINESS CLASS-B
CEA-2014-09 - 777-300ER ECONOMY CLASS-B
CEA-2014-09 - 777-300ER ECONOMY-A
CEA-2014-09 - 777-300ER FIRST CLASS-A
CEA-2014-09 - 777-300ER FIRST CLASS-B
CEA-2014-09 - 777-300ER SKY INTERIOR
CEA-2014-09 - NEW LIVERY 777-300ER
CEA-2015-04 - TOP 25 WORLD TRAFFIC.jpg
CEA-2016-01 - Wengzhou to Rome.jpg
CEA-2016-12 - E to W High Speed Rail.jpg
CEA-2017-10 - Shanghai to Cebu.jpg
CEA-2019-01 Guangzhou to Cebu.jpg



China (People's Republic of China) was established in 1949, it covers an area of 9,560,980 sq km, its population is 1,265 million, its capital city is Beijing, and its official language is Chinese.








MARCH 1995: 1 A300B4-605R DELIVERY. $600 MILLION, 5 ORDERS (MAY 1995 - 1997) A340-300'S (CFM56-5C2), 275 PASSENGERS (PAX).

JUNE 1995: 9 ORDERS MD-90-30'S.



MAY 1996: 2 A340-300'S OF 8 (CFM56-5C4), 289 PAX 3 CLASS, SHANGHAI TO LOS ANGELES (LAX).


9 ORDERS MD-90'S (DECEMBER 1997). 1 A340-300 (CFM56-5C4).




MARCH 1997: 1 A340-300X (CFM56-5C4) DELIVERY.

MAY 1997: FISCAL YEAR (FY) 1996 = +$71.2 MILLION (+$76.4 MILLION) (NET PROFIT) (-7%).


JUNE 1997: 1 A340-300 (CFM56-5C4) DELIVERY.




1ST 2 OF 9 ORDERS MD-90-30'S (53582; 53583) DELIVERIES.

DECEMBER 1997: 3RD MD-90-30 (53584) DELIVERY.






1 A320-200 (CFM56-5B4/P) DELIVERY.


1997 FISCAL YEAR (FY) = +$77 MILLION (+8%).


1 MD-90-30 (V2525-D5) DELIVERY.


1 JAL 79 (+2%); 2 QAN 59 (+8.4%); 3 SIA 55 (-.1%); 4 ANA 52 (+8.5%); 5 KAL 40 (+5.2%); 6 CAT 39 (-3%); 7 TII 31 (+7.1%); 8 MAS 29 (+2.8%); 9 ANZ 20 (+.8%); 10 GUN 18 (+6.4%); 11 CEA 10 (+16.7%).






1 737-39P (29411) DELIVERY. MD-90-30 (53587) DELIVERY.


2ND 737-39P (29412). A320-214's (883; 889), (GECAS) (GEH) LEASED. 2 F 100'S (11383; 11389) SOLD TO TAM SAO PAULO (TPR). COMPLETED 1ST "C" CHECK.




JANUARY 1999: A320-214 (925, B-2202), DELIVERY.


MARCH 1999: 2 MD-90-30'S (V2525-D5) DELIVERIES.


8,535 EMPLOYEES. (http://www.chinaeastern.com).



JUNE 1999: 1 737-300, ZHONGYUAN AIRLINES (ZHO) 1 YEAR LEASED, TO REPLACE 1 YAK 42D (B2935). 2 A320-214'S (1028; 1030), (GEH) LEASED.






SEPTEMBER 1999: 2 A320-214'S (1070; 1072), (GEH) 144 MONTH LEASED. LETTER OF INTENT (LOI) 4 ORDERS (FEBRUARY 2002) A340-600'S (TRENT 500), (ILF) LEASED. 3 F 100'S RETURNED TO LESSOR.









10,906 EMPLOYEES. (http://www.chinaeasternair.com).








5 ORDERS (FEBRUARY 2003) A340-600'S.

AUGUST 2000: 1ST 6 MONTHS = +$24.6 MILLION.


1ST A319 (CFM56-5), 8F, 114Y, (GECAS) (GEH) LEASED. TO LEASE +4 A319'S & +4 A320'S IN 2000. BY THE END OF 2002, FLEET TO INCLUDE 10 A300'S, 10 A319'S, & 20 A320'S. 5 A340'S TO BE DELIVERED IN 2003.






A320-214 (1312, B-2335) DELIVERY.

NOVEMBER 2000: 1 A319-112 (1377, B-2333) & 1 A320-214 (1330, B-2336), DELIVERIES.



A319-112 (1386, B-2334) & A320-214 (1357, B-2337), DELIVERIES.


A320-214 (1361, B-2338) DELIVERY.


MARCH 2001: 2000 = 12.92 BILLION RPK, 9.06M PAX.




2000 = +$21 MILLION.











2 A319-112'S (1541, B-2215; 1551, B-2216) DELIVERIES.



2 A320-214'S (1532, B-2219; 1542, B-2220) DELIVERIES.


2 A319-112'S (1601, B-2217; 1603, B-2222) GECAS (GEF) LEASED.



A320-214 (1639, B-2221) DELIVERY.





(TELEPHONE: (21) 62686268 EXT 37608). (FAX: (21) 62 68 60 39).



APRIL 2002: 13,000 EMPLOYEES.


(FAX: +86 21 6268 6116).


May 2002: Jinan to Seoul.

June 2002: China Eastern Airlines (CEA) serves as host carrier, for the 58th (IATA) Annual General Meeting, held in Shanghai. This is the 1st time such a summit has been held in China, and reflects the growing importance of China's civil aviation industry, on the world stage. Alan Mullaly, Boeing President Commercial Airplanes, attended.

737-76Q (1143-30282, B-2680), Boullioun (BOU) leased, for delivery to Shan Xi Branch, Taiyuan.

July 2002: 2001 = +$65.41 MILLION (+$21.24 MILLION): 15.91 BILLION RPK (+12.8%); 61.6% LF; 10.37 MILLION PAX (+13.8%); 949.80 MILLION FTK (+5%); 13,000 EMPLOYEES (-6.5%).

2 MD-11's (48496; 48497) heavy maintenance contracted to Alitalia (ALI). 2 A319-112's (1778; 1786), (GECAS) (GEF) leased.

August 2002: Air China (BEJ) applies to (CAAC) to start China's 3rd all-freight airline by end of 2002. The as-yet unnamed carrier, is to begin operations with (BEJ)'s existing 747-200F's and acquire 2 additional airplanes next year. A booming domestic freight market and opportunities abroad, prompted (BEJ) to challenge the existing all-freight carriers, China Cargo Airlines (CKK) (60% owned by Shanghai-based (CEA)), and China Postal Airlines (49% owned by (GUN)). (BEJ) will own 60% of the new carrier, with the rest of the stock, split between Beijing Capital International Airport, and Citic Pacific, the Hong Kong representative of China's largest foreign investment firm.

September 2002: $100 Million contract to Rolls Royce (RR) for 10-year fleet management covering (Trent 556) engines powering China Eastern Airlines (CEA)'s 5 A340-600'S.

Code share with Japan Air Lines (JAL) from Shanghai & Qingdao to Tokyo & Osaka.

China Eastern Air Group begins to take shape with consolidation of China Eastern Airlines (CEA) with Yunnan Airlines (YUN), and China Northwestern airlines (CNW). Completes acquisition of 40% of Wuhan Airlines (WUH), FOR # 240 Million Yuan/$29 Million, with (WUH) now becoming "China Eastern Airlines Wuhan" in corporate colors. Wuhans other shareholders are: Wuhan State-owned Assets Office (40%); Shanghai Junyao (18%); & Wuhan High-technology (2%). The Wuhan State-owned Assets Office will appoint a Chairman, and (CEA) will appoint a General Manager.

737-79P (1198-33037, B-2681), delivery.

October 2002: Joint venture with Rockwell Collins to set up an aviation, electronics maintenance center in Shanghai, with $7 Million capital, & total $14 Million investment, 65% owned by the USA company, and 35% by (CEA). Will be named "Collins Aviation Maintenance Services Shanghai Ltd." China Eastern Airlines (CEA) recently selected avionics and In-Flight Entertainment (IFE) systems produced by Rockwell Collins, for its 20 A320 airplanes.

(CAAC) announces the formation of 6 aviation groups: Air China Group (China National Aviation Holding Company); China Eastern; China Southern; China Aviation Oil Group; China Aviation Information Group; and China Aviation Equipment Group. These groups will operate independently. The (CAAC) no longer owns the state-owned assets of these groups, and will not take responsibility for their operating losses. The (CAAC) cuts its economic ties with these companies, and retreats to functioning only as an industry regulator. The assets of the 3 consolidated airline groups, comprise 80% of the industry's total assets. Their strength and ability to compete internationally, has been significantly enhanced through this restructuring.

737-79P (1219-33038, B-2682), delivery for (CEA)'s Shijiazhuang Branch.

November 2002: China Eastern Airlines (CEA) and Shandong Airlines (SHG), canceled an order for 37 Bombardier Dash 8's.

Li Fenghua, President, ex-China Southern Airlines (GUN), replaces Liu Shaoyong.

Cooperation with Cathay Pacific (CAT), Shanghai to Taipei.

1st 9 months = +# CNY 150.37 Million/+$18 Million (+473%): 8.6 Million passengers (PAX) (+9.31%); 64.76% LF (+1.14).

3 737-79P's (1244-33040, B-2685; 1247-28253, B-2683; 1227-33039, B-2684), (ILF) leased. A320-214 (1906, B-2228) delivery.

December 2002: 2 737-2T4's (1093-23272, B-2506; 1097-23274, B-2507), transferred from Air Great Wall (GWA). 737-36R (2970-29087, B-2988) transferred from Wuhan Airlines (WUH).

January 2003: In 4/03, Yantai - Osaka (Kansai) (2/week).

2002 = 12.01 Million passengers (+15.79%).

737-79P (1267-30651, B-5030) delivery. 2 A320-214's (1906, B-2228; 1911, B-2229), deliveries.

February 2003: 737-79P (1284-28255, B-5031), (ILF) leased.

March 2003: $98 Million joint venture with Singapore Technologies Aerospace (ST Aero) owning 49%, & (CEA) 51%, to set up a Maintenance repair & overhaul (MRO) facility at Shanghai Pudong and Hongqiao airports, to provide maintenance and modification services for Boeing and Airbus airplanes, starting 3rd or 4th Q 2003.

In 4/03, Harbin - Los Angeles (MD-11, weekly).

April 2003: In 6/03, Shanghai - London (3/week).

15,000 employees (including 1,345 (flight crew) FC; 1,596 (cabin attendants) CA; & 2,696 (maintenance technicians) MT).

3 orders (2/04) A320-200's (CFM56), (ILF) 10 year leased. A320-214 (1964, B-2230) delivery.

May 2003: Has grounded 60% of its 80 airplanes as passenger numbers plummeted owing to the Severe Acute Respiratory Syndrome (SARS) virus epidemic in China. The airline has been losing -$1.2 Million a day.

737-79P (1319-30657, B-5033), (ILF) leased.

June 2003: 2 A340-642's (468, B-6050; 488, B-6051) deliveries.

July 2003: 2002 = +$10.43 Million (+$65.45 Million): 18.21 Billion RPK (+14.4%); 65.1% LF; 11.53 Million PAX (+11.2%); 1.02 Billion FTK (+7.7%).

August 2003: 1st 6 months = 6.77 billion RPK (-20.4%); 4.4 Million PAX (-19.1%).

In 9/03, Los Angeles - Shanghai (5/week)/Beijing (4/week))/Harbin (weekly).

Expects to conclude the integration of China Northwest Airlines (CNW) and Yunnan Airlines (YUN) by the end of 2003.

1st 6 months = -# CNY 1.25 Billion (+# CNY 25.5 Million) due to (SARS) outbreak and high fuel prices.

2 A320-214's (2049, B-6008; 2056, B-6007) deliveries. 1st A340-642 delivery.

September 2003: Signs agreement with Rockwell Collins covering installation of Rockwell's (PAVES) in-flight entertainment system (IFE) on 20 A320's.

2002 = +$10.4 Million (+$65.5 Million) (net profit): 18.63 Billion RPK (traffic) (+17.2%); +11.1% ASK (capacity); 65% LF (load factor) (+3.4); 12 Million passengers (PAX) (+15.5%); 1.03 Billion FTK (freight traffic) (+8.3%); 15,719 EMPLOYEES (+5.1%).

32 (GUE) 21.90; 33 (ANZ) 21.48; 34 (SAA) 21.28; 35 (ASA) 21.23; 36 (SVA) 20.80; 37 (AAT) 19.93; 38 (EVA) 19.51; 39 (CEA) 18.63; 40 (BRI) 18.43; 41 (ARO) 17.65; 42 (CDF) 17.41; 43 (AUL) 17.34; 44 (AAR) 17.33.

In 11/03, code share with Japan Airlines (JAL) Group, Nagoya to Shanghai (daily), & Sapporo - Shanghai (2/week) operations by China Eastern Airlines (CEA).

A320-214 (2022, B-6002) delivery.

October 2003: In 12/03, Shanghai - Melbourne (A340, 2/week).

3rd Q = +# 228.3 Million yuan/+$27.6 Million (+# 96.7 Million yuan). 9 months = -# 1.19 Billion yuan (+# 150.4 Million yuan).

2 A320-214's (2034, B-6003; 2068, B-6006) deliveries.

December 2003: Kunming - Siem Reap (2/week). Kunming - Osaka (KIX) (2/week). In 4/04, Shanghai - London.

February 2004: China Cargo Airlines (CKK): Shanghai - (Anchorage) - Dallas/Fort Worth (MD-11, 3/week).

4 orders A321 transferred from (CASC) (CSC).

March 2004: In 4/04, Shanghai - London (LHR) (3/week). Jinan - Bangkok (A320, weekly). In 6/04, Shanghai - Vancouver (A340, 3/week). Applies to (CAAC) for Shanghai - Matsuyama.

April 2004: A320-214 (2182, B-6029) (ILF) leased.

May 2004: 1st Q = +# CNY 280.01 Million/+$38.8 Million.

Guilin - Wuhan - Osaka (737, weekly).

2 orders (2/05) 737-700, (ILF) 8 year leased and 5 orders (2/05) 737-800's (ILF) 8 year leased. 2 A320-214's (2199, B-6030; 2212, B-6015), (ILF) leased.

June 2004: 2-year contract with Sabre Airline Solutions to implement Phase II of an "extensive consulting project" valued at $1 Million. (CEA) will implement the recommendations made during Phase I of the detailed analysis conducted in 2003 into the improved design of its operational control procedures.

(MOU) with China Aviation Supplies Import & Export Group (CSC) for 60 orders 787-8's for operations by China Southern Airlines (GUN); Air China (BEJ); China Eastern Airlines (CEA); & Hainan Airlines (HNA); with commitments also expected for Shanghai Airlines (SHA) and Xiamen Airlines (XIA). 20/10 orders (2/06) A330-300's valued at $2.4 Billion which will be delivered to China Eastern Airlines (CEA).

USA and China have signed a landmark air services agreement that will more than double the number of USA airlines that may serve China and will permit a nearly 5-fold increase in weekly flights between the 2 countries over the next 6 years.

The agreement allows for +5 airlines from each country, the USA may name +1 additional all-cargo carrier, while China may name either a passenger or cargo carrier, to start service later in 2004. The other 4 new-entrant airlines may be either passenger or cargo carriers, with 1 new carrier entering the market in each of the years 2005, 2006, 2008, & 2010. United Airlines (UAL), Northwest Airlines (NWA), FedEx (FED), & United Parcel Service (UPS) currently serve China.

The agreement allows +195 weekly flights for each side, +111 by all-cargo carriers, & +84 by passenger airlines, resulting in a total of +249 weekly flights at the end of a 6-year phase-in period. A total of +14 of these flights will be available for new passenger services later this 2004.

Each country's carriers are now allowed to serve any city in the other country. Currently, Chinese carriers are limited to 12 USA cities, and USA passenger carriers may fly to only 5 Chinese cities. The agreement allows unlimited code sharing between USA and Chinese carriers, thus expanding the current agreement which only allows code sharing only to a limited number of cities.

The agreement also provides that when carriers establish cargo hubs in the other country, they will be afforded a high degree of operating flexibility, and expands charter opportunities beyond those provided by the existing agreement.

Trade between the countries has grown dramatically from $4.8 Billion in 1980 to >$170 Billion in 2003. The USA is China's largest export destination, and China is the USA's fastest-growing market.

5 A320-214's (2219, B-6009; 2221, B-6010; 2235, B-6011; 2239, B-6012; 2244, B-6013), deliveries. 2 A320-214's (2212, B-6015; 2155, B-6016), (GECAS) (GEF)) leased. 2 A340-642's (577, B-6053; 586, B-6055), deliveries.

August 2004: Chine Eastern Airlines (CEA), parent has 5 orders Blended Winglet shipsets as Buyer Furnished Equipment (BFE) to be installed on delivery of 737-800's in 2005 for subsidiaries China Eastern Shan Xi Branch (CHG), Taiyuan, and Wuhan Airlines (WUH).

Li Fenghua, President.

1st 6 months = +# CNY 479.86 Million/+$32.1 Million (-# CNY 1.2 Billion/-$149 Million): 63.1% LF.

September 2004: A320-214 (2274, B-6017), delivery.

October 2004: China Eastern Airlines (CEA) (51%), and (STARCO) (Shanghai Technologies Aerospace) which was formed by ST Aero (49%), will start building a Boeing/Airbus airplane Maintenance Repair & Overhaul (MRO) facility with 2-bay wide body and single-bay narrow body hangars at Hongqiao International Airport. Also plans to build a new two-bay wide body hangar complex at Pudong International Airport for completion for 2006.

2 A321-211's (2309, B-2289; 2315, B-2290) deliveries. Confirmed 20/10 orders A330-300's.

December 2004: Raised about $90 Million from 6 overseas lenders to improve the company's liquidity and provide funding for expansion.

15 orders (2/08) 787's, which are part of a (CAC) order for 60 787's for the Chinese major carriers. Confirmed $241 Million, 6 orders (1/06) 737-700's.

January 2005: (CAAC) (CAC), $7.2 Billion, 60 orders (2/08) 787-8's, 223 PAX: 13 787-8's to China Southern (GUN), including 3 787's for Xiamen Airlines (XIA); 15 787-8's to China Eastern Airlines (CEA); 8 787-8's to Hainan Airlines (HNA); 20 787-8's to go to Air China (BEJ); and 4 787-8's Shanghai Airlines (SHA).

February 2005: 2 737-79P's (29357; 29358), (ILF) leased. 737-89P (30681, B-5100), delivery. 4 MD-11F's (48461; 48496; 48498; 48520), wet-leased to China Cargo Airlines (CKK).

March 2005: 737-89P (30682, B-5101), (ILF) leased. 5 orders (6/05) Embraer Harbin ERJ-145's.

April 2005: 2004 = +# 514.1 Million yuan/+$62.1 Million (-# 949.8 Million yuan).

May 2005: 16,435 employees.

737-79P (29362, B-5096) & 737-89P (30691, B-5085), (ILF) leased and A320-214 (2437, B-2410), delivery.

June 2005: Selects Rockwell Collins sensors, radar & satellite communications for 20 new A330's.

6 orders 737-700 blended winglet shipsets from Aviation Partners Boeing (AVP). 2 737-79P's (33008, B-5074; 33009, B-5084) (ILF) leased deliveries included modifications for 1 hour of additional emergency oxygen supply and enhancements to the cabin pressure control system for operations to high-altitude remote airports such as Lhasa and Bangda. 1 737-89P (32802, B-5087), (ILF) leased. 2 A320-214's (2451, B-2411; 2478, B-2412) deliveries.

July 2005: 2 A320-214's (2493, B-2413; 2498, B-2415), deliveries.

August 2005: 20,817 employees (+26.7%).

2 A321-211's (2543, B-2291; 2549, B-2292) deliveries.

September 2005: Harbin Embraer Aircraft Industry delivered the first of 5 ERJ-145s to China Eastern Airlines (CEA). Completion of deliveries is expected by April, 2006.

2 Embraer ERJ-134LI's (00839, B-3049; 00848, B-3050), deliveries.

October 2005: Ultra said its Airport Systems business signed a $9 million contract to provide Information Technology (IT) integration services to Shanghai Pudong. Ultra will install its UltraIB integration broker product at the airport. It is supplying UltraIB services for the London Heathrow T5 project as well.

Japan Airlines (JAL) on October 30, will begin code sharing with China Eastern Airlines (CEA) on 3 domestic routes: Shanghai - Chengdu, Shanghai - Chongqing, and Shanghai - Shenzhen, a total of 42 weekly flights. (JAL) already code shares with Hainan Airlines (HNA) on 7 weekly flights between Beijing and Chengdu. It also operates (JAL) China Express with Hainan Airlines (HNA) from Beijing to 3 Chinese cities and on 6 routes from Beijing in cooperation with China Southern Airlines (GUN).

(SITA) Inc said British Airways (BAB), Cathay Pacific (CAT), China Eastern Airlines (CEA) and Malev (HGA) signed contracts with a total value of $10 million for its new Airfare Insight solution. Airfare Insight, part of (SITA)'s Airfare suite of applications, enables airlines to manage their entire fare structure in one system.

A320-214 (2562, B6259), (GEF) leased.

November 2005: Collins said it signed a 3-year fixed labor repair agreement with Collins Aviation Maintenance Services Shanghai Ltd, a joint venture between Rockwell Collins and China Eastern Airlines (CEA).

China signed a deal for 70 Boeing 737-700/800s for delivery between 2006 and 2008. The airplanes are destined for: Air China (BEJ), China Southern Airlines (GUN), China Eastern Airlines (CEA), Shanghai Airlines (SHA), Xiamen Airlines (XIA), Shandong Airlines (SHG), Hainan Airlines (HNA) & Shenzhen Airlines (SHZ).

2 A300B4-203F's, Kuzu Cargo (BRN) wet-leased. A320-214 (2591, B-6260), delivery.

December 2005: China Eastern Airlines (CEA) and Pratt & Whitney (P&W) signed a Memo of Understanding (MOU) to create a jet engine Maintenance Repair & Overhaul (MRO) facility in Shanghai devoted to the (CFM56). It is scheduled to open in 2007.

China and Singapore agreed to an expanded air services deal lifting restrictions on routes, capacity and airplane type on flights between the countries. The contract was signed in Beijing, according to media reports.

China Eastern Airlines (CEA) and Thai Airways International (TII) have become code share partners, with joint services between Shanghai and Bangkok. (CEA) is adding its code to A330-300 services operated by (TII), while (TII) is adding its code to A321 & A340-600 services operated by (CEA).

Airbus's negotiations with Chinese authorities resulted in a blockbuster contract as the airframer reached a "general terms agreement" with Chinese Aviation Supplies Import and Export Group for the purchase of 150 A320 family airplanes.

The order comprises A319s, A320s and A321s – the largest single order Airbus has ever received since it entered the Chinese market 20 years ago.

The deal is worth nearly $10 billion and was signed in the presence of Prime Minister Dominique de Villepin and Premier Wen Jiabao during the latter's visit to France.

"Since it was first introduced into the Chinese market in 1995, the A320 family airplanes have been put in service by 10 Chinese operators with a total of 216 airplanes, accounting for two-thirds of all in-service Airbus airplanes, or nearly one-quarter of the total airplanes in operation in China,” said (CSC) President Li Hai. “The demand for this modern and cost-saving airplane family from Chinese airlines has been rapidly increasing in recent years."

The 150 airplanes will be delivered to six Chinese airlines, including Air China (BEJ), China Eastern Airlines (CEA), China Southern Airlines (GUN), Sichuan Airlines (SIC), Shenzhen Airlines (SHZ), and Hainan Airlines (HNA).

The agreement followed by 1 day the signing of a Memo of Understanding (MOU) between Airbus and the National Development & Reform Commission of China covering Chinese participation in Airbus programs including the possibility of establishing a final assembly line "for single-aisle airplanes in China."

5 Chinese companies currently produce parts for Airbus, which has committed to increase procurement volume to $60 million by 2007 and $120 million by 2010. It employs 54 Chinese engineers, soon to be 200, at its Beijing engineering center, which will be part of China's promised participation in the A350 program. Airbus and China Aviation Industry Corporation signed a $500 million extension last month to a contract for A320 family wing boxes.

China Eastern Airlines (CEA) has placed an order for 4 737NGs. These airplanes are scheduled for delivery between August 2007 and October 2008.

737-79P (29364, B-5097), (ILF) leased & 2 A320-214's (2606, B-6261; 2627, B-6262), (GEF) leased.

January 2006: China Eastern Airlines (CEA) said its 2005 net profit will narrow by >-50% from its +CNY514.1 million/+$63.7 million 2004 earnings, according to Shanghai Securities News cited by "Reuters." (CEA)'s results have fluctuated wildly (it reported a -CNY471.4 million loss in the first half of 2005 but was +CNY673.2 million in the black by the close of the third quarter). It lost -CNY949.8 million in 2003. Fuel costs rose +41% and now accounts for 32% of total operating costs.

Chinese airlines reported robust growth in passengers and cargo for 2005 thanks to surging traffic, and in the case of China Eastern (CEA) and China Southern (GUN) the gains from mergers completed last year. Air China (BEJ) reported a +13% increase in passengers to 27.7 million while cargo jumped +10.2% to 732,818 tonnes. China Eastern (CEA) saw a +37% leap in passengers to 24.3 million and a +14% rise in cargo to 755,010 tonnes. China Southern (GUN) also had impressive numbers as passenger totals jumped +56.4% to 44.10 million and cargo climbed +42.1% to 774,550 tonnes. In Hong Kong, Cathay Pacific (CAT) reported +13% annual growth in passengers to 15.4 million while cargo rose +15% to a record 1.1 million tonnes. Dragonair (DRG) handled 5 million passengers, up +9.9%, and 385,000 tonnes of cargo, a rise of +12.5%.

(CEA) has extended 8 international routes that fly to Pudong Airport in Shangai to Xi'an, the capital of Shannxi Province in China's north-west. (CEA) will consider direct international flights between Xi'an and international destinations such as Paris, London, Vancouver, Los Angeles, Singapore, Kuala Lumpur, Bangkok, and Delhi if the extended routes prove successful.

737-79P (29365, B-5054), (ILF) leased. China Eastern (CEA) took delivery of its 1st 2 A330-343X's (713, B-6119; 720, B-6120). (CEA) will use the new A330s to replace A300-600s.

February 2006: China Eastern Airlines (CEA) contracted (EADS) (EFW) for the conversion of 3 A300-600 passenger airplanes to freighters. The 1st is expected to enter (EADS) (EFW)'s Dresden facility in December 2006. The remaining conversions will take place during 2007.

Chinese domestic airlines flew a record 138 million passengers in 2005, a rise of +15% over 2004 and double the number of 2000. The figure is expected to double again in the next 5 years, according to Gao Geng, the Vice Minister of the General Administration of Civil Aviation in China. Cargo and airmail throughput rose +14% to 3.04 million tons in 2005 and also is expected to double in the next 5 years. However, profit margins will remain tight within the sector. He noted revenues in the sector had grown to CNY170 billion/$21.09 billion at the end of 2005, but profits in the past 5 years had amounted to only CNY10 billion.

A319-115 (2693, B-6217) & A330-243 (728, B-6121), deliveries.

March 2006: China Eastern (CEA) will reduce frequency and downgrade equipment on its Shanghai to Okinawa route from March 26th. Currently the airline operates 5 flights a week, daily except Tuesdays & Saturdays with an A320; from the end of the month, China Eastern (CEA) will operate 2 flights a week, on Wednesdays & Saturdays with an A319.

China Eastern Airlines (CEA) is increasing the frequency of flights on its nonstop Kunming to Dhaka (Bangladesh) route to daily service. Flights are operated with a 737.

737-79P (33041, B-5208) & 2 A330-243's (732, B-6122; 735, B-6123), deliveries.

April 2006: China Eastern Airlines (CEA) reported a loss of -CNY955.1 million/-$119.1 million in the 1st quarter, according to press reports. The total was more than double its full-year 2005 loss of -CNY467.3 million. Revenue climbed +55.8% to CNY7.48 billion. (CEA) said it expects to incur losses in the current quarter as well.

China Eastern Airlines (CEA) will inaugurate nonstop service from Shanghai to Frankfurt on June 30th. (CEA) will operate 5 flights a week, departing Pu Dong daily, except Mondays & Wednesdays and Frankfurt daily, except Tuesdays & Thursdays and using an A340-600.

(CEA) posted a loss of -CNY467.3 million/-$58.3 million in 2005, a reversal from the +CNY320.7 million profit reported in 2004, according to press reports. Revenues rose +28.3% to CNY27.45 billion.

Singapore Technologies Aerospace and China Eastern Airlines (CEA) said their airframe (MRO) joint venture, Shanghai Technologies Aerospace Company received (FAA) certification. The announcement was made as the partners celebrated (STARCO)'s 1st year of operation. The facility, which is operated and managed as part of ST Aero's Maintenance Repair & Overhaul (MRO) network, is located at Shanghai Hongqiao. It has 2 hangars that can accommodate 2 wide body and 2 narrow body airplanes simultaneously.

(CAAC) (CAC) and the National Development and Reform Commission announced an increase in fuel surcharges on domestic routes of <800 km to CNY30/$3.74 from CNY20 and on routes >800 km to CNY60 from CNY40. Increases went into effect April 10 and will last until October 10.

Boeing is expected to sign contracts shortly with Chinese airlines for 80 737s. The deal is the 2nd part of an order announced late last year for 70 737s. Hainan Airlines (HNA) will take 15, China Southern Airlines (GUN) 10, Xiaman Airlines (XIA) 5, and Shandong Airlines (SHG) 6, with the balance taken by Air China (BEJ), China Eastern Airlines (CEA), Shanghai Airlines (SHA), and Shenzhen Airlines (SHZ). Airbus secured a similar commitment for 150 A320s last year but apparently signed a contract with CAAC (CAC), listing the orders as part of the year's record-breaking sales.

(CEA) has placed an order for 16 737NGs. The airplanes, more than likely 737-700 and/or 737-800 versions, are scheduled to be delivered between March 2009 and September 10.

ERJ-145 (00882, B-3053), delivery.

May 2006: The Chinese government is expected to invest a further CNY140 billion/$17.43 billion in aviation over the next 5 years, more than the country spent in the previous 15, according to local media reports. The CAAC (CAC) said the spending would be focused on the construction of 42 new airports, in addition to upgrading existing infrastructure.

The CAAC (CAC) expects the number of Chinese airports to increase from the current 142, to at least 220 by 2020, as the number of airplanes rises from 863 to 1,580 in 2010 and to about 4,000 in 2020.

Top of the (CAAC)'s agenda is to reinforce the status of Beijing Capital, Shanghai Pudong and Guangzhou Baiyun as key international hubs, and to upgrade Chengdu, Kunming, Xi'an, Wuhan and Shenyang airports to the status of major regional hubs. Yunnan Province in the southwest of the country will account for nearly one-seventh of the planned spending, as it adds another 5 airports by 2010.

The (CAAC) (CAC) expects overall passenger and cargo traffic to grow at an average of +14% annually through 2010, with growth slowing to +11% per year from 2011 to 2020. Last year, domestic airlines carried 138 million passengers, an increase of +15.5% from the previous year. Cargo traffic increased at +13.8% to 3.4 million tons over the same period.

737-79P (33042, B-5209), & A319-115 (2757, B-6218), deliveries. ERJ-145 (00898, B-3051), delivery.

June 2006: China is courting foreign pilots (FC) to keep up with its growing commercial airline industry.

The number of passenger planes in the country is expected to rise from around 800 in 2006 to 1,600 in 2011, according to the General Administration of Civil Aviation of China. Every 100 new planes would require +1,000 extra pilots, China's industry regulator said in February, while official media estimate that Chinese flying schools can only graduate 600 pilots (FC) a year.

United Eagle Airlines Company, LTD (UEG), one of the country's four private airlines, has hired three foreign captains (FC): Belgian Philippe Burtonboy, Pano Pahygiannis from Greece and David Harrigan from the USA. The 3, who previously worked for USA-based Independence Air (BLR) and US Air (USA), had >15,000 hours of accumulated flight time each.

The introduction of overseas staff is aimed at mitigating the shortage of domestic captains (FC), said (UEG) spokesman Hu Wenbin. Sources in the (UEG) said that the annual wage of a foreign captain (FC) is around 800,000 yuan/$100,000, while the average Chinese captain (FC) earns about 600,000 yuan/$75,000.

Last month, (CEA) announced 16 Indians had completed professional training as “air stewardesses (CA),” the first group of Indian cabin staff (CA) ever hired by a Chinese airline.

(CEA) announced the signing of an agreement to buy 30 A319s/A320s, part of the 150 A320 family airplanes ordered by China's government last year. The aircraft will be delivered in 2008 - 2010 to (CEA) and will be used for domestic services. China Southern Airlines (GUN) has confirmed it will be getting 50 A320 family airplanes. The deal is part of the 150 A320s ordered by China in December 2006. (GUN) is expecting delivery of the airplanes in 2009 and 2010. The 3rd carrier to announce its allotment, (GUN)'s order is valued at $3.3 billion. It will take delivery in 2009 and 2010. Air China (BEJ) will take 24 A320s. A total of 46 remain to be allocated to +3 more airlines.

737-79P (33043, B-5210), & ERJ-145LI (00905, B-3052) deliveries.

July 2006: China Eastern Airlines (CEA) inaugurated direct service from Shanghai Pu Dong to Lhasa. (CEA) now operates a daily service via Xi'An using an A319.

China and Japan reached an air services agreement that provides for a +20% increase in the number of passenger flights between the countries and a doubling of cargo services, "Reuters" reported. 13 carriers from each country will have access, up from the current 6. The number of permitted flights will rise to 547 per week, with Chinese carriers operating 300.

China Eastern Airlines (CEA) confirmed it is in talks with several potential foreign investors including Singapore Airlines (SIA), according to press reports. "Reuters" reported that (CEA) is considering selling at least a 20% stake, which would be worth approximately $260 million.

2 737-79P's (33044, B-5223; 33045, B-5225), A319-115 (2825, B-6231), and A330-343X (773, B-6125), deliveries.

August 2006: China Eastern Airlines (CEA) lost -CNY1.72 billion/-$215.4 million in the first 6 months of 2006, it told the Hong Kong Stock Exchange, according to the "Associated Press." The result compares to a -CNY580.6 million loss in the year-ago period. It reported a loss of -CNY 955.1 million in the 1st quarter, implying a -CNY764.9 million deficit in the quarter ended June 30.

Amadeus signed a 3-year agreements with (CEA) and China Airlines (CHI) to power their international websites with its e-Retail Solution. Both airlines also plan to implement the Amadeus e-Merchandise solution within a few months.

737-79P (33046, B-5231), delivery.

September 2006: China Eastern (CEA) inaugurated nonstop service from Weihai (China's Shandong Province) to Seoul. (CEA) will operate a daily flight using a 737-800. (CEA) will inaugurate nonstop service from Shanghai Pudong to New York (JFK) on December 8th. (CEA) will operate 4x-weekly departing Pudong on Mondays, Wednesdays, Fridays, & Sundays, and (JFK) on Mondays, Tuesdays, Thursdays, & Saturdays using an A340-600.

Air Bagan (BGN) of Myanmar, which was inaugurated in November 2004 and operates 2 ATR 72's, 3 ATR 42's and 1 F 100 from Yangon to 14 domestic destinations, announced it is planning international routes to Malaysia, Singapore and Thailand. (BGN) is in talks with China Eastern Airlines (CEA) about the purchase of 2 A310s with the aim to begin operating these new routes in December.

At the 4th annual USA - China Aviation Summit sponsored by the USA Trade & Development Agency (USTDA), the (USTDA) announced the award of a $560,000 grant to (CEA) for a specialized training program designed to improve management of airplanes and engine operations. Training of personnel from (CEA) will be conducted at (GE) learning centers in Cincinnati and Ossining, NY. (GE) will contribute to the training costs of the program.

A321-211 (2882, B-2419), A330-243, (777, B-6126), and A330-343X (782, B-6128), deliveries.

October 2006: China Eastern Airlines (CEA) is a major Chinese airline operating domestic, regional and international routes.

Employees = 20,817.

(IATA) Code: MU - 781. (ICAO) Code: CES - CHINA EASTERN.

Parent organization/shareholders: China Eastern (CEA) Air Holding (61.64%); publicly held H shares (32.2%); & publicly held A shares (6.18%).

Owns: China Cargo Airlines (CKK) (70%); China Eastern Airlines Wuhan (WUH) (40%); China Northwest Airlines (CNW); Yunnan Airlines (YUN) (100%); & Air Great Wall (GWA).

Alliances: Air France (AFA); American Airlines (AAL); Asiana Airlines (AAR); Japan Airlines International (JAL); Korean Air (KAL); Qantas Airways (QAN); & Yunnan Airlines (YUN).

Main Base: Shanghai Pudong International Airport (PVG).

Hub: Shanghai Hongqiao International (SHA).

Domestic, Scheduled Destinations: Baoshan; Baotou; Beihai; Beijing; Changchun; Changde; Changsha; Chengdu; Chongqing; Dali City; Dalian; Dayong; Diqing; Fuzhou; Guangzhou; Guilin; Guiyang; Haikou; Hangzhou; Harbin; Hefei; Hohhot; Huangyan; Jinan; Jinghong; Jinjiang; Kunming; Lanzhou; Lahsa; Lianyugang; Lijiang City; Lincang; Liuzhou; Luoyang; Luxi; Luzhou; Nanchang; Nanjing; Nanning; Ningbo; Pan Zhi Hua; Qingdao; Sanya; Shanghai; Shantou; Shenyang; Shenzhen; Shijiazhuang; Simao; Taiyuan; Tianjin; Tunxi; Urumqi; Wenzhou; Wuhan; Wuxi; Xi'An; Xiamen; Xining; Xuzhou; Yancheng; Yantai; Yibin; Yichang; Yinchuan; Zhaotong; Zhengzhou; & Zhoushan.

International, Scheduled Destinations: Bangkok; Busan; Cheongju; Daegu; Delhi; Dhaka; Fukuoka; Fukushima; Gwangju; Hiroshima; Ho Chi Minh City; Hong Kong; Jeju; Kagoshima; Komatsu; Kuala Lumpur; London; Los Angeles; Madrid; Mandalay; Matsuyama; Melbourne; Moscow; Nagasaki; Nagoya; Niigata; Okayama; Okinawa; Osaka; Paris; Penang; Phuket; Saipan; Sapporo; Seoul; Siem Reap; Singapore; Sydney; Tokyo; Vancouver; & Vientiane.

Japan Airlines (JAL) expanded its code share agreements with (CEA) and Xiamen Airlines (XIA). It will place its code on (CEA)'s daily Fukuoka - Shanghai service from October 29 and its 3x-weekly Osaka Kansai - Kunming service from December 12. (JAL) already operates its own service on the former route and serves Kunming through Beijing. (JAL) also will place its code on Xiamen's 2x-weekly Kansai - Hangzhou flights beginning December 8. It already operates its own 2x-weekly flight on the route.

China Eastern Airlines (CEA) replaced President, Luo Chaogeng with Cao Jianxiong, an Executive Director at (CEA), according to a company statement cited by "Reuters." Luo will remain as a director.

China Southern Airlines (GUN) and (CEA) each reported profitable third quarters, according to statements cited in recent press reports from Beijing.

(CEA) posted a +CNY491.5 million profit in the quarter, down from +CNY673.2 million in the 2005 3rd quarter. Revenues climbed +24.9% to CNY10.34 billion against a +27% increase in costs. Passenger numbers were up +19% to 9.5 million. However, (CEA) said it lost -CNY970.2 million through the 9-month period compared to a +CNY262.7 million profit in the year-ago period and does not expect to turn a profit in 2006. Both airlines cited a rising yuan as a factor in their success last quarter.

Phoenix Aircraft Leasing of Singapore purchased 2 (PW4000)-powered A310-200s from (CEA).

A321-211 (2895, B-2420), & A330-343X (791, B-6129), deliveries.

November 2006: Pratt & Whitney (PRW) and China Eastern Airlines (CEA) signed an agreement to create a (CFM56) engine overhaul facility in Shanghai, where (PRW) will maintain (CEA)'s (CFM56) engines as well as provide 3Rd-party Maintenance Repair & Overhaul (MRO). The facility, to be called the Pratt & Whitney Shanghai Aircraft Engine Maintenance Company, will overhaul (CFM56-3)s, (CFM56-5B)s, and (CFM56-7)s. Construction is expected to begin in the 1st half of next year with opening scheduled for 2008. Once fully operational, the center will overhaul 200 to 300 engines annually and employ about +800 workers.

January 2007: China's two top cargo airlines, Air China Cargo (CAO) and China Cargo Airlines (CKK), are set to merge before year end in a bid to strengthen China's market share over foreign carriers, which currently control about two thirds of the country's air cargo volume. The 2 cargo airlines, which are affiliated with Air China (BEJ) and China Eastern Airlines (CEA), will merge into 1 company based in Shanghai, the country's economic hub, under the "China Cargo"'s name. The joint company will be a 50 - 50 venture between (BEJ) and (CEA).

Later, Air China (BEJ) reportedly is planning to set up a Shanghai-based cargo joint venture with Cathay Pacific Airways (CAT). "We are now preparing for the joint venture program and hope to realize practical progress in the cargo business partnership with Cathay (CAT) in the 1st half of 2007," VP, Fan Cheng said. "How to significantly improve our cargo transport capabilities is an important task for Air China (BEJ) in 2007," he added. He said long-running attempts to reach a similar agreement with (CEA) had failed.

The Chinese government is considering an injection of up to $2 billion into the country's 3 major airlines to address balance sheet debt problems brought on by high fuel prices. Sources in the government confirmed the existence of a financial injection plan, 1st revealed in the "Asian Wall Street Journal."

Beijing generally has tried to maintain a hands-off approach to the fiscal affairs of Air China (BEJ), China Southern Airlines (GUN), and China Eastern Airlines (CEA), but it now believes intervention may be necessary as the carriers have been hit hard by fuel prices that are higher in China due to various levies.

Aviation Partners Boeing (APB) announced that Shanghai Airlines (SHA) and (CEA) have ordered Blended Winglets for airplanes purchased as part of last year's combined order for 150 737-700s/-800s. (SHA) is taking 13 airplanes and (CEA) 20 through 2010. (APB) said the orders will bring to 190 the number of winglet-equipped 737NGs in China. "We are realistically targeting to install winglets on every eligible airplane in China," (CEO) John Reimers said. (APB) said that "discussions continue" with Chinese carriers to launch the 1st retrofit winglet installation on the 737NG and 757-200.

March 2007: Starting April 28th, Shanghai - Male - Johannesburg, using A340s.

The Oneworld (ONW) Alliance is discussing membership with China Eastern Airlines (CEA), alliance Managing Partner, John McCulloch announced in a briefing with reporters cited by "Reuters." (ONW) has yet to recruit a member from mainline China, while the SkyTeam (STM) Alliance is preparing to welcome China Southern Airlines (GUN), and the Star (SAL) Alliance will admit Air China (BEJ) and Shanghai Airlines (SHA).

A330-243 (821, B-6082), and 2 ERJ-145s (00949, B-3059; 00958, B-3058), deliveries.

April 2007: China Eastern Airlines (CEA) reported a 2006 net loss of -CNY2.78 billion/-$359.8 million, reversed from a net profit of +CNY60 million in the prior year, on a -39% drop in operating revenue to CNY36.8 billion. (CEA) attributed the result mainly to "sale of old airplanes . . . In 2006, we sold some old airplanes whose actual sale price was far lower than their book value, which resulted in a loss of -CNY2 billion last year," according to Luo Zhuping, Secretary to (CEA)'s board. The company also cited rising oil prices. Operating expenses increased +49% to CNY34.05 billion, driven by a +52.3% jump in fuel costs to CNY13.53 billion. Passenger boardings climbed +44.3% to 35 million, and load factor improved +2 points to 71.3% LF. Cargo traffic rose +13.59% to 2.44 billion (FTK)s. "This year we are committed to making a turnaround in performance and building our high-end service brand," General Manager, Cao Jianxiong said.

(CEA)'s troubles continued into the first quarter as it posted a -CNY510.9 million/-$66.26 million loss, narrowed from a -CNY955.1 million deficit in the year-ago quarter. The news came days after (CEA) announced that it fell to a heavy loss in 2006. (CEA) identified "high gearing ratio and intensified market competition" as the culprits and said it expects losses to continue in the second quarter. 1st-quarter revenue climbed +23.6% year-over-year to CNY9.25 billion. Despite (CEA)'s financial troubles, Air China (BEJ) Group expanded its stake to 6.02% from 4.92% through the purchase of 17 million of (CEA)'s "H" circulation shares, deepening widespread speculation that China's airline industry is on the verge of a significant reorganization. The State Asset Supervision and Administration Committee (SASAC) reportedly intends to reconfigure several state-owned carriers this year, leaving 1 or 2 big companies to take the lead, while several smaller airlines act as complements. (CAAC) (CAC) has rejected this as rumor. "We know the Air China (BEJ) Group purchased "H" shares, which we think is a good sign of investors' confidence in (CEA)'s long-term development," Secretary to the Board, Luo Zhuping commented. "At present, our focus is to identify a new investor." (CEA) Managing Director, Cao Jianxiong revealed that there is "good news" about current negotiations with Singapore Airlines (SIA), but refused to disclose more details.

(CEA) starts Shanghai - Male - Johannesburg, using A340s.

Industry analysts have noted that while they don't rule out the possibility of a major industry reorganization, any movement depends on decisions made by (SASAC) and other relevant government organs.

(CEA) has an optimistic outlook for the Shanghai air transport market and plans to boost capacity this year. It will take delivery of 2 A319s, 2 A320s, 4 A321s, 1 A330-200, 5 A330-300s, 2 737-700s, 3 ERJ-145s, and 1 747F in 2007. It has been discussing selling a 20% to 25% stake to Singapore Airlines (SIA) as early as the middle of the year.

Among China's 3 biggest airline companies, China Eastern (CEA) is the only 1 that suffered a 2006 loss. China Southern Airlines (GUN) posted net income of +CNY188 million, and Air China (BEJ) reported a net profit of +CNY3.19 billion.

(EADS) (EDS) Elbe Flugzeugwerke of Dresden delivered an A300-600 converted freighter to (CEA). The conversion started in late December. A second A300-600F for (CEA) is undergoing conversion with the 3rd scheduled for September.

A330-343E (830, B-6083), delivery.

May 2007: China Eastern Airlines (CEA) stock continued to soar as widespread speculation continued that Singapore Airlines (SIA) is on the verge of taking a significant stake in (CEA), despite (CEA)'s insistence that concluding any deal requires more time. In the statement, (CEA) refused to offer details about any negotiations with (SIA), the most probable strategic investor. An (SIA) spokesperson confirmed that the carriers are "talking about possible cooperation" but said in a statement cited by press reports that "there have been no decisions to pursue any other relationships at this point in time." An internal source at (CEA) said that the company has little leverage in talks with (SIA) because of its poor financial performance. "That's why it's been so hard to reach an agreement with (SIA), even though the talks have lasted for 10 months," the source said. The China Eastern Airline (CEA) Group holds a 59.9% share of (CEA) and intends to sell off a 20% to 25% stake to a new investor, while maintaining a controlling stake. Insiders speculate that it may opt for circulation of additional A and H shares tailored for (SIA), although this practice also may challenge the controlling stake position. Analysts have noted that the cheaper H shares will be more attractive to (SIA), which may walk away if A share prices rise higher than expected.

Recently, Air China (BEJ) expanded its stake in (CEA) to 8.26% from 7.88% through the purchase of 6 million H circulating shares. JP Morgan also raised its stake to 5.12% by paying HK$12.8 million/$1.6 million for 5.22 million H shares. (UBS) noted that a "drop of fuel price, appreciation of the yuan and strong market demand" will be main contributors to (CEA)'s turnaround this year, but that the deal with (SIA) is key. (CEA) reported a 2006 net loss of -CNY2.78 billion/-$360.9 million and a -CNY510.9 million loss in the first quarter.

China Eastern Airlines (CEA)'s negotiations with Singapore Airlines (SIA) concerning the sale of a strategic stake in the mainland carrier, are progressing well thanks to the support of the Chinese government, (CEA) President, Li Fenghua revealed, although there is no fixed timetable to seal the deal. Li confirmed that (SIA), or another investor, will hold no more than <25% of (CEA) in accordance with (CAAC) (CAC) regulations on foreign ownership in China's airlines.

Since the (CEA) Group holds a 59.9% share of (CEA), and intends to maintain a controlling stake, insiders speculate that (CEA) may opt for circulation of additional A and H shares tailored for (SIA), although this practice could challenge its controlling stake position. But according to relevant Chinese regulations, the price of (CEA) shares, on sale to its strategic investor, must conform to the updated trading price of current circulation shares. Industry analysts have pointed out that "the government support" to which Li referred may be related to how it will sell the stake to (SIA). (CEA) said that it has consulted with the state-owned Assets Supervision and Administration Commission of the State Council regarding the issue.

Interest in (CEA) has soared recently as the Citadel Group increased its share in (CEA) to 6.36% with the purchase of 15.21 million H shares.

Later, (CEA) announced that trading in its H shares was suspended pending the release of a "price sensitive" announcement. It has been negotiating the sale of a stake to Singapore Airlines (SIA).

(SIA) joined (CEA) in suspending trading of its shares, saying it "is in an advanced stage of discussions for a potential investment," thereby deepening widespread speculation that it is on the verge of acquiring a 25% stake in (CEA). According to some Hong Kong press reports, negotiations already have closed and (CEA) is set to make an announcement soon, although its officials continue to say publicly that a deal has not been reached. (CEA) shares have risen rapidly in recent months, presenting a moving target for negotiators attempting to reach agreement on the size of (SIA)'s investment and stake. (CEA) President, Li Fenghua confirmed (SIA) will hold not >25%.

(SIA)'s and Temasek's acquisition of a 25%, $930 million equity stake in (CEA) is close to being finalized, with regulatory approval from Beijing expected within a week. Final structure of the deal still may be altered somewhat owing to regulatory concerns within the Chinese government, sources in Singapore said.

Japan Airlines (JAL) and (CEA) will expand their code share agreement to include flights the Chinese carrier (CEA) operates 4x-weekly between Nagoya and Beijing. (CEA) currently code shares on 12 routes linking China and Japan.

While USA airlines enthusiastically applauded the newly signed air services agreement with China, their Asian counterparts admit they are at a competitive disadvantage compared to the relatively strong carriers across the Pacific. While USA airlines have been focusing more on international service and already are on the Public Relations (PR) offensive, in an attempt to win the extra routes to China, Chinese carriers are equating strength with domestic market share. They commonly launch fare wars in order to attract passengers, and industry analysts are concerned this tactic may be used to gain a competitive edge in the expanded USA - China market. As USA carriers aim to improve long-haul service, Chinese airlines are engaged in "wasteful competition" that degrades collective profits, analysts have said.

The country's big three - - Air China (BEJ), China Southern Airlines (GUN), and China Eastern Airlines (CEA), - - all are suffering losses on their USA routes. (BEJ)'s investment in an upgraded first (F) and business class (C) product helped boost premium revenue last year to CNY3.79 billion/$494.6 million, up +19.8% from 2005, and may convince others to follow suit. It also has raised transpacific fares to match those charged by USA carriers.

But (BEJ) has said it has little interest in serving the USA from cities, other than Beijing and Shanghai, while China Eastern (CEA)'s admission that its new service to New York (JFK) launched late last year has fallen short of projections, may warn competitors to proceed with caution.

June 2007: China Eastern Airlines (CEA) has demonstrated a Required Navigation Performance (RNP) approach into Tibet's Linzhi airport. The 737-300 flight was a cooperative between the General Administration of Civil Aviation of China (CAAC), the (FAA), and Boeing. The (CAAC) has now formally approved Air China (BEJ)'s use of (RNP) procedures at the airport.

While China Eastern Airlines (CEA) is on the verge of selling a 25% stake to Singapore Airlines (SIA), Shanghai Airlines (SHA) appears to be interested finding its own foreign investor.

(ANA) President & (CEO), Mineo Yamamoto revealed that the Japanese carrier is considering a cross-shareholding arrangement with its future Star Alliance (SAL) partner. Yamamoto said in Tokyo that an arrangement with Shanghai Airlines (SHA) would be similar to the agreement reached with Asiana Airlines (AAR) last month, under which each carrier took a $12 million stake in the other.

Shanghai Airlines (SHA) Secretary of the Board, Xu Junmin said (SHA) has yet to receive the proposal from (ANA), while noting that it does have "cooperative relations with (ANA) on code share."

Meanwhile, Air China (BEJ) also has contacted (SHA) about a deeper cooperation. With principal hubs in Beijing and Chengdu, (BEJ) has sought greater penetration in the Shanghai market. (SHA) President, Zhou Chi has insisted that (SHA) should "go its own way," despite the interest from potential suitors. (BEJ) will join (SHA) and (ANA) in the Star Alliance (SAL) by year end.

Later, despite the delay, (CEA) remains committed to selling a stake to (SIA) and plans to issue additional shares tailored for (SIA), when the deal finally is concluded, (CEA) President, Li Fenghua confirmed at the IATA (ITA) Annual General Meeting (AGM) in Vancouver. "We are still in talks with (SIA), as both sides share a similar wish to seal the deal," he said. In addition to the significant cash injection, which may amount to as much as $930 million for 25% of (CEA), Li said the alliance with (SIA) will help (CEA)'s management and brand building. But the agreement will not include a cross-shareholding, according to an internal source. Last year's cross-shareholding deal between Air China (BEJ) and Cathay Pacific Airways (CAT) helped boost the former to a +CNY3.19 billion/+$416.6 million full-year profit. (CEA) suffered a -CNY2.78 billion net loss in 2006.

Industry insiders remain optimistic about the deal. "As Air China (BEJ) has outlined its new Shanghai strategy of building it as its second base next to Beijing, (CEA) will be able to boost its competitiveness and consolidate its position in the Shanghai market against (BEJ), once its alliance with (SIA) is realized," (CEA) and China Southern Airlines (GUN) independent nonexecutive Director, Le Gongnan said.

Guotai Junan Securities analyst, Lin Zhiyuan noted that (SIA) also may benefit by using Shanghai to generate greater transpacific passenger flow. "(SIA) needs a transit station to reach for the American West Coast market, and there's no doubt that Shanghai is a pretty good choice," he explained.

(BEJ) last month raised its stake in (CEA) to 10.07%, which deepened popular speculation that (BEJ) eventually may take it over. While the Chinese government may look favorably on the merger, both airlines have dismissed it. "It is only an investment and I don't think it will have much effect on our deal with (SIA)," Li confirmed.

China's traditionally isolationist flag carriers are taking the initiative to ally with foreign counterparts in order to take advantage of increasing liberalization and maintain their competitive position. Among the three principal carriers, (CEA) is the only one uncommitted to a global alliance, preferring to seal its partnership with (SIA) first. (CEA) President, Li Fenghua said that (SIA)'s investment does not tie his carrier to the Star Alliance (SAL), nor does the fact that Oneworld (ONW) has yet to secure a Chinese member, rendering that alliance the only option. "We are leaving all the options open, as the point is to identify which airline alliance is the most suitable for us to boost growth," he said.

Meanwhile, Air China (BEJ) and China Southern Airlines (GUN) are restructuring various departments to meet requirements established by the Star Alliance (SAL) and SkyTeam (SKT), respectively. (BEJ) expects to join the Star Alliance (SAL) formally in December. "Our top priority is to join (SAL), as we will be able to optimize our network through deeper cooperation with other (SAL) members to earn profit," Managing Director International Affairs & Cooperation, Lou Yongfeng said at the recent (IATA) (ITA) Annual General Meeting (AGM) in Vancouver. Lou said boosting airport infrastructure is key to meeting the (SAL) standards. To that end, (BEJ) convened a conference in Sichuan Province at which leaders from 33 domestic airports committed to supporting the carrier's effort.

(GUN) expects to join the SkyTeam (SKT) Alliance this year as well, which domestic industry analysts predict will help shore up (GUN)'s thin international network. Chinese airlines also are keen to cooperate on cargo operations. Domestic carriers' share of the international cargo market plummeted from 65.6% in 1995 to the current 23.8%, and they are looking for foreign partnerships more frequently in order to reverse that trend. For example, (BEJ) expects to launch a Shanghai-based cargo carrier with Cathay Pacific Airways (CAT) this year, while (GUN) has confirmed it is talking with Air France (AFA)/(KLM) about a cargo joint venture.

With China's big 3 committed to finding support abroad, industry analysts are indicating that smaller domestic carriers may be unable to compete unless they take similar steps.

A319-115 (3168, B-6167), & A330-343E (836, B-6085), deliveries.

July 2007: China Eastern Airlines (CEA) may post a net profit as high as +CNY40 million/+$5.3 million for the first half of 2007. The carrier expects to release its financial results next month and, as a listed company, was unable to confirm the figure. China Eastern (CEA) Group, President Li Fenghua said this month, that (CEA) is targeting the black following a net loss of -CNY2.78 billion last year. Li said this week that the airline's first-half operating revenue rose +12.3% year-over-year, which helped boost the parent company's six-month net profit to +CNY263 million. The carrier will release its results separately. He cited a +5.4% improvement in airplane utilization as the main contributor to the turnaround. Passenger boardings rose +9.2% to 18.3 million and cargo traffic was up +0.8% to 422,800 tonnes.

China Eastern Airlines (CEA) created a Beijing Branch Company in order to establish itself further in the capital, where its passenger traffic has increased +15% over the past two years, but its market share is just 11%. The Shanghai-based carrier noted that Beijing offers greater opportunities, due to its location, and next summer's Olympic Games. "We can take advantage of our Beijing Branch Company to expand our network in the Beijing-centered northern region," Managing Director, Cao Jianxiong said. Expanding in Beijing is becoming an attractive option for Chinese airlines based outside the capital. Guangzhou-based China Southern Airlines (GUN) set up a Beijing Branch Company in late 2005 in order to extend its international network. Hainan Airlines (HNA) parent, (HNA) Group will base its Grand China Air in Beijing, and Air China (BEJ) is attempting to hold off the competition with a CNY2.27 billion/$299.6 million investment in an expansion of its Beijing operation this year.

(CEA) President, Li Fenghua revealed that the relevant government bodies are supportive of its 25% stake sale to Singapore Airlines (SIA) and that approval should come very soon.

Six weeks after trading in its stock was suspended, China Eastern Airlines (CEA) appears to be moving forward with its 25% stake sale to Singapore Airlines (SIA) with the submission of plans to relevant government entities. (CEA) President, Li Fenghua confirmed recently that the deal has been going through normal procedures and that everything is going well, although the reasons for the delay remain unclear. The state-owned Assets Supervision and Administration Commission of State Council, the Ministry of Commerce, the China Securities Regulatory Commission and (CAAC) (CAC) reportedly are among the agencies that must vet the deal. Approval is expected, but not soon. Details of the transaction also have not been revealed. It was speculated widely that (CEA) planned to circulate additional shares tailored for China Eastern (CEA) Group, Temasek Holding and (SIA), with each share valued at HK$3.73/$0.48. Following the sale, China Eastern (CEA) Group is expected to be the controlling stakeholder with 50%, while (SIA) and Temasek will hold 20% and 5% respectively.

(CEA) is committed to an internal improvement in addition to securing foreign strategic investors. Li noted that the airline is targeting a first-half profit. It suffered a net loss of -CNY2.78 billion/-$365.1 million in 2006.

(CEA) said it now expects to report a profit for the first half of 2007 after previously projecting a loss. A source said that it posted a net profit of +CNY40 million/+$5.3 million in the first half, but the figure was not confirmed. The carrier reported a net loss of -CNY550 million in the first quarter.

China's big three airlines - - Air China (BEJ), China Southern Airlines (GUN), and China Eastern Airlines (CEA) - - expect to post first-half profits, thanks largely to "continuous growth of the domestic market" and the appreciation of the yuan. China Southern (GUN) said it expected a reversal from its -CNY835 million/-$110.4 million loss in the year-ago semester, while earlier, Air China (BEJ) said in a filing with the Shanghai Stock Exchange, that it expected to report a profit more than >20 times greater than the +CNY45.8 million earned in the first six months of 2006. China Eastern (CEA) is expecting to return to the black following a -CNY40 million loss in the 2006 first half.

China Eastern Airlines (CEA) said it sealed a deal to buy 10 A320s valued at $613 million. The carrier said in a statement that relevant government authorities have approved the transaction and the 10 airplanes are set to be delivered between March 2011 and June 2012. They will be used to meet increasing domestic demand for short/medium-haul flights.

A319-115 (3186, B-6172), A320-214 (3170, B-6333), and A330-343E (851, B-6095), deliveries.

August 2007: China Eastern Airlines (CEA) posted a -CNY384 million/-$50.8 million net loss in the first half under international accounting standards, narrowed from a -CNY1.71 billion deficit in the year-ago semester, on a +12.3% year-over-year lift in operating revenue to CNY19.04 billion. Based on domestic accounting standards, (CEA) reported a net profit of +CNY58.2 million. Like its competitors, it cited the rapid growth of the Chinese economy and the "continuous appreciation of the yuan" as key to its improved performance, but said fluctuating fuel prices affected the result.
Operating expense rose +8.7% to CNY19.84 billion, with fuel accounting for 35.1% of the figure. Passenger boardings grew +9.2% to 18.3 million, while load factor dropped -0.7 point to 61.6% LF. Cargo traffic increased +4% to 1.17 billion (FTK)s.

In the second half, (CEA) expects to meet rising domestic market demand, by taking delivery of 16 airplanes comprising three A330-300s, two A320s, four A321s, one A319, two 737NGs, three ERJ-145s, and one 747F freighter. It also said it will "prepare for the introduction of strategic investors as soon as possible." It will sign a strategic cooperative contract with Singapore Airlines (SIA) on September 2.

Nearly three months after trading in its shares was suspended, China Eastern Airlines (CEA) finally is on the verge of closing its deal to sell a 25% stake to Singapore Airlines (SIA).
The transaction has been approved by appropriate government entities and is awaiting only a final okay from the State Council. It is speculated widely that (CEA) will sell a 20% share to (SIA) and a 5% stake to (SIA) controlling shareholder Temasek Holdings, the investment arm of the Singapore government. (CEA) likely will circulate additional "H" shares tailored for (SIA) and Temasek, although the Chinese carrier has not confirmed this. China Eastern Group currently holds 59.67% of (CEA).

Last month, (CEA) Board Secretary, Luo Zhuping said that although the relevant government bodies had reached a consensus on the sale, the airline had not been informed formally. He said he still expected final approval and that (SIA) is "a pretty good choice" as a new strategic investor. Industry insiders have suggested that (CEA) will be forced to merge with either Air China (BEJ) or China Southern Airlines (GUN), or both, if it fails in its latest effort to secure a new investor. Luo revealed that the State Council's State-owned Assets Supervision and Administration Commission has considered recombining the trio into a super airline for some time, but he argued that Chinese carriers need to find help on the open market rather than working through their difficulties by administrative order.

(BEJ) Board Secretary, Huang Bin said consolidation may be inevitable, as it would "definitely boost Chinese airlines' competitiveness when competing with foreign airlines, as the current vicious competition in the domestic market has damaged the economic interests of Chinese airlines as a whole."

Later, China Eastern Airlines (CEA) finally received approval from the State Council to sell a stake to Singapore Airlines (SIA). "We expect to sign a strategic cooperative contract with (SIA) and announce the relevant details of the deal on September 2," the source said, adding that the carrier's stock will resume trading the following day. (CEA) currently is in final discussions with (SIA) concerning the price for the stake, rumored to be 25%, and subsequent route cooperation between the airlines. (CEA) President, Li Fenghua confirmed in June, that the company will circulate additional shares tailored for (SIA), but he did not reveal whether it will circulate its "A" shares or "H" shares. Industry analysts have noted that Shanghai-based, (CEA) can count on a further cash injection once the deal with (SIA) is sealed. "We also hope (SIA), as our strategic investor, can improve our management level," Li said. The sale will provide (SIA) with a sought-after foothold in Northern Asia, through which it will exercise fifth freedom rights to open more international routes from Shanghai to the West, and grab a share of the profitable high-end market in China's business capital.

(CEA) expects to return a profit for the first half of 2007 despite posting a -CNY510.9 million/-$67.5 million loss in the March quarter.

In response to the increasing competition posed by railroads, (CAAC) (CAC) asked Air China (BEJ), China Southern Airlines (GUN), China Eastern Airlines (CEA), Shanghai Airlines (SHA), and Hainan Airlines (HNA) to cooperate on the Golden Route of Beijing - Shanghai, and help make transport more efficient. Launched August 6, the new "Air Express Service (AES)" has met with mixed reaction so far. Nearly 4.2 million passengers traveled on the route in 2006, accounting for 3% of China's total passenger traffic. (CAAC) (CAC) cited its desire to "facilitate business customers to enjoy faster air service" as the reason behind (AES). Of the 37 daily flights between the two cities, (BEJ) operates 14, and (CEA) 11. Average load factor exceeds >75%. (AES) features a flight every half hour and all tickets are fully and freely endorsable. Average travel time has been cut by as much as 40% to 3 hours as the five carriers now offer unified ground handling operations, dedicated boarding and security areas and a unified billing and accounting system. While reports last week featured some support for the faster service, there also was widespread concern and speculation that (AES) was the front for an alliance that would allow the five airlines to manipulate ticket prices. The fare on the route indeed was raised while popular discounted tickets briefly disappeared. (CAAC) (CAC) denied the speculation, while (CEA) explained that the hike was due to the increased costs associated with the unified ground handling operation. Late last week, the discounted price was reintroduced as (CAAC) (CAC) clarified its antimonopoly position.

Industry analysts have noted their disapproval, arguing that market forces must dictate demand and fares and not a forced cooperation initiated by (CAAC) (CAC). The freely endorsable tickets mean that schedule and slots will determine each carrier's load. If one of the five promotes and sells a deeply discounted ticket, the other four could pay.

Despite the nascent controversy, (CAAC) (CAC) said it would consider promoting similar service on other important business trunk routes from Beijing to Guangzhou, Shenzhen and Chengdu, plus Shanghai - Shenzhen. China Southern (GUN) Beijing Branch, Vice Managing Director, Li Jun said last week that "as far as I am concerned, (CAAC) (CAC) has finished the market research for these four routes.

737-79P (36269, B-5242), delivery.

September 2007: (ANA), Shanghai Airlines (SHA), and Air China (BEJ) will codeshare on flights between Tokyo Haneda and Shanghai Hongqiao beginning September 29. The flights, operated by (ANA) and Shanghai (SHA), will be introduced from the mostly domestic airports to commemorate the 35th anniversary of the normalization of diplomatic ties between the countries, (ANA) said. Japan Airlines (JAL) also will operate the route, flying daily from September 29, aboard a 767, switching to a 747-400 on October 28. China Eastern Airlines (CEA) will codeshare on those flights and also operate its own daily service.

While Air China (BEJ) charted an ambitious international expansion plan, that includes opening 12 new routes to the USA and Europe in 2008 and 2009, China Eastern Airlines (CEA) is taking a more cautious approach, with only one new international route planned in the next two years. According to the 2008 - 2009 long-haul routes distribution program released by the (CAAC) (CAC), (CEA) will start Shanghai - Los Angeles service next year, but will stay away from further international expansion. (CEA) Board Secretary, Luo Zhuping explained that the carrier's reluctance to open more international routes doesn't necessarily mean that it will cede the market to competitors. He said the "temporary withdrawal" will enable China Eastern (CEA) "to be better prepared for more successful international expansion in the future," adding, "It's easy to open a new international route, but it's difficult to earn a profit."

Currently, (CEA) suffers big losses on services to New York, Moscow and Johannesburg. In order to improve its competitiveness, it already has begun cooperating on long-haul routes with Singapore Airlines (SIA), which agreed earlier this month to purchase a 24% stake in the Chinese carrier.

Luo said (CEA) will launch more international routes, when it believes such services will yield profits. By the end of 2009, it will take delivery of 11 long-haul airplanes comprising four 787s and seven A330s.

China Southern Airlines (GUN), China Eastern Airlines (CEA), Hainan Airlines (HNA), and Shanghai Airlines (SHA) are scheduled to open new routes to the USA, under the (CAAC) (CAC) program, despite the fact that Chinese carriers collectively suffer heavy losses in transpacific operations. Industry analysts have pointed out that conditions may improve, if the USA and China sign a tourism agreement this year, that will ease USA visa restrictions on Chinese citizens.

Next year, (GUN) will open daily Beijing - Newark, and Guangzhou - Moscow flights, while (CEA) will start twice-weekly Shanghai - Los Angeles service. Hainan (HNA) will fly four-times-weekly from Beijing to Berlin and Seattle, and Shanghai Airlines (SHA) will fly from its namesake city to Vienna (five-times-weekly), Hamburg and Zurich (both thrice-weekly).

In 2009, (GUN) will fly from Beijing to Detroit and London, and from Guangzhou to Vancouver (all daily). Hainan (HNA) will open daily service from Beijing to Chicago and Newark, and Shanghai Airlines (SHA) will fly to Seattle and Los Angeles.

Singapore Airlines (SIA) and its parent, Temasek agreed to purchase 15.7% and 8.3% stakes respectively in China Eastern Airlines (CEA), giving them a combined 24% holding valued at HK7.15 billion/$917 million. Based on the agreement, about which there has been speculation for months, (SIA) and Temasek will be entitled to nominate two and one (CEA) board members, respectively. In addition, (CEA) and (SIA) will cooperate on marketing and sales, personnel training and flight management. "Our routes are complementary with (SIA) and thus our cooperation with them has already started in the long-haul routes," (CEA) President, Cao Jianxiong said. Chairman, Li Fenghua noted that (CEA) hopes to take advantage of (SIA)'s experience in airline management to upgrade service levels and raise profitability. (CEA) posted a -CNY384 million/-$50.8 million net loss in the first half.

Industry analysts in China projected that the deal will herald a new era of tie-ups between Chinese airlines and foreign carriers, and also likely will alter Beijing's strategy to reorganize Air China (BEJ), China Southern Airlines (GUN), and China Eastern (CEA) into one mega-carrier. "I don't support Chinese airlines' reorganization by administrative orders," Li said. "[Any realignment] should be realized by market means." He added that the nation needs three carriers rather than one, because it would be difficult for a single airline to provide differentiated flight products to passengers in a market as vast as China.

Air China (BEJ) CEO, Cai Jianjiang said that he wouldn't exclude the possibility of merging with other Chinese carriers, but cautioned that there is "no specific timetable" and that "Beijing will have the final say on this issue."

Regarding the (SIA) investment in (CEA), the Centre for Asia Pacific Aviation said, "After all, China needs a fast-track route, if it is to assert itself most effectively in international markets."

Cathay Pacific Airways (CAT) abruptly backed away from its proposed bid to buy a stake in China Eastern Airlines (CEA), that could have trumped the share sale agreement between (CEA) and Singapore Airlines (SIA). (SIA) and its parent, Temasek earlier this month agreed to purchase 15.7% and 8.3% stakes respectively in (CEA), but the deal has not yet been approved by (CEA) shareholders. Cathay (CAT) requested the suspension of trading of its shares on the Hong Kong Stock Exchange "pending the announcement of a proposed transaction." Widespread reports speculated that (CAT) and Air China (BEJ) were preparing to invest $4 billion jointly in (CEA). But (CAT) issued a statement saying the purchase of (CEA) shares "will not now proceed." It offered no explanation for why it backed away from the deal, and said its shares will begin trading again. Air China (BEJ) said in a statement it would make no offer for (CEA) shares for at least "the next three months."

Later, China Eastern Airlines (CEA) said it is moving to complete a stake sale deal with Singapore Airlines (SIA) "as soon as possible" following Cathay Pacific Airways (CAT)'s decision earlier to back away from a (CEA) share purchase. (CAT) suspended trading of its shares on the Hong Kong Stock Exchange pending a transaction announcement that was widely believed to be an offer to purchase a major stake in (CEA) in conjunction with Air China (BEJ). The deal could have trumped an agreement reached earlier this month in which (SIA) and its parent Temasek agreed to purchase 15.7% and 8.3% stakes, respectively, in (CEA). But (CAT) abruptly backed off the deal and Air China (BEJ) similarly said it had no plans to invest in (CEA), causing the stock prices of all three carriers to drop significantly. The (SIA) deal has yet to receive approval from (CEA) shareholders, leaving the door open for other offers. But a (CEA) official told reporters that the carrier is "unlikely to accept any other offers" until the (SIA) deal is either approved or rejected by shareholders, according to press reports. (CEA) added that the (SIA) deal has gained "initial approval" from the Chinese government.

China Eastern Airlines (CEA) confirmed its plan to launch a new regional carrier in partnership with AVIC I, continuing a recent trend that has seen several companies invest in China's long-neglected regional market. (CEA)'s new western-based airline will operate mainly MA60s and the new ARJ21, which is scheduled to come off the assembly line by year end. It will compete in part with (HNA) Group's new "Grand Xinhua Express," which launched in March, and the joint venture between Shenzhen Airlines (SHZ) and Mesa Air Group, "Kunpeng Airlines." (CEA) President, Hu Xiaojun said the carrier will offer access to mid-size and small cities through point-to-point service as well as increased frequencies of regional connecting flights. Ganzhou in the southeast will be established as a trial station from where passengers will be able to connect to 42 cities through Beijing, Shanghai and Guangzhou. (CEA) will add frequencies to smaller airports from those three cities.

Meanwhile, (HNA) already is considering adding capacity at Tianjin-based GXE, which operates 29 Dornier 328s. Chairman, Cheng Feng said he would not exclude the possibility of introducing some of the 50 ERJ-145s and 50 EMB-190s the company ordered last August into the "Grand Xinhua" fleet, when deliveries start this month. "Kunpeng Airlines, which will launch with three CRJ-200s, intends to add 20 50/90-seat airplanes annually until it reaches a fleet of 160 to 200 planes. "With trunk route traffic nearing saturation, Chinese carriers began to shift their attention to the regional market, which will mean China will need 630 30/120-seat regional airplanes in the next twenty years," Embraer China Chief Representative, Guan Dongyuan said. China's combined regional fleet currently numbers 72, accounting for 7% of the total commercial fleet of 1,024.

2 A321-211s (3247, B-6330, 3249, B-6331), and A330-343X (866, B-6097), deliveries.

October 2007: China Eastern Airlines (CEA) nearly doubled its third-quarter profit, posting net income of +CNY976 million/+$130.4 million, up +98.7% from the +CNY492.9 million earned in the year-ago period. It also reported a net profit of +CNY1.04 billion during the nine-month period ended September 30, based on domestic accounting standards, a reversal from a -CNY910 million loss in the first nine months of 2006. It attributed the turnaround to improvements in the airline's management and appreciation of the yuan. President Li Fenghua said at this summer's (IATA) (ITA) Annual General Meeting (AGM) that (CEA) expects to return to profit this year after reporting a -CNY2.78 billion loss last year. In the third quarter, operating revenue increased +16.2% to CNY10.09 billion, while operating expenses rose +8.3% to CNY7.85 billion. The carrier is preparing for the sale of a 24% stake to Singapore Airlines (SIA), which is scheduled to be approved at a shareholders meeting to be held before year end. Two-thirds of (CEA) shareholders must approve the transaction to make it binding. Air China (BEJ) is the biggest holder of (CEA)'s circulating shares and Luo said his company is prepared for any action (BEJ) might take. Recently, Air China (BEJ) appeared on the verge of a major stake purchase in (CEA) in conjunction with Cathay Pacific Airways (CAT), but both carriers backed off the deal. "So far, we haven't received any proposals for taking over (CEA) through the purchase of our major stake," Luo said, noting that the government has the final say on whether other carriers can take control. China Securities Co aviation analyst, Li Lei suggested that the withdrawal of (BEJ) and (CAT) reflected the government's support for China Eastern (CEA)'s deal with (SIA). (CEA) already has begun cooperation with (SIA) on long-haul operations starting with Singapore - Shanghai - New York (JFK) service, (CEA) Managing Director, Cao Jianxiong said. "We are very careful with opening new routes, as it will be better for us to achieve profit on our current routes first," Cao noted, adding that the airline hopes to increase frequencies to Los Angeles and New York in order to attract more business (C) travelers.

China Eastern Airlines (CEA) has an optimistic outlook about its cooperation with Singapore Airlines (SIA) as the carriers share common business interests, (CEA) President, Li Fenghua said. "Our deal with (SIA) is a milestone and a turning point for us," Li commented. The deal was sealed last month, but has yet to be approved by shareholders. By selling a 24% stake to (SIA), (CEA) more than quadrupled its net capital to CNY14.13 billion/$1.88 billion and dropped its debt ratio to 80.17% from 94.95%. But Li said that cash injection was not the airline's ultimate goal. He said at this summer's (IATA) (ITA) Annual General Meeting (AGM), that (CEA) aimed to improve its profitability and management level by introducing (SIA) as its strategic investor. Once (CEA) shareholders approve the arrangement, which is expected to occur at year end, (SIA) will send 12 senior officials to help facilitate cooperation in Flight Operations, Maintenance Repair & Overhaul (MRO), Service, Procurement, Marketing & Sales, and Training. Li also noted that (CEA ) is working on building its "Shanghai hub," and is targeting an increase of its share in that market from the current 36% to 50%. By 2010 it will develop a hub-and-spoke system, with Shanghai serving as an international passenger and freight hub, while Kunming, Xi'an and Wuhan will act as its domestic regional hubs. It expects to operate a fleet of 322 airplanes by that time, he added, compared to the 209 it was flying at the end of July.

Xinhua (XIH) reported that Li this week rejected the idea of a "super mega carrier" proposed by Air China (BEJ) President, Li Jiaxiang, who has suggested a merger between (BEJ) and domestic competitors, including (CEA), that would gain a stronger foothold in China and be better positioned to compete against foreign airlines. "It's not suitable for China to have only one 'super mega carrier' as it will damage the competition environment in China's airline industry," Li said.

Despite its abrupt withdrawal from the deal to purchase a major stake in China Eastern Airlines (CEA) in conjunction with Cathay Pacific Airways (CAT) last month, Air China (BEJ) still is considering a merger and will evaluate its options over the next three months, President, Li Jiaxiang told reporters after attending the Communist Party of China's national congress in Beijing. Li explained that (BEJ) backed off the (CEA) deal with (CAT), because China Eastern (CEA)'s share value was too high. That deal would have trumped an agreement reached earlier in September, under which Singapore Airlines (SIA) and parent Temasek agreed to purchase 15.7% and 8.3% stakes respectively in (CEA).

Industry analysts noted that Shanghai's importance as an aviation hub was the driver behind the (BEJ)/(CAT) bid for a major stake in (CEA) in competition with (SIA). Approximately 50% of China's total passenger volume and 70% of cargo volume pass through the Yangtze River Delta Region centered on Shanghai. (CEA) currently has a 36% share of the Shanghai market, while (BEJ) holds 12%, and (CAT) with Dragonair (DRG) have 4%. "We will never give up on the Shanghai market as it plays a significant role in our strategy and we can expand our Shanghai market share in many ways," (BEJ) Board Secretary, Huang Bin said. He noted that (BEJ) is moving forward with its plan to launch a Shanghai-based joint venture cargo carrier with Cathay (CAT).

Consolidation appears to be the development trend in China's airline industry, but Hainan Airlines (HNA) Group President, Chen Feng said that the "super carrier" idea promoted by some officials will not work. Chen was speaking after attending the Communist Party of China's national congress in Beijing. He noted that Air China (BEJ), China Southern Airlines (GUN), China Eastern Airlines (CEA) and Hainan (HNA) have controlled 90% of the domestic market since 2002, despite the increase in new entrants. "I don't think there is a possibility that these four bigger airlines will merge," he said. Air China (BEJ) President, Li Jiaxiang has insisted that "merger and consolidation with other domestic carriers" is one of (BEJ)'s targets in the next few years.

737-79P (36270, B-5243), and A321-231 (3262, B-6332), deliveries.

November 2007: China Eastern Airlines (CEA) suspended trading in its stock, saying its deal to sell a 24% stake to Singapore Airlines (SIA) is pending. (CEA) said its stock will not resume trading until the (SIA) deal is sealed. In September, (SIA) and parent Temasek agreed to purchase stakes of 15.7% and 8.3% respectively, giving them a combined 24% holding, valued at HK$7.15 billion/$921.8 million. The accord still needs approval from (CEA)'s minority shareholders.

Air China (BEJ) claims to be the biggest circulation shareholder with an 11.02% stake as of September 30. It still is considering a merger with (CEA), and will evaluate its options over the next three months despite its abrupt withdrawal from a deal to purchase a major stake in conjunction with Cathay Pacific Airways (CAT), President, Li Jiaxiang has said. (CAAC) (CAC) Minister, Yang Yuanyuan said that he opposes any merger among China's big three airlines, although the state-owned Assets Supervision and Administration Commission of the State Council, the state-owned controlling shareholder of the trio, has the final say.

Later, Singapore Airlines (SIA) and parent Temasek said that they have signed a definitive agreement to buy 15.73% and 8.27% stakes respectively in China Eastern Airlines (CEA), nearly finalizing a deal that was announced in September. The agreement gives the Singaporean investors a 24% holding in (CEA) and has led to speculation about potential further foreign investment in Chinese carriers and also possible consolidation in the rapidly growing market. (SIA) and Temasek will pay HK$7.2 billion/$927 million for the combined stake. (CEA) Holdings will retain 51% ownership. (SIA) appears prepared to play a significant role in (CEA)'s development, saying in a statement that it will nominate its Chairman, Stephen Lee, and CEO, Chew Choon Seng to (CEA)'s board and "will work with (CEA) to implement best practices in corporate governance standards, improve operational efficiency and performance, raise product and service standards, and enhance the brand identity and image of (CEA)." It added that (SIA) and (CEA) will explore cooperation in Marketing, Purchasing, Flight Operations, and Training, among other areas. (CEA) shareholders and relevant regulatory authorities must still approve the stake sale.

China Eastern Airlines (CEA) expects to improve its financial and operational performance greatly on international routes through its planned cooperation with Singapore Airlines (SIA), according to (CEA) Board Secretary, Luo Zhuping. "Currently we [lose] between CNY1 million/$134.000 to CNY2 million in one flight from Shanghai to New York," Luo said. "And our average load factor of business class (C)/first class (F) is 30% LF to 40% LF, in international routes, while this figure is more than >90% [for] (SIA), so we hope to raise our figure to 70% LF to 80% LF in partnership with (SIA)." (SIA) and parent Temasek recently signed a definitive agreement to buy 15.73% and 8.27% stakes, respectively, in (CEA), and (SIA) pledged significant cooperation with the Shanghai-based carrier. The airlines are considering operating a joint Singapore - Shanghai - New York route that would include cooperation on sales, cabin layouts and service. (CEA) said it would likely take six months to conclude research on the possible joint route. It said it plans to adapt (SIA) amenities and suggestions on other international routes, if it can turn around the financial performance of Shanghai - New York flights. "Maybe (SIA)'s cabin crews (CA) will even appear on (CEA)'s international flights in the near future," Luo said. He added that approval by (CEA) shareholders of the (SIA) stake purchase is expected to occur after Christmas.

China Eastern Airlines (CEA) is targeting a shareholders meeting on January 8 to secure approval for the sale of a 24% stake to Singapore Airlines (SIA) and parent Temasek, and soon will launch a road show to gather support for the deal in Beijing, Shanghai, Shenzhen, Hong Kong and Singapore. (CEA) this month signed a definitive agreement to sell 15.73% and 8.27% stakes to (SIA) and Temasek, respectively, and agreed to nominate (SIA) Chairman, Stephen Lee and CEO, Chew Choon Seng to the (CEA) board. Based on the relevant domestic finance regulations, the sale requires approval from two-thirds of (CEA)'s shareholders. Currently, Air China (BEJ) holds an 11.02% stake, making it the largest circulation shareholder. In September, (BEJ) planned to invest $4 billion to purchase a major stake in (CEA) in conjunction with Cathay Pacific Airways (CAT), but both carriers backed off. At the time, (BEJ) President, Li Jiaxiang said (CEA) was valued too high. (BEJ) said it is evaluating its options over a three-month period that will expire December 18. Citibank aviation analyst, Ma Yue noted that (BEJ) may make a more limited purchase of (CEA) shares, during the December 18 - January 8 period, that could trump the (SIA)/Temasek deal. Cathay (CAT) CEO, Tony Tyler recently was reported as saying that he still would consider buying into a Chinese airline along with (BEJ) if the latter asks for (CAT)'s cooperation. But (CEA) Board Secretary, Luo Zhuping dismissed speculation of a possible merger with (BEJ). "The (CAAC) (CAC) and the relevant regulatory authority have already approved our deal with (SIA). So what we need to do now is to have further discussions with our shareholders to make them approve it," he said.

Chinese carriers responded to climbing oil prices by raising fuel surcharges on domestic services +20% to +25%. The levy on flights of fewer than 800 km increased to CNY60/$8.04 from CNY50 per ticket, while the fee on flights of 800 km or more, went from CNY80 to CNY100. China raised the domestic price of jet fuel by CNY500 per ton, starting November 1, a move that industry insiders said
was the catalyst for the surcharge hike. The fourth quarter is considered the domestic low season. With a fuel price increase of just CNY100 per ton, Air China (BEJ)'s net profit will be cut by -CNY180 billion, while net incomes of China Southern Airlines (GUN), and China Eastern Airlines (CEA) will be reduced by -CNY250 million and -CNY220 million respectively, according to China (CITIC)
Securities. Industry analysts predict that Chinese carriers will raise the fuel surcharge on international routes soon.

Singapore Technologies Aerospace (STARCO) has begun work on the first A320 "C" check, on behalf of (ANA), at its China Eastern Airlines (CEA) joint venture facility, Shanghai Technologies Aerospace Co. Work on the airplane, the first of 30 (ANA) A320s to undergo "C" checks and modifications, at (STARCO) under a Letter of Intent (LOI) with the airline, began after the Hongqiao-based facility gained certification from the Japanese Civil Aviation Bureau. The airplane will be redelivered this month.

December 2007: The China Eastern Airlines (CEA) shareholders conference that will decide the fate of the Singapore Airlines (SIA) stake purchase is drawing near, and Air China (BEJ) parent, China National Aviation Corp (CNAC) again has raised its stake in (CEA). (CNAC) upped its share to 12.07% from 11.02%, by purchasing its 4.278 million "H" shares, according to data released by the Hong Kong Stock Exchange. (CEA) Board Secretary, Luo Zhuping declined to comment, but insisted the carrier's deal with (SIA) has been approved by Beijing, although it still needs to be okayed by (CEA) shareholders on January 8. (CNAC) has increased its holding in (CEA) nine times since May, deepening speculation that (BEJ) may make a more limited purchase of (CEA) shares during the December 18 to January 8 period, that could trump the (SIA)/Temasek deal. In October, (BEJ) President, Li Jiaxiang said the airline still is considering a merger and will evaluate its options over a period that will expire December 18.

China Eastern Airlines (CEA) applied to the Chinese government (CAAC) (CAC) to be allocated 40 of the 110 A320 family airplanes, Beijing recently agreed to purchase from Airbus (EDS) and is contemplating ordering a similar number of 737s. It also plans to give Singapore Airlines (SIA) executives significant management roles following next month's expected closing of (SIA)'s and parent Temasek's 24% stake purchase, according to Chairman, Li Fenghua. Li is in Hong Kong, touting the virtues of the (SIA)/Temasek deal, and in interviews with various media outlets, hinted at the carrier's future plans. He told "Reuters" that (CEA) formally has asked the government for 40 A320s that were part of the recent Airbus (EDS)/China accord, but conceded that it is "still uncertain how many we will get." He added that the carrier has had discussions with Boeing (TBC) regarding fleet expansion and may order up to 40 737s.

He also revealed that (SIA) officials will play a significant role in (CEA) management, following what he believes is near-certain approval from shareholders next month of the (SIA)/Temasek deal. (CEA) already had announced that (SIA) Chairman Stephen Lee, and CEO, Chew Choon Seng will join an expanded (CEA) board. Li told "The Wall Street Journal" that (SIA) also "will send 10 personnel from various departments to work side-by-side with us, mainly in Product Development, Sales & Mmarketing, and Treasury Operations. This is long term. They will actually be on permanent secondment to China Eastern (CEA)." He added that the (SIA) officials assigned to (CEA) "will have sufficient authority to implement the changes they see as necessary. As Chairman, I will see that this happens. They are not coming just to be advisers. Otherwise, we could have just employed consultants." In addition, 20 (CEA) managers will spend six months in Singapore following the stake purchase, studying (SIA)'s management strategies and operations, he said.

Rockwell Collins reached agreement with China Eastern Airlines (CEA) to launch its dPAVES IFES for 30 A320s and six 737-800s. Deliveries are scheduled to begin next year and continue through 2010.

Domestic China market share is shown on ATTACHED - "CEA-DOM-MKT-SHARE-DEC07."

January 2008: 2007 statistics: 57.18 billion (RPK)s passenger traffic +13.8%; +10.3% capacity (ASK)s; +2.2 load factor for 73.6% LF. SEE ATTACHED COMPARISON CHART TO SELECTED OPERATORS - "CEA-2007-STATS."

Japan Airlines (JAL) placed its code on China Eastern Airlines (CEA)'s twice-weekly, Tokyo Narita (NRT) - Nanjing service. It will introduce its new premium economy service on (NRT) - Frankfurt flights beginning February 3.

Air China (BEJ) parent, China National Aviation Holding Co (CNAC) said that China Eastern Airlines (CEA) needs to renew discussions with Singapore Airlines (SIA) on the high-profile stake sale, arguing that the HK$3.80 price set for each of the additional shares tailored for (SIA) is inadequate. It was the second such statement from (CNAC), which said on December 26, that it never promised not to vote to veto the deal at a shareholders' conference scheduled for January 8. (CNAC) currently is (CEA)'s largest circulation shareholder with 12.07%.

(CEA) President, Li Fenghua admitted that the carrier is facing significant pressure from (BEJ), which he called a "troublemaker." But he insisted that the deal has been sealed and that the share price will not change. (BEJ) has said it is interested in partnering with (CEA) through a cross shareholding as well as establishment of a cargo joint venture. But CEA, Managing Director, Cao Jianxiong rejected the possibility, saying the carrier would rather cooperate with (SIA). "So far, China's big three airlines' (RASK) on long-haul routes is around CNY0.30, while this figure for (SIA) has reached between CNY0.60 and CNY0.70," he explained. "So (SIA) is a better cooperative partner to improve (CEA)'s management level in the long run, especially in long-haul operations, that account for one-third of (CEA)'s total operating revenue."

(BEJ) President, Li Jiaxiang was promoted to (CAAC) (CAC) Minister on December 28, which industry analysts have said could have an impact on the (CEA)/(SIA) deal.

The China Eastern Airlines (CEA)/Singapore Airlines (SIA) deal appears increasingly less likely to go through, with Air China (BEJ) stating that it is planning a counterbid, while a change in (CAAC) (CAC) leadership signaled that Beijing may be cooling to the stake sale. Li Jiaxiang, President of Air China (BEJ) parent, China National Aviation Holding Co, was promoted to head China's aviation ministry on December 28, and is known to be skeptical about foreign investment in Chinese airlines. (CEA) Chairman, Li Fenghua said last month, that (SIA)/parent Temasek's 24% stake purchase would not be blocked by minority shareholder (BEJ), which holds approximately 12% of (CEA), because the government supported the deal and would direct (BEJ) to approve it. But Li Jiaxiang's appointment to lead the (CAAC) (CAC) appears to have emboldened (CNAC), which in recent days has said (SIA)/Temasek is paying too little for the stake, and that negotiations between (CEA) and the Singaporeans (SIA) should be restarted. It has stated that it has not made any promises regarding the (CEA) shareholders' vote to be scheduled soon, and announced plans to offer its own bid for the 24% stake, if shareholders block the (SIA) deal. It added that it would vote against the (SIA) stake purchase unless the sale price, currently at HK$3.80/$0.49 per share, is "improved." Whereas shareholders may have been wary about voting against the stake sale to (SIA) because, as Li Fenghua suggested, it was Beijing's wish that it be approved, Li Jiaxiang's stance against foreign investment, and being in favor of building up China's airline industry internally, may reverse that calculation. (CNAC) denied that it has been given any direction by Beijing, and told various media outlets that it believed the government would allow (CEA) shareholders to make their own decisions. Interestingly, the official news agency of the Chinese government, "Xinhua," reported that the (CEA)/(SIA) deal "was left in uncertainty" and noted that (CNAC) has said it does "not reflect the fair value of" (CEA). According to "Xinhua," "Analysts said [CNAC's] statement, coupled with the promotion of Li Jiaxiang . . . added uncertainty to the share placement of China Eastern (CEA). Li has sought to build Air China (BEJ) into a 'super carrier' by restructuring domestic airlines, a move thought to be necessary, to compete with foreign competitors for larger market shares."

China Eastern Airlines (CEA) Chairman, Li Fenghua insisted that the carrier's plan to sell a 25% stake to Singapore Airlines (SIA) and its parent Temasek was not dead even after more than >77% of (CEA)'s minority shareholders voted against the deal, effectively killing it.
Li also vowed to continue to oppose efforts by Air China (BEJ) to take a similarly sized stake, declaring that (CEA) would not be swayed by a richer marriage proposal from (BEJ) and parent China National Aviation Holding Co (CNAC). "It's not simply the price that I look at. It's like if you don't like her, no matter how big the dowry is, it wouldn't work," he said. (CNAC), which led the opposition to the Singapore (SIA) investment, and Cathay Pacific Airways (CAT) said they now will join together to bid on the stake in (CEA), which has a highly desirable hub in Shanghai. (CNAC), which holds about 12% of (CEA), made it clear in the weeks leading up to the shareholder vote, that it would move to block the sale because (SIA)/Temasek's HK$3.80/$0.49 per share offer was too low. (CNAC) said before the vote that it planned to offer HK$5 per share for no more than a 30% stake, if the (SIA) deal was vetoed. But Li told reporters, "We won't give up our deal with (SIA), as it is the best cooperative partner for us. . .We are aware that it's a long-term process to [convince] minority shareholders [to back the sale], but we will keep working on it." He added that another shareholder conference will take place in three months, and a vote will be taken again.

(SIA) said it will continue to pursue the stake purchase. "Singapore Airlines (SIA) is disappointed that the proposed transaction involving an equity stake in China Eastern Airlines (CEA) did not receive the required level of support from independent shareholders," it said in a statement. It added that it "will continue to support the building of a relationship with China Eastern (CEA)" and pointed to the fact that (CEA) and (SIA) are "mutually willing" to enter into a partnership. (SIA) reiterated that its offer represented "full and fair value."

China Eastern Airlines (CEA) has begun to soften its stance on a possible investment by Air China (BEJ) and now says it plans to take seriously a cooperation with (BEJ) if Singapore Airlines (SIA), whose bid for a stake was rejected by minority shareholders recently, remains unsolved. "We are talking with Singapore Airlines (SIA) every day," China Eastern (CEA) Board Secretary, Luo Zhuping said, noting that (BEJ)'s stated intention to purchase a no-more-than-30% stake in (CEA) for at least HK$5/$0.64 per share, has raised minority shareholders' expectations that (SIA) will come back with a higher bid than the HK$3.80 per share offered originally. "But if Singapore Airlines (SIA) raises its price now, (BEJ) will possibly offer a higher price. So we have to wait until (BEJ) proposes its offer formally, and then we will make a serious consideration of it after proper discussions with (SIA)," Luo elaborated. (SIA) has said it will continue to pursue a stake purchase but has insisted that its offer represented "full and fair value."

(BEJ) parent, China National Aviation Holding Co said it is confident that its bid will be approved by the parties concerned, but that its ultimate success "depends on whether a possible price war [with (SIA)] will happen." According to the November agreement between (CEA) and (SIA), the carriers are not allowed to sign stake purchase agreements with other investors until August 9. China Securities Co aviation analyst, Li Lei noted that "(CEA) won't impede (BEJ) from proposing its offer, as there is little possibility that (CEA)'s deal with (SIA) can be successfully passed by (CEA)'s minority shareholders within this timeframe."

Later, Air China (BEJ) parent, China National Aviation Holding Co (CNAC) submitted its formal bid to China Eastern Airlines (CEA), it announced, saying it intends to purchase 2.9 billion "H" shares in (CEA) for at least HK$5 per share and raise its stake to 26.14% from the current 12.07%. According to China International Capital Corp, (CNAC)'s financial adviser, (CEA) will earn HK$14.9 billion from the offer, and reduce its debt ratio from the current 94.3% to 77%. The deal would increase (CEA)'s annual revenue by HK$4.31 billion and cut annual costs by HK$1.08 billion. (CNAC) said it will cooperate with China Eastern (CEA), especially in Shanghai, and that the carriers will launch a cargo joint venture.

But China Eastern (CEA) expressed doubt about the offer, saying "it is informal and does not conform to legal procedures." (CEA) has said it will not accept any offer without the involvement of Singapore Airlines (SIA), which it claimed is its ideal cooperative partner. (SIA) spokesperson, Stephen Forsaw stated recently that (SIA) will be "very patient to develop relations with (CEA) on the terms both carriers agreed." He reiterated that (SIA) will not get into a "price war" with Air China (BEJ) for (CEA).

Guosen Securities said (CNAC)'s offer would result in better synergies for China Eastern (CEA) than its deal with Singapore Airlines (SIA), which was rejected by (CEA) shareholders. But "due to (CEA)'s continuous resistance and its November agreement signed with (SIA) that the carriers are not allowed to sign stake purchase agreements with other investors until August 9, (CEA) will not reach an agreement with (CNAC) in the short term," Guosen said. Industry analysts noted that (BEJ)'s proposed alliance with (CEA) will pose a potential threat to China Southern Airlines (GUN), which is based in Guangzhou. (GUN) said that it will continue to keep a close watch on (CEA) and "will react properly to any changes in China's domestic airline industry."

Later again, while attempting to hold off Air China (BEJ)'s drive to replace Singapore Airlines (SIA) as a strategic partner and purchase its own sizeable stake, China Eastern Airlines (CEA) found a domestic ally in China Southern Airlines (GUN), with whom it signed a cooperation agreement in Shanghai. The accord outlines a partnership that includes airplane purchasing, ground handling services, marketing and sales, network synergies, loyalty programs and other elements, but does not reference the attempted stake sale to (SIA), nor (BEJ)'s counteroffer. "Our domestic route network is complementary with (CEA)'s, as ours is mainly concentrated in the south, while (CEA) has a broad route network in the east," (GUN) Chairman, Liu Shaoyong said. (CEA) Chairman, Li Fenghua said, "This cooperation can lower both carriers' operating cost and provide better service to passengers." Liu also noted that (GUN) wants to recommend (CEA) as a future member of SkyTeam (STM), which China Southern (GUN) joined two months ago. Industry analysts saw the agreement as a sign that (CEA) and (GUN) intend to compete against Air China (BEJ), rather than cooperate or cede to its apparent "supercarrier" ambitions. "(CEA) has sent a very clear message to (BEJ) that the latter is not its cooperative partner and (CEA) can cooperate with other domestic carriers besides Air China (BEJ)," China Securities Co aviation analyst, Li Lei said. Industrial Securities analyst, Xia Fulu agreed, saying, "If (BEJ) successfully won its (CEA) bid, and gains more control over the latter, then its next target will be China Southern (GUN) . . . That's why (CEA) and (GUN) have vowed to deepen their cooperation now, in order to boost their own growth as they don't want to be merged into (BEJ) in the future."

(CEA) said that it expects to report a profit for 2007, due to "currency exchange gains from yuan appreciation." It posted a net loss of -CNY2.78 billion in 2006.

Japan Airlines (JAL) will link its loyalty program to those of China Eastern Airlines (CEA) and Mexicana (CMA) from February 1. (JAL) has similar agreements with Air France (AFA), Emirates (EAD), and its oneworld (ONW) partners.

February 2008: China Eastern Airlines (CEA) and Shanghai Airlines (SHA) expanded their codeshare arrangement with an eye toward solidifying their presence at their increasingly competitive Shanghai hub. The new accord, which goes into effect March 1, will see each carrier place its code on the other's flights to Harbin, Tianjin, Chengdu, Chongqing, and Shenzhen for a probationary period lasting until March 29. At that point, if the airlines agree, the cooperation will be extended to the end of the summer schedule. In addition, (CEA ) and (SHA) plan to codeshare on flights to Hong Kong and Macau this year. Last fall, they signed a codeshare deal covering flights to Huhhot, Nannin, Urumqi, and Xuzhou, that expires on March 29.

(SHA) Chairman, Zhou Chi noted recently that the carrier is looking at expanding its relationship with (CEA). Further codesharing, slot coordination and even the delivery of transfer passengers to each other's flights are under discussion. Currently, (CEA) holds a 36% share of the Shanghai market, while (SHA) has 18%.

China Eastern Airlines (CEA) and AVIC I unveiled terms of their regional airline joint venture, which will be called "Happy Air" and eventually will fly a fleet of 50 MA60s and 50 ARJ21s, although regulatory approval may be delayed. (CEA) Managing Director, Cao Jianxiong said that the new venture has yet to secure (CAAC) approval, although it submitted its plan to the regulator last August. "We are still in preparations, although there is no specific timetable on when we will get approval," Cao said. Industry analysts have suggested that "Happy" may have to wait for the government's go-ahead, as (CAAC) Aviation Minister, Li Jiaxiang reiterated last month that the regulator will not approve any new entrants before 2010, and will impose stricter conditions and procedures for new carriers in order to slow the rapid growth of Chinese commercial aviation. AVIC I will be "Happy"'s controlling shareholder with a 60% stake, and an investment of CNY600 million/$83.4 million, while (CEA) will put in CNY400 million to hold the remaining 40%. The carrier will be based in Xi'an, which industry insiders suggest is a sign that (CEA) hopes to recapture the West China market, it has yielded to Hainan Airlines (HNA) parent (HNA) Group since its 2005 decision to transfer its Xi'an-based fleet to Shanghai - Beijing service, in an effort to bolster its market share in Shanghai. China Securities Co aviation analyst, Li Lei noted there is little hope for the new venture to be profitable in the short term, as Chinese regional carriers are posting collective losses and relying on government subsidies to survive.

China Eastern Airlines (CEA) continues to press on in its effort to reach a deal with Singapore Airlines (SIA) and plans to cooperate with (SIA) parent, Temasek to fashion terms that will be acceptable to minority shareholders, who vetoed the sale of a 24% stake last month. (CEA) is preparing for the second minority shareholders conference even though it has yet to reach a revised deal with (SIA)/Temasek. The latter recently confirmed that it will work with (CEA) to win over minority shareholders. (SIA) repeatedly had said it would not raise its offer.

Meantime, the Shanghai-based carrier noted that it has made no progress with Air China (BEJ) parent, (CNAC), which presented its own offer for (CEA), that trumped (SIA)'s. Cathay Pacific Airways (CAT), a close ally of (BEJ), offered its support to the bid earlier this week. According to the "Financial Times," (CAT) CEO, Tony Tyler said his airline wanted to avoid any dilution of its 17.5% cross-shareholding with Air China (BEJ), which would occur "if they were to issue a load of shares in order to buy China Eastern (CEA) or a big chunk of (CEA)." He also said that better management would have little difficulty in turning (CEA) around.

Later, Cathay Pacific Airways (CAT) raised its stake in Air China (BEJ) from 17.5% to more than >18% through the February 6 purchase of 15 million "H" shares, according to a statement released by the Hong Kong Stock Exchange last week. (BEJ) Board Secretary, Huang Bin noted that Cathay (CAT) may want to avoid any dilution of its cross-shareholding in (BEJ), as the latter plans to circulate 400 million additional "A" shares to raise funds for the acquisition of 54 airplanes. That purchase is awaiting approval from the China Securities Regulatory Commission. Cathay (CAT)'s holding in (BEJ) cannot exceed >20% under the terms of the agreement between the carriers. Huang ruled out the possibility that (CAT)'s purchase is related to (BEJ)'s bid for China Eastern Airlines (CEA), but (CAT) CEO , Tony Tyler said that his airline will help fund (BEJ)'s effort to beat out Singapore Airlines (SIA) for a strategic stake in (CEA). Industry analysts speculated that the share purchase has more of a symbolic significance to (CAT), as it bought the stock on the market rather than directly from (BEJ), which did not benefit financially from the transaction. However, by raising its stake in (BEJ), (CAT) sent a signal that it will stand by its promise to help the carrier in its bid for (CEA).

Later again, China Eastern Airlines (CEA) formally rejected Air China (BEJ)'s bid to raise its stake in the Shanghai-based airline from 12% to just over 26% and said it will continue its search for a strategic investor with a continued preference for Singapore Airlines (SIA). (BEJ) parent, China National Aviation Holding Co (CNAC) submitted its bid to (CEA) last month, saying it intended to purchase 2.9 billion "H" shares for at least HK$5/$0.64 per share. (CNAC) also said it would cooperate with (CEA), especially in Shanghai, and that the carriers would launch a cargo (JV). But (CEA) accused (BEJ) of "lacking sincerity to make the cooperation happen." (CEA) Board Secretary, Luo Zhuping noted earlier that the companies had no contact and conducted no negotiations following (BEJ)'s bid submission. Ying Ming Law Firm, (CEA)'s legal adviser, said in a statement that (BEJ)'s bid was full of "uncertainties" and could lead to "antitrust investigations." (CEA) financial adviser, Shenyin & Wanguo Securities Co said the bid would not enable (CEA) to realize its goal of importing foreign know-how that could advance its management expertise and upgrade its operating level and profitability. To that end, (CEA) Independent Director, Zhou Ruijin revealed that the airline's board still prefers (SIA)'s bid, even though (SIA) CEO, Chew Choong Seng insists there will be no increase of its offer for a 24% stake. "Whether (SIA) will raise its offer or not, is not the most important thing," Zhou said, adding that (CEA) and (SIA) will begin new discussions on the stake sale soon.

Honeywell (SGC) signed a $33 million agreement to provide wheels and brakes for China Eastern Airlines (CEA)'s new 737NGs. Delivery of the 14 737-700s and six 737-800s began in 2007 and will continue through 2010.

China Eastern Airlines (CEA) signed an airplane purchase agreement with Boeing (TBC) for 30 737NGs in Shanghai, according to a statement released by the Shanghai Stock Exchange. Boeing (TBC) did not acknowledge the specifics of the order, saying only that (CEA) "announced the selection of additional" airplanes and that it will issue a statement "when the order process is completed." The deal is worth CNY13.98 billion/$1.94 billion at list prices, but (CEA) said it will pay less. Although the order will increase its 94.3% debt ratio, it noted that it will not affect daily cash flow or profitability. (CEA) will take delivery of the airplanes from July 2011 to November 2015.

China Eastern Airlines (CEA) took delivery of its third and final A300-600F at the EADS (EDS) EFW facility in Dresden. Conversion began last September.

March 2008: Japan Airlines (JAL) will codeshare on six additional routes operated by China Eastern Airlines (CEA): Shanghai to Kagoshima, Matsuyama, Niigata, and Okinawa, plus Qingdao to Fukuoka, and Nagoya.

AirMedia Group announced a 15-year Joint Venture (JV) with China Eastern Media Corp (CEMC) to obtain concession rights for the management of digital TV and other media resources across China Eastern Airlines (CEA)'s fleet. AirMedia will hold 49% while (CEMC) takes 51%.

Hainan Airlines (HNA) is in crisis following the appeal of six pilots (FC) to the Haikou arbitration committee to have their labor contracts terminated. The six resigned at the end of last year, bringing to 20 the number of (HNA) pilots (FC) who have walked out since 2006. The carrier has accepted none of the resignations and their disputes remain unresolved. Luo Zulin, one of the six who asked for arbitration, said the resignations were a result of "frequent overtime" and "long delays in getting their salary." (HNA) is insisting on the validity the contracts and denied Luo's accusation regarding pay. It said that if the committee ruled in the pilots (FC)'s favor, it would request several million yuan in compensation from them and the return of their licenses.

Air China (BEJ), China Eastern Airlines (CEA), Xiamen Airlines (XIA), and Xinhua Airlines (XIH) also have faced labor disputes with resigned pilots (FC), largely because Chinese carriers traditionally cover training expenses that can amount to millions of yuan per pilot (FC). There is considerable reluctance to allow them to transfer to competing carriers.

Under a Pilots Flow Management Proposal policy implemented by (CAAC) (CAC) in 2005, "the potential new employer" of these resigned pilots (FC) must attain the permission of the "old employer" before hiring, then pay compensation of CNY700,000 to CNY2.1 million/$98,300 to $294,800. According to (CAAC) (cac) statistics, China's commercial aviation fleet numbered 1,099 airplanes last September 30 and is expected to rise to 1,250 by 2010, leading to an estimated shortfall of -200 pilots (FC) annually.

In order to make up the severe shortage, carriers are beginning to follow the internationally common practice of recruiting privately trained pilots (FC). China Southern Airlines (GUN) started the trend last May, announcing its plans to recruit 100 such pilots (FC). Sichuan Airlines (SIC) followed three months later, hiring 50 private pilots (FC). Spring Airlines (CQH), East Star Airlines (ESR), and United Eagle Airlines (UEG) have disclosed their interest in recruiting such pilots (FC).

China Eastern Airlines (CEA) admitted that recent "disgraceful" incidents at its Yunnan Branch Co, where 21 flights departing the airport turned around and returned, were the result of a "human factor," most likely disgruntled pilots (FC). The flights, which were scheduled to leave Kunming for Dali, Lijiang, Banla, Mangshi, Simao, and Lincang, took off, but then returned, causing significant delays at the airport. (CEA) originally cited weather as an explanation, even though other carriers operating from the provincial capital completed their flights successfully. The airline said the incidents are under investigation and that it already has dismissed two senior officials from the Yunnan Branch Co. The (CAAC) (CAC) also is investigating, and both (CEA) and the regulator noted that "severe punishments" await the responsible parties once the events become clearer. (CEA) is not alone in suffering from pilot (FC) discontent. Last month, 11 pilots (FC) from East Star Airlines (ESR) took "collective leave" due to a labor dispute with the carrier while more than >40 Shanghai Airlines (SHA) pilots (FC) staged a sickout citing unfair treatment. In addition, 22 Hainan Airlines (HNA) pilots (FC) have resigned since 2006 without first securing permission from the company.

April 2008: China Eastern Airlines (CEA) enjoyed a turnaround in 2007, posting a net profit of +CNY269 million/+$38.4 million, that represented a reversal from the -CNY3.3 billion loss suffered the previous year. Operating revenue rose +13% to CNY42.52 billion, but (CEA) cited yuan appreciation as the main driver behind its improved performance, as a great deal of its debt was incurred in USA dollars, reducing its financial costs by -114% year-over-year. Operating expenses climbed +4% to CNY43.08 billion with jet fuel accounting for 40.9%, up from 29.2% in 2006.

The Shanghai-based carrier expanded its fleet to 223 airplanes from 203 and operated them on 6,275 weekly flights to 138 destinations. Traffic jumped +13.8% to 57.18 billion (RPK)s against a +10.29% increase in capacity to 77.71 billion (ASK)s. Load factor improved +2.2 points to 73.6% LF.

In 2008, (CEA) expects to benefit from the Beijing Olympics and its "continuing efforts to build Shanghai as an aviation hub." It is targeting 43 million passengers, a year-over-year increase of approximately +9.7%, and plans to introduce eight A320s, five A321s, one A330-200, three A330-300s, one 737-700, and one 737-800 this year.

Chinese mainland carriers are preparing for commercial flights across the Taiwan Strait to be permitted before year end, as the newly elected President of Taiwan, Ma Yingjiu, has promised. Ma will take office on May 20, and said he plans to allow the launch of weekend charter flights across the strait in July, followed by daily scheduled flights before 2009.

According to China International Capital Corp (CICC), mainland carriers see "big market potential" across the strait. The route is expected to contribute more than CNY5 billion/CNY714.2 million to the collective annual net profit of mainland airlines.

News reports out of Taiwan said that Air China (BEJ) plans to take the lead and establish a branch office on the island after Ma assumes the presidency. (BEJ) did not confirm, but did stated that "all mainland carriers are preparing for launching the cross-strait flights."

(CICC) noted that China Eastern Airlines (CEA) will benefit most from the flights as 35% of the Taiwanese population living on the Chinese mainline resides in Shanghai and the neighboring Jiangsu Province. China Southern Airlines (GUN) should reap more benefits than (BEJ) as well, according to (CICC), as it holds a 60% stake in Xiamen Airlines (XIA). A quarter of the mainland's Taiwanese population lives in the Pearl River Delta region and another 10% in nearby Fujian Province.

Air China (BEJ) holds a 17.5% stake in Cathay Pacific Airways (CAT) and a 51% stake in Air Macau (MCU). Those two carriers will be impacted by the liberalization, especially (CAT), which connects Taiwan to both the mainland and Europe through Hong Kong.

The (CAAC) (CAC) announced it will transfer rights to routes operated by China Eastern Airlines (CEA) in Yunnan Province to other carriers and impose a fine of CNY1.5 million in response to a March 31 - April 1 incident in which pilots (FC) returned outbound flights to Kunming. The (CAAC) (CAC)'s investigation concluded that the "disgraceful incident," involving 21 flights largely was the fault of disgruntled (CEA) pilots (FC). It said one of the 21 flights returned for "technical reasons" and two could be attributed to weather. But nine were found to have problems with Quick Access Recorder (QAR) equipment, making it difficult for investigators to pinpoint the reason for return, and nine others were attributable to "human factors." The (CAAC) (CAC) told the Shanghai-based carrier to upgrade its (QAR) equipment within three months. (CEA) has dismissed two senior officials from its Yunnan Branch Co and suspended 11 pilots (FC).

Later, China Eastern Airlines (CEA) said it will "take the lesson seriously" as it apologized for the March 31 to April 1 flight returns , that resulted in (CAAC) (CAC) sanctions. "We would like to express our deep regret for any negative impact and inconvenience caused by this incident," (CEA) said in a statement. It admitted that the incident, in which 21 flights returned to Kunming shortly after takeoff, exposed management problems at its Yunnan Branch Co (YUN) and promised to reach a settlement with inconvenienced passengers. An industry insider who refused to be named, revealed that the routes (CAAC) (CAC) decided to transfer to other carriers are from Kunming to Xishuangbanna and Lijiang - - the most profitable for (CEA)'s Yunnan Branch Co (YUN). It also imposed a CNY1.5 million/$214,500 fine. (CEA) has played a dominant role in the Yunnan market. For example, it operates 11 of the 16 daily flights to Lijiang, with five other carriers each operating one. It also operates 11 daily flights to Xishuangbanna. Industry analysts have pointed out that an increased presence on either route could help another airline establish a foothold in Yunnan, and break (CEA)'s quasi-monopoly position in the market.

China Eastern Airlines (CEA) reported net income of +CNY210.8 million/+$30.1 million, up +142.9% from the +CNY86.8 million earned in the year-ago quarter. Revenue rose +14.2% to CNY10.6 billion.
However, (CEA)'s bottom line will take a hit owing to the loss of two routes from Kunming, following work actions by pilots (FC). According to a company statement cited by "Reuters," it expects to lose -CNY405 million in revenue this year. The suspended flights accounted for 1.5% of its 2007 sales, "Reuters" said.

A321-211 (3471, B-6345), and A330-243 (916, B-6099), deliveries.

May 2008: China Eastern Airlines (CEA) plans to schedule a second shareholder conference to consider Singapore Airlines (SIA)'s bid for a strategic stake, following the August 24 conclusion of this summer's Olympic Games. (CEA) minority shareholders rejected (SIA)'s purchase of a 24% stake in January. "So far, there is no specific timetable for our second shareholders conference, as all Chinese domestic carriers currently are busy with preparing for the upcoming Beijing Olympic Games," (CEA) Board Secretary, Luo Zhuping said, while confirming the carrier will set a new vote after the Olympics.
Meanwhile, (CEA) rejected widespread reports that it is considering resubmitting (SIA)'s bid at its annual shareholders conference scheduled for June 30. (SIA) spokesperson Stephen Forshaw said the carriers remain in negotiations and confirmed that "no timetable has been fixed for the second shareholders conference."

A320-214 (3481, B-6346), delivery.

June 2008: Chinese airlines carried 15.4 million passengers in May, down -1.1% year-over-year, as the devastating Sichuan Province earthquake and surging oil prices impacted demand, according to the (CAAC) (CAC). Air China (BEJ) passenger boardings dropped -10.7% to 2.7 million, and load factor fell -4.5 points to 71.3% LF, which (BEJ) attributed to the earthquake and the dedication of some capacity to relief efforts. China Eastern Airlines (CEA) saw passenger numbers plunge -8% to 3 million. Operating expenses rose with fuel prices. (BEJ) noted that it purchased 244,000 tonnes of jet fuel in May with the average price per tonne rising +31% to CNY7,447/$1,081. Airlines collectively cut their schedules and raised fares, leading to a -2.8-point decline in overall load factor to 70.9% LF, and a -7.2% fall in average utilization to 9 hours. The total fleet numbered 1,181 airplanes at the end of May, an increase of +13 during the month.

China's airlines are moving to upgrade their fleets and cut international flights to mitigate the impact of skyrocketing fuel costs. China Eastern Airlines (CEA) also is considering cutting international flights. "These long-haul routes incur more fuel consumption and even [lead to a] loss," Board Secretary, Luo Zhuping said. "For example, currently we [lose] between -CNY1 Million/-$144,000 and -CNY2 million on one flight from Shanghai to New York." In addition to these measures, Chinese carriers have raised fuel surcharges on international routes, including a +33% increase by China Southern Airlines (GUN).

Airlines are concluding preparations for the launch of commercial charter flights across the Taiwan Strait, which are expected to start July 4, after an agreement between the Strait Exchange Foundation (Taipei) and the Association for Relations Across the Taiwan Strait (Beijing) was signed in Beijing. The deal allows for 18 direct flights across the strait each weekend (including Fridays). Taiwan will have access to Beijing, Shanghai, Guangzhou, Xiamen, and Nanjing, with future flights to Chengdu, Chongqing, Hangzhou, Dalian, Guilin, and Shenzhen under consideration. In turn, mainland Chinese carriers will be able to fly to Kaohsiung, Taipei, Taichung, Matsuyama, Penghu, Hualien, Kinmen, and Taitung. The agreement calls for negotiations on regularly scheduled direct flights to start "as soon as possible." Both parties agreed to discuss cargo charters in the next three months.

Passengers currently traveling between the Chinese mainland and Taiwan must transfer in Hong Kong, which typically adds 4 to 5 hoursd to the trip. The cross-strait flights also will help reduce operating costs and expand markets, which is important especially for struggling Taiwanese airlines suffering from fuel price hikes and fierce competition from high-speed rail.

Air China (BEJ) VP Zhang Lan said that the Beijing-based carrier will operate five airplanes to Taiwan. (BEJ) noted that "everything is ready now" and it planned to send a delegation to Taipei to conduct operational integration with China Airlines (CHI) and (EVA) Air.

China Eastern Airlines (CEA) plans to establish offices in Taipei and Kaohsiung. The Shanghai-based carrier sent a delegation led by Managing Director, Cao Jianxiong to Taiwan to discuss ground handling, Maintenance Repair & Overhaul (MRO), and other operational necessities.

China Southern Airlines (GUN) announced that it will sign a strategic agreement with (CHI) on June 23 to address both carriers' full-scale cooperation on cross-strait flights. (GUN) said it has concluded all its preparations.

The Chinese government raised the domestic fuel price more than +25% to CNY7,450/$1,082 per ton, which China Securities aviation analyst Li Lei reported would lead to a +CNY3.6 billion increase in annual expenses for China Southern Airlines (GUN) - - which operates the largest domestic network - - a +CNY1.8 billion rise for Air China (BEJ), +CNY2.2 billion for China Eastern Airlines (CEA), and +CNY700 million for Hainan Airlines (HNA). However, Li said the increase will not have a significant influence on second-quarter financial performance, as yuan appreciation will continue to drive profits. However, he said the second-half outlook is "less optimistic," owing to fuel costs and "declining" domestic demand. Airlines plan to follow their fuel surcharge increase on international routes with a domestic increase. (GUN) Chairman, Liu Shaoyong said that (GUN), (BEJ) and (CEA) applied for the right to boost domestic charges by +33.3% to CNY80 on routes shorter than 800 km and by +50% to CNY150 on longer flights.

July 2008: China Eastern Airlines (CEA) and Shanghai Airlines (SHA), both of which are based in China's largest city, denied reports that they are planning to merge. Several domestic press reports claimed that (CEA) and (SHA) already are in negotiations that were initiated by (CEA)'s controlling stakeholder (the State-owned Assets Supervision and Administration Commission (SASAC)) and the arm of the Shanghai Municipal Government that controls (SHA).

(CEA) said in a statement that it has never held any talks or negotiations with any other carriers save Singapore Airlines (SIA). Board Secretary, Luo Zhuping noted that so far, the company has not been asked by (SASAC) to enter merger discussions with (SHA). "Our current priority is to make preparations for the upcoming Olympic Games," he said.

(SHA) also released a statement claiming it was uninvolved in talks related to domestic consolidation. Board Secretary, Xu Junmin insisted that it is sticking to its long-term policy of "going its own way" and that "So far we don't have any plan of conducting a domestic merger or consolidation." A combination of the two airlines has been suggested before, but it was scuttled, when they could not reach agreement on corporate control. In addition, the fact that they are held by government organizations functioning at different levels, complicates matters.

(CEA) and (SHA) currently codeshare on flights from Shanghai to Harbin, Tianjin, Chengdu, Chongqing, & Shenzhen. They plan to expand that arrangement to Hong Kong and Macau, later this year.

China Eastern Airlines (CEA) remains confident in its plan to introduce Singapore Airlines (SIA) as its strategic investor, despite the fact that the exclusive stake sale agreement signed with (SIA) last September will be invalid after August 9. "As fuel prices keep surging, it is a difficult time for the airline industry, which makes it more necessary for carriers to conduct cooperation," (CEA) Board Secretary, Luo Zhuping said. "I think our cooperation with (SIA ) won't be hindered by the short-term difficulty caused by the rising fuel price. Now the only thing it needs is to be approved by our minority shareholders." Those shareholders rejected (SIA)'s purchase of a 24% stake in January. In May, (CEA) hinted it might schedule another shareholder vote following the conclusion of next month's Olympic Games. However, the Shanghai-based carrier did not discuss the stake sale at its annual shareholders conference June 30, except to note that "it will continue to push forward introducing a strategic investor." Industry analysts have said that if both (CEA) and (SIA) still wish to cooperate, they may sign a new agreement to extend the validity of their previous deal. So far, (SIA) has remained largely silent, saying it maintains contact with (CEA) senior management, but that discussion tends to center on future commercial cooperation.

The first weekend of charter flights across the Taiwan Strait concluded with 11 carriers having offered services, which many regard as an important step toward the opening of scheduled flights between the Chinese mainland and Taiwan. The 11 airlines are Air China (BEJ), China Southern Airlines (GUN), China Eastern Airlines (CEA), Hainan Airlines (HNA), Shanghai Airlines (SHA), Xiamen Airlines (XIA), China Airlines (CHI), Mandarin Airlines (MDN), TransAsia Airways (FSH), Uni Air (MAK), and (EVA) Air.

Taiwanese aviation authorities reported that six airports handled 72 flights transporting 12,000 passengers July 4 through 7. Taipei Taoyuan handled 32 flights, followed by Taipei Songshan with 26. Makung (six), Kaohsiung (four), Taichung (two), and Hualien (two) handled the remainder. Corresponding statistics for the mainland were unavailable, but the (CAAC) (CAC) noted that there will be 144 roundtrip flights across the strait this month. Mainland carriers expect the flights to provide a new growth point as they have experienced slowing increases in demand, especially in May, when passenger volume dipped 1.1% year-over-year, the first decrease since 2003.

(GUN) Chairman Liu Shaoyong, who was aboard the inaugural A330 flight to Taipei, called the current allowance "too little" and said that "daily regular direct flights [without having to overfly Hong Kong] should be realized as soon as possible."

China Airlines (CHI)'s former Chairman, Zhao Guoshuai, who resigned this week, agreed with Liu. He argued that "it is far from enough to operate only 72 charter flights every weekend." He expressed confidence that the flights "will exert a positive effect on China Airlines (CHI)" as the mainland is a new market for the Taipei-based carrier.

Meantime, (CEA) already has established an office in Taipei. According to Managing Director, Cao Jianxiong, the Shanghai-based carrier plans to recruit staff and cabin crew in Taiwan in the future while (CHI) and (EVA) act as agents for ticket sales.

Chinese carriers were dealt another blow to their bottom lines this month as authorities decided to raise the jet fuel price by +CNY720/+ $104.83 per ton.

Air China (BEJ) Board Secretary, Huang Bin confirmed that the increase took effect on July 1. It is the third time fuel prices have gone up this year following a +CNY210 per ton increase in the first quarter and a +CNY1,500 hike on June 20. China's quarterly adjustment of jet fuel prices traditionally takes import costs into consideration, which largely has shielded airlines from the soaring international oil prices over the past two years.

CITIC Securities Company aviation analyst, Ma Xiaoli said he expects China Southern Airlines (GUN) will be hit hardest by the domestic increase as it flies the largest number of domestic routes. According to his estimate, (GUN) faces a reduction of -CNY250 million in marginal profit for every +CNY100 increase in the cost of jet fuel, while China Eastern Airlines (CEA)'s bottom line would sink by -CNY220 million and Air China (BEJ)'s would drop by -CNY180 million.

To mitigate rising fuel expenses, Chinese carriers collectively approved an increase in domestic fuel surcharges beginning July 1. In addition, (BEJ), (GUN), Shanghai Airlines (SHA), and Hainan Airlines (HNA) will raise surcharges on international routes.

(CEA) Board Secretary, Luo Zhuping said that while higher surcharges are helpful, "The shrinking market demand is a bigger blow for airlines than the surging fuel price. If fuel surcharges keep on rising, it will impact the market demand to reduce further, which will lead to a drop in airfares."

Huang shares the same view. He said that (BEJ) will be cautious as "the company has to take market tolerance into account." In the meantime, Morgan Stanley analyst, Edward Xu wrote in a research note that Chinese carriers will report poor traffic data for June.

China Eastern Airlines (CEA) announced a CNY1.3 billion lease deal for three A340s with Industrial and Commercial Bank of China Financial Leasing Co. (CEA) plans to add 20 to 30 airplanes each year through 2013, increasing capacity by +12% annually. It currently operates 220 airplanes. (CEA) Managing Director, Cao Jianxiong said the leases will help with the carrier's cash flow problem.

August 2008: China Eastern Airlines (CEA) posted a net loss of -CNY212.5 million/-$31 million in the 2008 first half, narrowed from a -CNY305.6 million deficit/-$55 million in the prior-year period, on a +6.6% lift in operating revenue to CNY20.31 billion. Operating expenses jumped +10.52% to CNY21.94 billion, triggered by a +22.8% surge in fuel expenses to CNY8.57 billion. A currency exchange gain of +CNY1.95 billion, more than double that reported in the year-ago semester, helped offset "declining domestic market demand," and high fuel prices that still impacted the result significantly.

Passenger traffic grew +0.2% year-over-year to 26.56 billion (RPK)s on a +0.6% increase in capacity to 37.35 billion (ASK)s, producing a load factor of 71.1% LF, down -0.3 point. Passenger boardings decreased -1.2% to 18.1 million.

Looking ahead, (CEA) is planning a dramatic fleet expansion thanks to improving ties between China and Taiwan, that "will facilitate the development of economic, tourism and cultural exchange between the two sides" and other auspicious factors such as the tourism spike expected to follow the Olympics, and an easing of restrictions on visiting the USA.

The carrier plans to introduce three A330-300s, four A321s, seven A320s, one 737-700, and one 737-800 in the current semester. Next year it will take delivery of 10 A320s, seven 737-700s, three 737-800s, and four 787s, and it will introduce 14 A320s, four 737-700s and two 737-800s in 2010.

However, it warned that a domestic economic slowdown likely will continue to suppress demand in the near future, while "ever-increasing costs are also likely to pose a threat."

Continental Airlines (CAL) began selling seats for its new Newark - Shanghai 777-200 service that begins in March 2009. (CAL) has
served Hong Kong from Newark since 2001 and Beijing from Newark since 2005. China Eastern (CEA) is the only other airline flying between New York and Shanghai, but it only does so three times per week (with A340-600s). That’s remarkable considering each city is the respective financial capital of the two most important economies in the world.

Will start serving Copenhagen, via Frankfurt in the Fall.

The China Eastern Airlines (CEA) board approved plans to launch a business aviation service company, that will provide ground handling and maintenance for private and charter flights, among other services. The new venture will be a wholly owned subsidiary and will require an investment of CNY50 million/$7.3 million. The Shanghai-based carrier noted that it has no plans to purchase any business airplanes for the time being, but it did not rule out the possibility of reconfiguring some of its existing airplanes. It is in negotiations with an American emergency lift company that is expected to place its four business jets in Shanghai early next year. (CEA) launched a business jet service department in 1995, that has seized a 95% market share in Shanghai.

China Eastern Airlines (CEA) continued to hope that it could secure Singapore Airlines (SIA) as a strategic investor, even though its stake sale deal expired officially this month. (CEA) noted in a statement that the deal, reached last September, was "automatically terminated owing to the preconditions for implementing the agreement had not been satisfied by the deadline." Board Secretary, Luo Zhuping said that the sale's revival depends on acceptance by the carrier's shareholders and rejected local speculation that (SIA) has lost interest in a partnership. "Whether to renew the agreement or not, and when to renew the agreement, is only a technical issue," Luo said. Meantime, (SIA) said that it would continue to seek other ways to establish a foothold in China and that it is optimistic about the future of that country's commercial aviation industry. An (SIA) spokesperson recently told media that the carrier has not given up on the (CEA) deal, even though it was rejected by shareholders in January. The spokesperson, Stephen Forshaw, claimed (SIA)'s cooperation with (CEA) would focus on the commercial aspect and said it would not rule out an investment as long as the purchase price of HK$3.80/$0.49 per share was accepted by (CEA) shareholders. Air China (BEJ) Chairman, Kong Dong noted recently that the Beijing-based carrier remains interested in increasing its stake in (CEA). (BEJ) parent CNAC is (CEA)'s largest circulation shareholder at 12.07%. (CEA)'s share price just closed at HK$1.97.

Airlines on both sides of the Taiwan Strait want to launch weekday services, as weekend charter flights linking the Chinese mainland and Taiwan reach the one-month mark. "Judging from the one-month results, the weekend charter flights are indeed widely welcomed by people on both sides of the strait," (EVA) Air Vice General Manager, Nieh Kuo-wei told Chinese state news agency "Xinhua." Cross-strait charter flights kicked off on July 4 under an agreement signed by the China-based Association for Relations Across the Taiwan Strait and the Taiwan-based Straits Exchange Foundation. According to "Xinhua," there have been 144 roundtrip flights carrying some 53,000 passengers over the last four weekends. The average load factor is reported to be 87% LF.

Airlines on both sides of the Taiwan Strait carried 95,765 passengers across the strait with an average load factor of 87% LF over the seven weeks ended August 18, according to Taiwanese authorities. Taiwan Civil Aviation Chief, Li Long Wen told media that cross-strait routes are among the few profitable services operated by Taiwanese carriers. The Shanghai route reported the highest load factor at 92.3% LF, followed by 85.4% LF for Xiamen, 82.8% LF for Guangzhou, 78.7% LF for Beijing, and 77.3% LF for Nanjing. Owing to the strong traffic to Shanghai, China Eastern Airlines (CEA), Shanghai Airlines (SHA), China Airlines (CHI), and (EVA) Air have raised the business class (C) fare on the route to CNY6,500 from CNY5,500.

737-79P (36271, B-5245), A320-214 (3611, B-6371), A321-211 (3612, B-6367), and A330-343X (942, B-6507) deliveries.

September 2008: Air China (BEJ) and China Southern Airlines (GUN) both endured double-digit year-over-year traffic declines in August, and while some of the drop can be attributed to heightened security related to the Beijing Olympics, slowing domestic economic growth likely portends a poor full-year 2008 traffic and financial performance for Chinese carriers. (BEJ)'s overall passenger traffic plummeted -16.3% year-over-year in August to 5.26 billion (RPK)s on a capacity decrease of -0.9% to 7.4 billion (ASK)s. Its load factor of 71.1% LF was down by -13 points. Passenger boardings dropped -16.6% to 2.77 million, while cargo volume fell -4.1%. Similarly, China Southern (GUN) suffered a sharp decline in August, as passenger boardings plunged -16.2% to 4.99 million, with load factor at 71.2% LF, down -8.7 points from last year and a new low for 2008.

Spring Airlines (CQH) Chairman, Wang Zhenghua said he is optimistic that domestic demand will rebound in September and October, a view that is not widely shared. But even he commented that this month and next provide the only opportunity for carriers to improve their domestic traffic performance this year.

China Eastern Airlines (CEA) has not yet released its traffic statistics for August, but in contrast to Wang, (CEA) Board Secretary Luo Zhuping expressed pessimism regarding the remainder of 2008. "The biggest problem we are facing now is the continuous decline of domestic demand. The winter is coming and uncertain economic prospects make it difficult for domestic demand to rebound in the short term."

Shenyin Wanguo Securities, Aviation Analyst, Li Shurong agreed with Luo, pointing out that "high domestic fuel prices show little possibility [of falling] for the time being and the slowdown of yuan appreciation, and continuous decline of domestic demand are expected to exert a negative impact on Chinese carriers." China International Capital Corp predicted that "excepting Air China (BEJ), most [of China's] carriers [including] China Southern (GUN), China Eastern (CEA), Hainan Airlines (HNA), and Shanghai Airlines (SHA) will post a full-year net loss in 2008."

(CEA) second quarter (Q2) financial results = net loss of -$122 million and an operating loss of -$259 million.

China Eastern Airlines (CEA) and Hainan Airlines (HNA) experienced a sharp traffic decline in August, another sign of China's sagging domestic passenger market. (CEA) posted a -23.1% year-over-year drop to 2.92 million passenger boardings with a load factor of 69.4% LF, down -8.6 points. (HNA) transported 1.2 million passengers, a -5.2% decrease, as load factor fell -7.8 points to 74.3% LF. China Galaxy Securities Co aviation analyst, Mao Ang projected that Chinese carriers will post an "unpromising" financial performance in the third quarter owing to rising fuel prices, "falling demand," and "the slowdown of yuan appreciation."

October 2008: China Eastern Airlines (CEA) suffered a -CNY2.33 billion net loss in the third quarter, reversed from a +CNY976.5 million profit in the year-ago period, on a -13.7% decrease in operating revenue to CNY10.81 billion. Board Secretary, Luo Zhuping attributed the result to the "continuous decline of domestic market demand, caused by the worsening economic environment." He pointed out that the third quarter traditionally is the "peak" period for both traffic and profit, but said the negative growth the Chinese industry has been experiencing since May, means full-year results will be "ugly," with a loss expected. Furthermore, "Domestic traffic demand will not recover anytime soon." The nine-month loss reached -CNY2.3 billion.

China Eastern Airlines (CEA) received (CAAC) (CAC) permission to resume operating from Kunming to Dali and Xishuangbann, six months after its suspension, resulting from a highly publicized incident in which disgruntled pilots (FC) returned outbound flights. The regulator also restored (CEA)'s frequencies on six other routes from Kunming, owing to its "impressive contribution to Sichuan earthquake relief and rescue efforts." The (CAAC) (CAC) fined the airline CNY1.5 million/$218,800, in addition to the aforementioned sanctions, which caused (CEA)'s market share at Yunnan to fall from 47.8% to 39.5% by the end of June. The airline said the route suspension would result in -CNY405 million in lost revenue. Ironically, restoring service on the two routes may not help, as they are targeted mainly at the tourism market, which has suffered continuous declines since the May earthquake, China Securities Company noted. Lucky Air (LKY) and West Air recently decided to quit flying from Kunming to Dali and Xishuangbanna, respectively.

November 2008: China Southern Airlines (GUN) and China Eastern Airlines (CEA) have started to ground airplanes and cut flights as there is little sign of a recovery in the slumping domestic market.
According to the (CAAC), Chinese carriers again suffered from falling demand last month, despite the "golden week" travel period surrounding October 1 National Day. Passenger load factor fell -2.2 points year-over-year to 76.9% LF, while daily airplane utilization was down -2.1% to 9.2 hours. (GUN) President, Liu Shaoyong said the company has grounded 12 MD-82s and reconfigured both its domestic and international schedules. He predicted that the "domestic market will recover in the second half of next year, while the international market will turn for the better in 2010."

(CEA) President, Li Fenghua agreed with Liu and blamed the global economic downturn for the domestic decline. "Nowadays almost all the big carriers are cutting flights, especially international flights," Li noted. Earlier, (CEA) Board Secretary, Luo Zhuping told foreign media that the carrier has cut some "unprofitable" routes and grounded about 20 airplanes in secondary domestic markets.

The difficulty facing Chinese carriers again has raised the possibility of consolidation. (CAAC) Minister, Li Jiaxiang said the regulator would support any move that would benefit the airline industry, claiming that it is necessary to "huddle together to get warmth against the cold." But Liu pointed out that China's "big three" will continue to limit their cooperation to business areas that do not involve stakes.

Hit hard by the continuous decline of the domestic market, China Southern Airlines (GUN) parent, China Southern Group, and China Eastern Airlines (CEA) parent, China Eastern Group are expecting their requests for government aid to be approved. An industry source said that Beijing is expected to inject +CNY3 billion/+$439 million into each airline, allowing China Eastern (CEA) to reduce its net debt ratio to 94.7% from 98%, and China Southern (GUN) to reduce its net debt ratio to 80.5% from 83%.

(GUN) Chairman, Liu Shaoyong had made numerous appeals for up to CNY40 billion in financial aid from Beijing. The carrier reported a -CNY810 million third-quarter loss. (CEA) posted a -CNY2.33 billion loss in the quarter.

Meantime, Air China (BEJ) parent, (CNAC) also reportedly is seeking government capital. (BEJ) reported a -CNY1.9 billion loss in the third quarter.

The dream of a direct routing across the Taiwan Strait is closer to reality following the signing of an agreement between Beijing's Association for Relations Across the Taiwan Strait and Taipei's Strait Exchange Foundation. The deal, which will take effect in 40 days, will allow carriers to bypass Hong Kong airspace and reduce flight time, operating costs, fuel burn, and emissions.
Taiwanese carriers will have access to 16 cities in mainland China in addition to Beijing, Shanghai, Guangzhou, Xiamen, and Nanjing. They are Chengdu, Chongqing, Hangzhou, Dalian, Guilin, Shenzhen, Wuhan, Fuzhou, Qingdao, Changsha, Haikou, Kunming, Xi'an, Shenyang, Tianjin, and Zhengzhou. The number of permitted weekly roundtrip flights will rise from the current 36 to 108.

Mainland carriers welcomed the move. The agreement allows 60 return cargo flights per month operated by 2 - 3 mainland and 2 - 3 Taiwanese airlines. Mainland carriers will have access to Taipei and Kaohsiung, while their counterparts will fly to Shanghai and Guangzhou.

Nine mainland Chinese carriers were selected to operate weekday flights across the Taiwan Strait and are expected to launch service on December 15, according to the (CAAC) (CAC). In addition to Air China (BEJ), China Eastern Airlines (CEA), China Southern Airlines (GUN), Hainan Airlines (HNA), Xiamen Airlines (XIA), and Shanghai Airlines (SHA), which all already operate weekend cross-strait flights, Sichuan Airlines (SIC), Shandong Airlines (SHG) and Shenzhen Airlines (SHZ) were tapped to operate the weekday flights.

Mainland carriers are permitted to operate 54 weekday flights per week. According to the (CAAC) (CAC), (BEJ) will operate 10 while 12 have been allotted to (CEA), 10 to (GUN), five to (HNA), six to Xiamen (XIA), and five to (SHA). Sichuan (SIC), Shandong (SHG), and Shenzhen (SHZ) each have been granted permission to operate two weekly weekday flights.

Regarding cross-strait cargo flights, (CEA) subsidiary, China Cargo Airlines (CKK), China Southern Airlines (GUN), and Air China Cargo (CAO) have been selected. China Cargo Airlines (CKK) and (GUN) each are expected to operate 10 monthly flights from Shanghai and Guangzhou respectively, while Air China Cargo (CAO) is expected to operate five monthly flights from both Shanghai and Guangzhou.

Honeywell (SGC) will supply China Eastern Airlines (CEA) with its 131-9A (APU) for 30 forthcoming A320s. The deal includes a 10-year maintenance agreement and covers additional A320 deliveries over the next three years.

December 2008: China Eastern Airlines (CEA) appealed to China's Ministry of Finance for a reduction in its tax liabilities as it reported a -CNY1.83 billion/-$265.5 million fuel hedging loss as of October 31. (CEA) CFO, Luo Weide said the carrier's tax burden includes a business tax, import tax, value-added tax, and civil aviation fees. It paid approximately CNY20.6 billion to the Beijing government from 2002 through the first half of this year. It also said that its application for a capital injection, similar to that granted to China Southern Airlines (GUN), is underway. Trading in (CEA) shares in Hong Kong, Shanghai, and New York remains suspended.

(CEA), whose stock has been suspended from trading since November 27, said that it will receive a CNY3 billion/$435.8 million cash injection from the government, according to press reports. (GUN) received a similar payout late last month. (CEA) will raise CNY2.35 billion through the issue of 652 million "A" shares to its state-owned parent company and an additional CNY652 million through the issue of "H" shares to its China Eastern International Holding subsidiary, according to a statement cited by the "Shanghai Daily." The parent company's stake in the airline will rise to 68.2% from 59.7%. "The raised funds will reduce (CEA)'s asset-liability ratio, increase the size of net assets, enhance the carrier's antirisk ability and ease its pressure from operational capital," the airline said. It reportedly has debts of approximately CNY70 billion.

As domestic demand continues to decline, overcapacity has become a problem. (CEA) Board Secretary, Luo Zhuping said the airline expects to take delivery of more than >40 airplanes by 2010, which will leave it facing "a tougher situation." He said Chinese airlines can continue to expect negative growth through the first half of 2009. For this reason, (CEA) has grounded around 20 airplanes and China Southern (GUN) has parked approximately 12. Air China (BEJ) plans to phase out or sell eight airplanes. But Luo said he is optimistic the industry will recover, when the economic situation improves. A key driver will be flights to secondary cities, and Beijing is expected to announce a significant investment in secondary airport expansion in the coming days.

Truly direct scheduled flights across the Taiwan Strait finally began when (CEA) inaugurated its Shanghai - Taipei service. Cross-strait flights have occurred intermittently and infrequently since 2003, typically during peak leisure travel periods such as the Chinese New Year. Weekend cross-strait flights began in July, but this latest flight was the first that was not required to fly through Hong Kong airspace rather than directly across the Taiwan Strait. (CAAC) (CAC) Minister, Li Jiaxiang noted a direct routing can save approximately 1 hour 20 minutes and some 8 tonnes of fuel on a Beijing/Shanghai - Taipei flight. Last month, the (CAAC) selected (CEA), (BEJ), (GUN), (HNA), Xiamen Airlines (XIA), Shanghai Airlines (SHA), Sichuan Airlines (SIC), Shandong Airlines (SHG), and Shenzhen Airlines (SHZ) to operate 54 weekday flights between 16 mainland cities and Taiwan.

(CEA) is scheduled to conduct 10 cross-strait flights per week (four Shanghai - Taipei frequencies and a combined six from Beijing, Tianjin, Hangzhou, Chengdu, and Chongqing). (GUN) also will operate 10 - - four each from Guangzhou and Shanghai, and two from Shenzhen. This first flight operated the first direct cargo flight from Guangzhou.

(CEA) will fly 12-times-weekly - - seven from Shanghai, two from Nanjing, and one each from Xi'an, Kunming, and Wuhan. (HNA), (XIA), (SIC), and (SHZ) will operate from Haikou, Fuzhou, Chengdu, and Shenzhen respectively.

China Southern Airlines (GUN) Group Chairman, Liu Shaoyong was appointed as the new Chairman of (CEA) parent China Eastern Air Holding Co, appearing to pave the way for the merger of (CEA) and Shanghai Airlines (SHA). In an effort to boost Shanghai's status as an international aviation hub, the State-owned Assets Supervision and Administration Commission of the State Council, (CEA)'s controlling shareholder, reached agreement with the State-owned Assets Supervision and Administration Commission of the Shanghai Municipal Government, (SHA)'s controlling shareholder, on the merger of the two Shanghai-based airlines, an industry insider said. Key details on how the combination will move forward remain undecided, but Liu is expected to be Chairman of the merged carrier. The government's plan to revive (CEA) includes a change in leadership in advance of any consolidation. The (CAAC) (CAC) supports domestic consolidation. Among the measures announced as part of its effort to bolster the flagging Chinese airline industry was its promise to "support mergers and consolidation" when such combinations would improve management levels and enhance international competitiveness. Beijing also is considering injecting CNY28 billion/$4.08 billion in both (GUN) and (CEA) in addition to the CNY3 billion it already has granted each carrier.

Meantime, SASAC named Air China (BEJ) parent, China National Aviation Holding Co (CNAC) VP, Ma Xulun as (CEA)'s new CEO. He succeeds Cao Jianxiong, who is expected to be (CNAC)'s new VP. (GUN) Party Secretary, Li Wenxin will be responsible for the Guangzhou-based carrier until a new Chairman is appointed.

The Chinese government cut the domestic fuel price -32% to CNY5,050/$736.49 per ton from CNY7,450, marking the sixth time this year, Beijing has adjusted the domestic price. Because of the way in which fuel prices are managed by the government, Chinese airlines have not reaped the immediate benefit of the collapse in oil prices. Fuel expense currently accounts for 40% to 50% of Chinese carriers' total operating expenses. China Southern Airlines (GUN) is expected to benefit most from the new cut as it has the largest number of domestic routes, comprising 80% of its total. According to Shenyin Wanguo Securities Aviation Analyst, Li Shurong (GUN) will save about -CNY5.8 billion in fuel costs annually. China Eastern Airlines (CEA) is expected to save -CNY3 billion, while Air China (BEJ) can save -CNY3.7 billion, as its domestic routes account for only 50% of its total. The (CAAC) (CAC) also cut fuel surcharges on domestic routes by a large margin.

A320-214 (3716, B-6399), delivery.

January 2009: The Chinese government injected an additional CNY4 billion/$584.5 million into China Eastern Airlines (CEA) on top of the CNY3 billion provided last month, in an effort to help (CEA) work through its financial difficulties. (CEA) plans to sell nonpublic shares to its parent China Eastern Air Holding Company in order to reach the CNY7 billion total. The holding company's stake in (CEA) will rise to 74.6% from 59.7%. (CEA) expects to reduce its debt ratio by 8.4 points to 90.1% as a result of the aid, which it said will "exert an important influence for (CEA) to get out of difficulties and realize prosperity again." Its financial situation deteriorated as the global financial crisis hastened a continuing decline of domestic demand. It reported a -$420,000 loss on its fuel hedge contract in November, which followed a CNY1.83 billion writedown the previous month.

It has become a growing trend for Chinese carriers to seek - - and receive - - government aid. China Southern Airlines (GUN) received CNY3 billion last month, while (HNA) Group and Shanghai Airlines (SHA) have asked for help from local authorities. Tianjin-based Grand China Express Airlines is expected to receive CNY200 million from the Tianjin municipal government.

But some local analysts argue that government aid will not solve all the problems. Newly appointed (CEA) Chairman, Liu Shaoyong shares that view, saying, "No matter how much government aid we can get, CNY3 billion or even more can't solve the fundamental problem. So I think the Chinese airline industry needs a big 'surgery' in the future. But how to perform this 'surgery' has to be decided by Beijing."

Air China (BEJ) parent China National Aviation Holding Company (CNAC) intends to take over struggling Wuhan-based, East Star Airlines (ESR) in an effort to expand its foothold in central China. (BEJ) said in a statement that (CNAC) "has had an initial discussion with (ESR) about purchasing its shares," without revealing how much (CNAC) was planning to buy. There has been no formal agreement.

Industry analysts noted that (BEJ) would enhance its position in the region through an acquisition of (ESR), as (BEJ) does not operate a base at Wuhan, the capital of Hubei Province. China Southern Airlines (GUN) and China Eastern Airlines (CEA) do operate bases there, with (GUN) grabbing 40% of the Wuhan market and (CEA) plus (ESR) holding more than >20% and >10%, respectively. (BEJ) accounts for only 5%.

(BEJ) Chairman, Kong Dong had said that the carrier would "change its previous practice of just focusing on large domestic cities in 2009 and will give some attention to secondary cities," owing to the tough external operating environment. (ESR) currently leases nine A320s and A319s and operates to 16 domestic destinations from Wuhan. (ESR) is struggling to survive as it has been unable to pay off significant debt owed to certain airports.

737-89P (36272, B-5199), delivery.

February 2009: China Eastern Airlines (CEA) is targeting a breakeven 2010 and a profitable 2011, newly appointed Chiarman, Liu Shaoyong said, adding that (CEA) is open to consolidation and a potential merger with Shanghai Airlines (SHA). Liu told reporters, "I don't think it's a bad thing that there is a wide expectation that (CEA) will merge with (SHA)," noting that the airlines' cooperation has not extended to negotiations regarding a stake sale or swap.

(CEA), which was granted a +CNY7 billion/+$1.02 billion capital injection by the Chinese government, expects to report a significant 2008 loss but intends to narrow that deficit this year. Meanwhile, China's Assets Supervision and Administration Commission of the State Council, (CEA)'s controlling stakeholder, reportedly has begun discussions with its counterpart in the Shanghai municipal government about a merger. "No matter which airlines are going to merge and how they are going to merge, our current top priority is to stand up so that we can be in control of the whole situation," Liu emphasized. He admitted that 2009 will be "extremely difficult" but claimed a turnaround should begin in 2010.

To that end, (CEA) has targeted a bottom-line boost of CNY3.15 billion through the sale of its stakes in "Joy Air" and its Yunnan branch company, as well as abandonment of some two dozen other projects. It also is canceling or delaying airplane deliveries and cutting certain international routes, including its Johannesburg service, which loses -CNY100 million per year, and a Copenhagen flight that lost -CNY10 million in just the first month. "We must control the impulse of opening more international routes," Managing Director, Ma Xulun said. Instead, (CEA) will focus on its Shanghai hub and building regional hubs at Xi'an and Kunming.

Later, (CEA) shareholders approved a CNY7 billion capital injection. Industry insiders have noted that the government money paves the way for a merger between (CEA) and (SHA). The airlines' respective financial problems have delayed a tie-up. (CEA) Chairman, Liu Shaoyong told reporters that it has agreed to sell a 35% stake in regional "Joy Air" to majority-owner AVIC. It will continue to hold 5% of the regional.

Naverus said it will develop Required Navigation Performance (RNP) procedures for China Eastern Airlines (CEA) for operating into Lhasa. Naverus also will assist (CEA) in obtaining the necessary regulatory approval to fly the procedures with both 737NG and A319 airplanes.

Travelport Global Distribution System (GDS) reached content distribution agreements with Xiamen Airlines (XIA), China Southern Airlines (GUN), and China Eastern Airlines (CEA) to provide Galileo, Apollo and Worldspan subscribers with access to international fares and inventory via its (GDS) technology.

Undeterred by the operating environment that has resulted in steep losses at Chinese carriers, Shenzhen Airlines (SHZ) plans to go ahead with the launch of its Kunming Airlines (KMG) subsidiary on February 15 as it searches for a foothold in the Yunnan market. The new venture has registered capital of CNY80 million/$11.7 million, with Shenzhen holding an 80% stake. Private investor, Wang Qingmin will take the remaining 20% with a CNY16 million investment.

(KMG)'s inaugural flight will be a Kunming - Changsha - Harbin routing. It initially will operate two 737-700s and one 737-800 provided by (SHZ), which also will furnish cabin crew (FC)/(CA) and Maintenance, Repair & Overhaul (MRO) support.

(SHZ) has ambitious plans for Kunming. (KMG) will operate 10 airplanes by year end on 10 domestic routes, 30 to 40 airplanes by the end of next year, 80 to 100 by 2015, and 150 to 200 by 2022.

Located in southwestern China, Yunnan is home to numerous resorts and is a popular tourist destination. (KMG) will face competition. China Eastern Airlines (CEA), which boasts the largest share (39.5%) of the Yunnan market, plans to turn its provincial branch company into a separate subsidiary by selling shares to the Yunnan government. Hainan Airlines (HNA) signed an agreement with the provincial government last June to launch Yunnan Airlines, which will be comprised mainly of the assets of Lucky Air (LKY), which accounts for a 9.6% share of the market.

A320-232 (3793, B-6558), delivery.

March 2009: China Eastern Airlines (CEA) is looking to drive load factors by making it easier and more economical for potential passengers to connect. (CEA) said its point-to-point network has made it difficult to attract more passengers in a declining market, so it has identified some 900 "transit routes" featuring multiple segments between markets that may have growth potential. Through schedule optimization, shorter connecting times and fares designed to entice passengers who might need two flights to get to their destination, it hopes to boost passenger traffic without increasing capacity.

Managing Director, Ma Xulun has noted that (CEA) will focus on its Shanghai hub and on building regional hubs at Xi'an and Kunming this year. Those three, plus Wuhan, Qingdao and Hangzhou will be the first transit cities. It will offer more favorable fares on flights via those airports that will be lower than those on direct routes operated by competitors. It plans to add more transit routes by connecting domestic and international routes in the coming days. Its 250 airplanes operate on 293 direct domestic routes and more than >80 internationally.

(CEA) is considering joining a global airline alliance in an effort to improve its financial performance, according to Chairman Liu Shaoyong, who told reporters in Beijing that the Shanghai-based carrier is scheduled to evaluate the three global alliances in June in order to find the most "suitable" fit. Liu, who previously was Chairman of China Southern Airlines (GUN), led that Guangzhou-based carrier into SkyTeam (STM) in 2007 and suggested at the time that (CEA) join the alliance. He noted that (GUN)'s Beijing - Amsterdam service suffered an annual net loss of more than >-CNY100 million/-$14.6 million before it joined (STM) (which includes (KLM)), after which the route's performance improved and it even became profitable during peak traffic periods. "The process of joining a global airline alliance is also a training process, which has benefited (GUN) a lot," he added.

(CEA) is looking to work with airlines around the world as well. "We welcome various kinds of partners, no matter whether they want to conduct strategic cooperation with us, make financial investment in us or manage our brand," Liu said. As the global financial crisis deepens, he expects Chinese carriers to face a "more difficult situation." He called on Beijing to increase its financial commitment to airlines. (CEA) and (GUN) already have received capital injections from the government totaling CNY7 billion and CNY3 billion, respectively.

Liu also pushed Beijing to accelerate consolidation and mergers across the domestic airline industry in order to improve global competitiveness. It is widely expected that (CEA) will merge with Shanghai Airlines (SHA) this year.

(CEA) is looking to reduce the number of new airplanes due this year from 29 to 14 to combat overcapacity problems brought about by the slowdown in traffic demand. (CEA) has already grounded 20 airplanes and is implementing a series of measures to reduce costs, including selling unprofitable assets. It will sell over 30% of its "Joy Air" venture to partner China Aviation Industry Corporation. Other measures will include reducing management-level salaries and encouraging staff to take unpaid leave.

April 2009: China Eastern Airlines (CEA) reported a -CNY13.93 billion/-$2.04 billion loss in 2008, according to domestic accounting standards, a reversal from a +CNY604 million profit net profit reported in 2007. Its loss under international accounting standards reached -CNY15.26 billion. Operating revenue fell -4% year-over-year to CNY41.84 billion (domestic accounting standards) while expenses climbed +14% to CNY43.08 billion, an increase attributable mainly to a +22.3% jump in fuel costs to CNY18.49 billion.

(CEA) blamed "the rapid decline of domestic demand" caused by various natural disasters, the global financial crisis and "drastic increases in capacity" throughout China for the result. It said the global recession also had a "negative impact" across its international network.

(CEA) is committed to engineering a turnaround through cost control, targeted expansion and SkyTeam (STM) alliance membership despite the threat of insolvency. Chairman, Liu Shaoyong said earlier this year that (CEA) plans to narrow its loss significantly in 2009, break even in 2010 and turn a profit in 2011. But Managing Director, Ma Xulun said that (CEA)'s negative equity property has exceeded CNY10 billion and that in order to achieve its earnings target it was forced to cut operating costs by more than >-15% in the first quarter. "But cost control has its limits, so the only way to make a turnaround is to further explore the market," he said. "Currently there is a strong rebound in the domestic market, as passenger boardings jumped +18.7% on domestic routes in the first quarter, while the figure was reduced by -18.8% on international routes. For this reason, we have switched some capacity from international routes to domestic routes accordingly," Ma elaborated.

(CEA) posted a +CNY40.1 million/+$5.9 million net profit in the first quarter, down -81% from the +CNY210.8 million earned in the year-ago period, on a -15.6% decrease in operating revenue to CNY8.95 billion.
Ex-special items, (CEA) had a +$2 million net profit (-$189 million).

Operating expenses dropped -12.8% to CNY 8.42 billion. (CEA) credited CNY422 million in earnings on its fuel hedges and the return of CNY500 million in aviation construction funds for the result.

In order to shore up its finances during the downturn, (CEA) received a CNY20 billion credit line from the Bank of China, which boosted its total credit line from domestic banks to CNY56 billion.

Meantime, (CEA) plans to enhance its position in Shanghai. Ma said it holds just 32% of its home market, which is less than its "big three"' rivals command at their bases. China Southern Airlines (GUN)'s market share in Guangzhou exceeds 50% and Air China (BEJ) holds 45% of the Beijing (PEK) market. But (CEA) intends to compete in those cities as well. It will start in the capital with the addition of four A330s to its (PEK) operation, to be followed by more A320s/A321s. It currently has a 12.8% share of that market.

It also intends to join (GUN) in the SkyTeam (STM) alliance, Liu revealed earlier. Ma said (CEA)'s lack of alliance membership "takes part of the blame for our operating loss, as we always transport passengers from point-to-point instead of carrying them through a hub-and-spoke system. It not only can boost our revenue to join an international airline alliance but more importantly, it can help us enhance our management level, which can benefit us most"

Airlines on either side of the Taiwan Strait are expected to reap further benefits following the recent signing of an expanded agreement by the Taipei-based Strait Exchange Foundation and the Beijing-based Association for Relations Across the Taiwan Strait that will more than double the number of permitted flights. Direct cross-strait flights will be increased from the current 108 per week to 270. The increase likely will take affect in July. In addition, Taiwanese carriers will be granted access to six new cities - - Hefei, Harbin, Nanchang, Guiyang, Ningbo and Jinan - - bringing to 27 the number of mainland gateways available. Airlines flying to Taiwan from Guangzhou, Shenzhen and Xiamen no longer will be required to bypass Hong Kong, while an additional route to the north has been created to alleviate crowding aboard the increasingly popular services.

The frequency increase is not as high as was anticipated in February but still is significant. Cross-strait routes enjoy load factors of more than >80%, higher than nearly all domestic mainland and international routes despite the global economic and industry downturn. "The cross-strait routes are 'golden' routes, as they are the most profitable," (EVA) Air mainland spokesperson, Ke Jincheng said. "The supplementary agreement has encouraged us a lot and is very positive news for our carriers hit hard by the global financial crisis." (EVA)'s first quarter was its first three-month period in the black since the third quarter of 2007.

Industry analysts pointed out that China Eastern Airlines (CEA) should benefit most from the expanded agreement, as the Shanghai-based carrier has bases in Hefei, Nanchang, Ningbo and Jinan, while China Southern Airlines (GUN) has bases in Harbin and Guiyang, and Air China (BEJ) has a base in Jinan. (CEA) Board Secretary, Luo Zhuping said the carrier's cross-strait routes have operated at 80% to 90% capacity and that it plans to fly to Taiwan from the new cities.

On the cargo front, the new agreement permits belly freight for the first time and boosts cargo flights from the current 60 per month to 112.

It had a fleet of 240 airplanes as of December 31. It took delivery of 19 airplanes in 2008: One A319, seven A320s, five A321s, one A330-200, three A330-300s, one 737-700 and one 737-800 - - as well as one 737-300 and one 747F on lease. It reported a -5.9% drop in (RPK)s to 53.8 billion and a -4.9% reduction in passenger boardings to 37.2 million. Load factor fell -2.8 points to 70.8% LF and cargo traffic was down -5.4% to 889,480 tonnes.

The Shanghai-based carrier has received a CNY36 billion line of credit from domestic banks to shore up its finances during the downturn. It predicted "negative growth" in the international market this year, although the domestic market may recover. Expo 2010, scheduled to take place in Shanghai next year, will offer new opportunities, but "domestic overcapacity still remains serious," it said.

This year, (CEA) aims to transport 42.8 million passengers while raising load factor +2.2 points to 73% LF and boosting cargo traffic to 950,000 tonnes. Chairman, Liu Shaoyong noted earlier this year that it plans to narrow its loss by a significant margin in 2009, break even in 2010 and turn a profit in 2011.

(CEA)'s effort to reach financial break even by 2010 and a 2011 profit will include the forced retirement of 160 mid-level executives, who will be replaced by lower-salaried employees from both inside and outside the company. Chairman, Liu Shaoyong claimed (CEA) is still in "extremely deep crisis" and said that "internal reforms are the only way to make sure the carrier survives, gets up and runs again." Its human resource reforms also will include the annual retirement of -3% of its workforce and job rotations for management employees who have been with the airline for more than six years. Last month it promoted Wu Yongliang to CFO. He had been Vice Chief Accountant & Director of the Capital Management Department.

APG Global Associates said five more airlines joined its interline e-ticketing program - - Air China (BEJ), China Eastern Airlines (CEA), Ghana International Airlines (GHN), Phoebus Apollo Aviation (PHB) and Zambezi Airlines (ZBZ). Joining APG IET permits airlines to use the Heli Air Monaco (YO/747) e-ticket as a neutral ticketing platform.

Joy Air, the joint venture launched by AVIC and (CEA) in March 2008, is expected to be formally operational in June, AVIC Chairman, Lin Zuoming told "China Business News." Lin said the Xi'an-based carrier plans to conduct trial flights in May, although it has not yet obtained its airworthiness certificate (AOC). It has registered capital of CNY1 billion, in which AVIC originally contributed a 60% stake and (CEA) 40%. In February, (CEA) sold a 35% stake back to AVIC, leaving the airline with 5%. Joy plans to operate three MA60s initially and increase its fleet to 100 airplanes, comprising 50 ARJ-21s and 50 MA60s, in the next eight years.

May 2009: China Eastern Airlines (CEA) is expected to receive a further +CNY2 billion/+$294 million capital injection from the Chinese government to help the struggling carrier survive. (CEA) was allocated CNY7 billion from Beijing at the end of 2008, which was approved by minority shareholders in February and is awaiting approval from the China Securities Regulatory Commission. "Our biggest problem is insolvency. We would have gone bankrupt if we hadn't received [the] capital injection," (CEA) Board Secretary, Luo Zhuping noted. CEO, Ma Xulun also admitted that the carrier can't solve its financial problems by itself. (CEA) had a debt burden of CNY83.7 billion as of March 31 and its debt ratio reached 115.13% in the same time frame, according to its financial report for the first quarter.

Industry analysts pointed out that the bailout money is meant to pave the way for a merger with Shanghai Airlines (SHA), which is reported to have been discussed at the government level, but no specific plan has been made. (SHA) Chairman, Zhou Chi has stressed that the merger won't happen in the near future.

Air China (BEJ) and China Eastern Airlines (CEA) insisted that fuel hedging is a solid long-term strategy and pledged to continue with it to insulate them from price fluctuation despite huge hedging losses for full-year 2008 and the 2009 first quarter. (BEJ) and (CEA) reported -CNY948 million/-$138.8 million and -CNY916 million fuel hedge losses respectively in the first quarter, which followed hedging losses of -CNY7.47 billion and -CNY6.2 billion, respectively, by the two carriers for full-year 2008.

(CEA) announced that its CNY7 billion capital injection from Beijing has been approved by the China Securities Regulatory Commission.

(CEA) signed a five-year, CNY590 million/$86.3 million sale and leaseback contract with Bank of Communications Finance Lease Company for two A340s. The airplanes, delivered in 1996, will be leased back for CNY17 million per quarter. "We can not only improve our cash flow and reduce debt ratio by a sale and leaseback of these two A340s but we also can optimize our fleet makeup," (CEA) Board Secretary, Luo Zhuping explained. He said (CEA)'s high debt ratio remains its biggest problem. Although CNY7 billion in government aid reduced its debt ratio by -8.4 points to 90.1%, an expanded credit line granted in recent months added to the debt burden. It has a total credit line of CNY56 billion from domestic banks.

737-79P (36757, B-5255) and A320-232 (3904, B-6559), deliveries.

June 2009: China Eastern Airlines (CEA) has partnered with the Yunnan provincial government to launch a joint venture based on (CEA)'s Yunnan branch subsidiary (YUN) that will endeavor to build Kunming into a regional hub. (CEA) is expected to sell a stake in the branch company to the government, although it is widely speculated that (CEA) will remain the controlling shareholder.

In February, (CEA) Chairman, Liu Shaoyong noted that (CEA) is looking to buttress its network with regional hubs at Kunming and Xi'an. Its Yunnan branch commands 45% of the provincial market and was profitable in the first quarter, although it did not disclose that figure. The new venture will face competition. Hainan Airlines (HNA) signed an agreement with the provincial government last June to launch its Yunnan Airlines. It will be comprised mainly of the assets of Lucky Air (LKY), which accounts for 9.6% of the market.

Shenzhen Airlines (SHZ) launched Kunming Airlines (KMG) on February 15 and is looking at expanding its fleet to 10 airplanes by year end operating 10 domestic routes. It hopes to be operating 30 to 40 airplanes by the end of 2010, 80 to 100 by 2015, and 150 to 200 by 2022. It currently operates two 737-700s and one 737-800 provided by Shenzhen (SHZ).

(CEA) is expected to hold 65% of its new Kunming-based joint venture with the Yunnan provincial government, with which it signed an agreement recently. The government will hold the remainder and is investing both real estate and cash. The new carrier will not fly with (CEA)'s logo nor code but will use the green logo of Yunnan Airlines, the predecessor of (CEA)'s local branch company that merged with the larger airline in 2002. It will adopt its own name and flight code.

(CEA) Chairman, Liu Shaoyong shrugged off the competition the new venture will face in the Yunnan market. The government reportedly was expected to inject capital into Lucky Air (LKY), which will form the foundation of its joint venture with Hainan Airlines (HNA). Shenzhen Airlines (SHZ) subsidiary Kunming Airlines (KMG) launched in February. "We are open to market competition, as no company can monopolize the market. But our new venture will be the 'national team' of Yunnan province, which will definitely make it better positioned compared with other companies," Liu said.

(CEA)'s Yunnan branch currently operates 37 airplanes and transports approximately 6 million passengers annually. It plans to expand the new carrier's fleet to 50 airplanes next year and increase passenger boardings to 8 million in the same time frame. In addition, it is committed to boosting its share of the Yunnan market from 45% to 50% this year.

The government-prompted merger of (CEA) and Shanghai Airlines (SHA) is expected to happen shortly as Beijing seeks to implement its long-term plan to position Shanghai as an international aviation hub. Both (CEA) and (SHA) suspended trading and are planning an important announcement, according to a statement released by the Shanghai Stock Exchange. (SHA) VP Feng Xin confirmed the trading suspension was related to the pending merger. "Yes, we are going to merge with (CEA) very soon," Feng said, but he would not reveal any details on the process.

Another source close to the issue said the merger plan "has already been approved by China's State Council and most probably will be conducted through cross-shareholding." (CEA) currently code shares with (SHA) on 88 flights across five domestic routes.

(CEA) General Manager, Ma Xulun noted in April that the carrier plans to enhance its position in Shanghai. Ma said it holds just 32% of its home market, less than its "big three"' rivals command at their bases. China Southern Airlines (GUN)'s market share in Guangzhou exceeds 50% and Air China (BEJ) holds 45% of the Beijing market. As (SHA) takes up 18% of Shanghai market, the new (CEA) is expected to occupy about 50% when the merger is finished. (CEA) and (SHA) each suffered big losses last year. (CEA) posted a record deficit of -CN13.93 billion/-$2.04 billion, while (SHA) reported a -CNY1.25 billion net loss. In order to pave the way for the merger, the government already has made capital injections of +CNY9 billion and +CNY1 billion to (CEA) and (SHA), respectively.

Industry analysts have said that (SHA) may have to withdraw from the Star Alliance (SAL), since (CEA) is expected to sign a membership agreement with SkyTeam (STM) this month.

Air China (BEJ), China Southern (GUN), and Shenzhen Airlines (SHZ) are supporting the merger publicly. "Let's wait and see and we will be happy to see they have a successful merger," (GUN) Chairman, Si Xianmin said.

Joy Air, the joint venture launched by AVIC and China Eastern Airlines (CEA) in the spring of 2008, will begin operations next month following the arrival of two MA60s. The Xi'an-based carrier signed a contract for 13 MA60s at last November's Zhuhai Air Show and plans to acquire 50 of the type, plus 50 ARJ21s, within the next eight years.

737-79P (36758, B-5256) and A320-232 (3937, B-6560), deliveries.

July 2009: Shanghai Airlines (SHA) hopes to maintain its membership in the Star Alliance (SAL) even after its merger with China Eastern Airlines (CEA), which most likely will join the SkyTeam (STM) alliance, Chairman, Zhou Chi said. He noted that (SHA) needs to discuss the matter with (SAL) airlines. "Also, whether we can maintain it or not will be up to which global airline alliance (CEA) joins," he said. (CEA) Chairman, Liu Shaoyong has said internally that the carrier prefers the (STM), which already includes China Southern Airlines (GUN). (CEA) was scheduled to sign an agreement with the (STM) last month, but it was postponed because it is "busy with merger issues with (SHA)."

After the merger, (SHA) is expected to become a wholly owned subsidiary of (CEA) but maintain its brand. "It is important for us to operate independently. Our relationship with (CEA) will be just like Cathay Pacific (CAT) and Dragonair (DRG)," Zhou revealed. "We never expected to expand our business by relying on the merger with (CEA), but the merger will produce synergies and will help build Shanghai as an international aviation hub." The carriers remain in negotiations and the specific merger plan is expected to come out this month. Zhou emphasized that the merger is being pushed by Beijing and led by (CEA). "The whole merger process will have to take about 4 to 5 months to complete," he said.

Later, (CEA) shares in Hong Kong rose as much as +14.4% after (CEA) announced it was acquiring rival Shanghai Airlines (SHA) for just under Rmb 9 billion/$1.3 billion as it battled high operating losses. However, the shares lost much of their early gains to close just +2.9% higher at HK$1.79, against a -2.6% decline in the benchmark Hang Seng index. The state-orchestrated tie-up will see (CEA) dominate the Shanghai aviation hub and become China's largest airline by market share.

(CEA) also said it would raise about Rmb7 billion by issuing new shares to strengthen its balance sheet. This followed a +Rmb7 billion cash injection from its state-owned parent last month. In a widely-anticipated agreement, (CEA) said the acquisition would be conducted through a share swap at 1.3 (CEA) shares for each (SHA) shares.

(CEA) has been the worst performer of the country’s struggling airlines industry. Last year, (CEA) saw its total liabilities exceed its total assets by more than >Rmb12.6 billion. It also made a net loss of -Rmb13.9 billion because of falling passenger numbers and massive hedging losses caused by plummeting oil prices, while (SHA) reported a net loss of -CNY1.24 billion. (CEA) said it needed to raise more capital because its gearing ratio remained at a very high level and its net assets were still negative, even after last month’s capital injection. “As a result, (CEA)’s operating and financial condition is under enormous pressure,” (CEA) said.

Following the merger, (CEA)’s market share in Shanghai will increase from 35% to more than >50%. (CEA) will also control 30% of China’s aviation market. The fierce price war between the two Shanghai-based airlines – which had many overlapping routes – had been a major reason for (CEA)’s losses. (CEA)’s domestic yield per seat is -10% and -3% lower than that of Air China (BEJ) and China Southern (GUN), respectively. According to Citigroup analysts, the merger should immediately boost (CEA)’s earnings by +Rmb1 billion to Rmb3 billion. They also expected (CEA) to return to profitability this year.

But analysts also warned that cost savings from the merger would be limited in the longer term. “It will create a dominant airline in Shanghai and synergies will come from some cost cutting. But there won’t be massive layoffs given (CEA) is a state-owned company and it will be hard to see lots of efficiency,” said Kelvin Lau, analyst at Daiwa Institute of Research in Hong Kong.

(CEA) also plans to expand its Beijing market share to 20% from 13% over the next five years, Chairman, Liu Shaoyong said. This month, it launched its Beijing branch company, which is expected to operate nine A330s by year end. Air China (BEJ) plays a dominant role in the capital with a 45% market share, while China Southern Airlines (GUN) occupies 16%.

"After the merger, (CEA) is interested in selling a stake to an Asian carrier that will be its strategic investor. Most likely, it will try to introduce Singapore Airlines (SIA) again. Both carriers have started contact," an internal source said.

In a prelude to an overhaul of the troubled aviation sector, China in December reshuffled top executives among its three largest state-owned airlines (CEA)/(GUN)/(BEJ), paving the way for the industry to consolidate.

(CEA) will benefit the most from the agreement reached in April to expand significantly the number of flights permitted across the Taiwan Strait, according to a cross-strait distribution plan released by the (CAAC) (CAC). The Taipei-based Strait Exchange Foundation and the Beijing-based Association for Relations Across the Taiwan Strait, signed the accord that increases from 108 to 270 the number of direct flights allowed beginning this month. Under the (CAC)'s plan, (CEA) is designated to operate 58 weekly flights to Taipei from Shanghai, Nanjing, Wuhan, Qingdao, Kunming, Xi'an, Hefei, Ningbo, and Nanchang. (CEA) Board Secretary, Luo Zhuping noted that the carrier's cross-strait routes are among its most profitable and have operated at 80% to 90% (ASK) capacity on average.

Air China (BEJ) was assigned 54 weekly flights to Taipei from Beijing, Shanghai, Chengdu, Chongqing, Hangzhou, Tianjin, and Guiyang. China Southern Airlines (GUN) also was allocated 54 weekly flights to Taipei to be operated from Shanghai, Guangzhou, Xiamen, Dalian, Guilin, Shenzhen, Wuhan, Changsha, Haikou, Shenyang, Zhengzhou, Harbin, and Guiyang.

Hainan Airlines (HNA) and Shanghai Airlines (SHA) each were allocated 20 weekly flights, while Xiamen Airlines (XIA) was given 22. Sichuan Airlines (SIC), Shandong Airlines (SHG) and Shenzhen Airlines (SHZ) were granted 14 weekly flights each.

On the cargo front, Air China Cargo (CAO) was assigned 10 weekly flights to Taipei from Shanghai and Guangzhou, while (CEA) subsidiary China Cargo Airlines (CKK) was assigned eight weekly flights from Shanghai to Taipei and China Southern (GUN) was assigned 10 weekly flights from Guangzhou to Taipei.

737-79P (36759, B-5257), and A320-232 (3965, B-6585), deliveries.

August 2009: China Eastern Airlines (CEA) enjoyed a first-half turnaround, reporting a +CNY984.7 million/+$143.9 million profit based on international accounting standards that compares to a -CNY212.5 million net loss in the first six months of 2008. (CEA) credited a CNY2.79 billion hedging gain and "elimination of the civil aviation infrastructure tax that was imposed in the second half of last year, as well as government subsidies," for the result. Operating revenue dropped -15.8% to CNY17.5 billion, while expenses fell -15% to CNY16.86 billion owing to lower fuel prices.

(CEA) said that the "domestic market showed signs of recovery, but competition is quite fierce and airfares keep dropping, while the international market continues to suffer from negative growth."

(CEA) introduced three A320s, two 737-700s and one 737-800 during the semester and retired two 737-300s and one 737-800. Passenger boardings jumped +14.8% to 20.8 million and load factor was down -0.3 point to 70.8% LF. Cargo traffic plummeted -8.1%.

Looking ahead, (CEA) expects to find opportunities for growth from a recovery in the economy, government efforts to stimulate domestic demand, its efforts to position Shanghai as a global hub and Expo 2010 Shanghai. (CEA) plans to introduce seven A320s, five 737-700s and three 737-800s in the second half of this year.

Meantime, Shanghai Airlines (SHA), which is merging with (CEA), announced a -CNY91.3 million net loss in the first half. It is noteworthy that (SHA)'s operating revenue from domestic routes fell 9.8% to CNY3.47 billion, while international revenue plummeted -45.5% to CNY792.4 million.

Shenyin Wanguo Securities Aviation Analyst, Li Shurong said the carrier's investment in China United Airlines (CUL) and Shanghai Airlines Cargo International (SHA), which have suffered operating losses, also was a drag on results. "The main challenge for the merged carrier (CEA)/(SHA) will be how to make a turnaround on international routes, which will decide whether it can achieve continuous growth in the future or not," Li commented. The merger of (CEA) and (SHA) is expected to be completed by year end.

(SHA) has begun the merger process with China Eastern Airlines (CEA), which revealed last month that it was profitable through the 2009 first half.

Regarding his own airline, (CEA) Chairman, Liu Shaoyang pointed out that the international market is recovering more slowly than the domestic, meaning the carrier's international routes will continue to be a financial drag. In addition, he expects cargo traffic to continue to fall and is concerned about "serious" overcapacity in the domestic market. He said he remains optimistic that (CEA) can narrow its loss significantly over the full year. (CEA) earned +CNY40.1 million in the first quarter.

(CEA) General Manager, Ma Xulun said he expects the (CEA) to complete its acquisition of Shanghai Airlines (SHA) by year end. Last month, (CEA) said it would acquire (SHA) through a share swap of 1.3 China Eastern shares for each (SHA) share. (SHA) will become a wholly owned subsidiary of (CEA) but will keep its brand.

(CEA) said it has submitted its acquisition application to the (CAAC) (CAC) and expects to get approval from the regulator this month. Also reviewing the transaction will be the Assets Supervision and Administration Commission of the State Council and the China Securities Regulatory Commission. Both carriers' shareholders also will be required to clear the deal. Ma revealed that the shareholders' conference will be held in October. China's Ministry of Commerce will conduct an antitrust review.

Ma said (CEA) is postponing its decision on joining a global alliance until after the (SHA) merger is completed. It had planned to sign an agreement with Skyteam (STM) in June; (SHA) is a member of the Star Alliance (SAL). (SHA) Chairman, Zhou Chi has said that he hopes to maintain the carrier's membership in the (SAL) but conceded it will depend on which alliance (CEA) decides to join. Ma said that (CEA) plans to make an alliance announcement "at the end of this year."

Later, The (CAAC) (CAC) approved China Eastern Airlines (CEA)'s acquisition of Shanghai Airlines (SHA), according to (CEA) General Manager, Ma Xulun. The merger still requires the approval of both carriers' shareholders, but (CEA) said it has started the merger process and expects the transaction to be completed by year end. A shareholders conference is planned for October 9 to consider and vote on the merger and approval is expected.

"The total fleet of (CEA) and (SHA) is more than >300 airplanes, so we plan to make a more reasonable utilization of these airplanes during winter and spring flight schedules," Ma said. He revealed that (CEA) plans to promote Express Air Service to denote high frequency on the 22 routes the carriers share. "On some routes, the daily frequencies will be boosted to 14. That is, a flight will be operated every half hour," he said.

Huang Bin, board secretary for Air China (BEJ), said, "(CEA)'s merger with (SHA) will definitely change the competition scenario of the Shanghai air transport market." But he affirmed that it won't affect (BEJ)'s determination to make Shanghai its international gateway.
He added that (BEJ) will "accelerate the preparation process with Cathay Pacific Airways (CAT) to launch a cargo joint venture (JV) based in Shanghai." (BEJ) VP, Fan Cheng told reporters that the asset valuation for the (JV) is "nearing an end," paving the way for it to be launched by year end.

September 2009: China Eastern Airlines (CEA) was granted approval at a shareholder's conference to issue 1.35 billion "A" shares and 490 million "H" shares worth a combined CNY7.02 billion/$1.03 billion.
The shares will not be available to the general public and will be circulated on the Shanghai and Hong Kong stock exchanges, respectively. The capital injection is expected to reduce the (CEA)'s debt ratio to 94.7%.

(CEA) reported a +CNY984.7 million net profit in the first half of this year, but Chairman, Liu Shaoyong admitted, "The fundamental problems will require a longer time to solve." He said: "The domestic market is recovering well but airfares still remain low owing to fierce competition, while the international market shows little signs of recovery and the cargo market needs more time to recover."

Meantime, Liu expressed concern over the cost pressure that will result from the European Union (EU)'s decision to include airlines in its emissions trading scheme (ETS) beginning in 2012. "The carbon emission of China, which has a population of 1.3 billion, is equal to Europe, which has a population of 800 million. This is unfair," he complained. He said he hoped the (EU) would calculate emissions on a per-capita basis.

Naverus said (CEA), supported by the (CAAC) (CAC), successfully completed a Required Navigation Performance (RNP)-validation flight at Yushu Airport in the Himalayas using an A319 on September 15.

737-89P (36763, B-5473), and 2 A320-232s (3775, B-6586; M3797, B-6587), deliveries.

October 2009: China Eastern Airlines' (CEA)'s acquisition of Shanghai Airlines (SHA) was approved by both carriers' shareholders.
(CEA) Board Secretary, Luo Zhuping reiterated that the merger will be completed by year end. The transaction already has been approved by the (CAAC) (CAC) and all other relevant government authorities except the China Securities Regulatory Commission, which has not yet issued a ruling but is not expected to reject the deal.

(CEA) is acquiring (SHA) through a share swap in which each (SHA) share is exchanged for 1.3 (CEA) shares. (SHA) is expected to become a wholly owned subsidiary of (CEA) but will keep its brand.

Both carriers have started the merger process, laying the groundwork to promote "Express Air Service" denoting the high number of frequencies that will be offered on the 22 routes both operate during their winter and spring schedules. (CEA) also is continuing to push forward on internal reform. "We have gone through the most difficult time and overcome the crisis, but we are still in great difficulty as our debt ratio remains high and the international [passenger] market and cargo market have not recovered," Chairman, Liu Shaoyong told reporters following the shareholder conference. Liu revealed that (CEA) will decide which global alliance to join at year end. It is widely speculated that it will join the Skyteam (STM) alliance, though (SHA) is a member of the Star Alliance (SAL).

China's cargo industry appears to be moving toward consolidation as airfreight players look to mitigate damage from continuing losses that have resulted from the global economic downturn. According to an industry insider, Chinese logistics giant Sinotrans has signed a cooperative agreement with China Eastern Airlines (CEA) and "is considering selling some or all of its stake" in Grandstar Cargo International Airlines (GSC), the joint venture carrier it launched with Korean Air (KAL) last year. Sinotrans owns 51% of (GSC) while (KAL) controls 25%. A further 13% is owned by Hana Capital Company and 11% by Shinhan Capital Company. The industry source said that the Sinotrans stake would be sold to either (CEA) or Air China (BEJ), with which the logistics company signed a similar cooperative agreement earlier this year. A final decision on the stake sale has not been made, the insider said.

Grandstar (GSC) has been unable to turn a profit in its first 17 months of operation. Sinotrans cited a -CNY61.8 million/-$9 million third-quarter deficit on its investment in a recent report to investors. (GSC) has not expanded beyond its initial Tianjin - Frankfurt route.

Additional air cargo consolidation in China could result from Air China (BEJ)'s negotiations with Cathay Pacific Airways (CAT) to launch a cargo (JV) in Shanghai by next spring. Also, (CEA) subsidiary, China Cargo Airlines (CKK)'s merger with Shanghai Cargo Airlines likely will result from the pending (CEA) acquisition of Shanghai Airlines (SHA).

China has nine cargo carriers that operated a total freighter fleet of 70 airplanes as of December 31, 2008. But hit hard by the global financial crisis, those carriers are suffering from serious financial difficulties, especially on international routes. The (CAAC) (CAC) last month implemented a series of measures designed to lift the nation's airfreight carriers out of the red, including increasing shipping rates, providing subsidies and encouraging mergers and consolidation.

(CSA) Czech Airlines plans to code share on China Eastern Airlines (CEA)'s Frankfurt - Shanghai Pudong flights from March 28.

(CEA) established a branch company in Zhejiang province in an effort to explore the market in east China further. It plans to expand its fleet there from 24 airplanes to 40 to 50 in the next three years, with weekly departures climbing from the current 400 to around 900. (CEA) also is trying to capitalize on the influx of tourists expected for next year's Expo 2010 in Shanghai, which is expected to attract 70 million visitors to the region.

The airport authorities for Hong Kong and Shanghai are teaming on
a joint venture to upgrade the management of Shanghai's Hongqiao airport. Shanghai has two main airports, with the older Hongqiao handling mostly domestic flights and the newer Pudong handling mostly
international flights.

2 737-79Ps (36762, B-5259; 36764, B-5262), 737-89P (36765, B-5475), and 2 A320-232 (3870, B-6600; 4037, B-6601), deliveries.

November 2009: 737-79P (36766, B-5263), delivery and 737-89P (29661, B-5492), American Capital Group (CGP) leased. A320-232 (3929, B-6616), delivery.

December 2009: China Eastern Airlines (CEA)'s merger with Shanghai Airlines (SHA) received final approval from the China Securities Regulatory Commission (CSRC), giving (CEA) clearance to grab about 50% of the Shanghai market. (CEA) plans to acquire (SHA) through a share swap in which each (SHA) share will be exchanged for 1.3 (CEA) shares. (SHA) will keep its brand.

Meantime, (CEA) received approval to issue additional nonpublic shares on the Hong Kong Stock Exchange worth CNY490 million/$71.8 million. The (CSRC) already had approved the issuance of CNY6.53 billion in nonpublic shares on the Shanghai exchange. (CEA) Chairman, Liu Shaoyong said the carrier's debt ratio will fall to 94.7% through the CNY7.02 billion capital injection and that it aims to reduce the ratio to 80% in 2010.

(CEA) Managing Director, Ma Xulun revealed that (CEA)'s operating expenses dropped -18% in the first 10 months of 2009 compared to the year-ago period, although he did not disclose the exact figure. "We are still sticking to our original goal, that is to reduce the operating loss by a big margin, achieve breakeven next year and earn a profit in 2011. But even if we have a turnaround this year, it will be partly credited to fuel hedge gains. But our mainline aviation business has improved," he said.

Beijing reportedly is urging (CEA) to restart talks with Singapore Airlines (SIA). Liu has said he remains open to the introduction of a strategic investor.

(CEA) will decide which global alliance to join prior to the Chinese New Year on February 14, according to Managing Director, Ma Xulun.

The SkyTeam (STM) alliance continues to be the favorite, which likely would lead to Shanghai Airlines (SHA)'s withdrawal from the Star (SAL) Alliance. (CEA)'s acquisition of (SHA) received final approval from the China Securities Regulatory Commission last month.

With a 50% share of the Shanghai market, (CEA) will have a base from which it can explore new destinations that will enhance the airport's status as an international hub, Chairman, Liu Shaoyang said. It is considering opening express service from Fujian province and other areas of southeast China that will feed international routes from (PVG).

Liu said (CEA) was +CNY1.85 billion/+$270.6 million) in the black through the first 10 months of 2009. It earned +CNY1.2 billion through the third quarter and "has survived through the most difficult period," he said, while warning that "rapid reforms" are still needed to continue the recovery. (CEA) is expected to finish issuing additional shares worth CNY7 billion this month, reducing its debt ratio to 94.7%.

Naverus announced that (CEA) completed a performance based navigation 737 flight at Lhasa, marking the first Required Navigation Performance (RNP) implementation of the airplane at an airport located higher than >10,000 ft. It also announced the granting of an Instrument Flight Procedure Service Certificate by the Civil Aviation Authority of New Zealand authorizing it to design, certify and maintain (RNP) procedures.

737-89P (29652, B-5493), Aviation Capital Group (CGP) leased and A320-232 (4144, B-6617) delivery.

January 2010: China Eastern Airlines (CEA) remains committed to choosing an alliance by the February 14 New Year holiday and is scheduled to negotiate with each of the three global groupings. "We are still evaluating the decision on which airline alliance to join, which will depend on our negotiations with the three alliances regarding route network, frequent-flyer program, code sharing, etc.," (CEA) Managing Director, Ma Xulun said. (CEA) had shown an interest in Oneworld (ONW) as far back as 2005, when it cooperated closely with Cathay Pacific Airways (CAT). But now that (CAT) has executed a cross-shareholding deal with the Star Alliance (SAL)'s Air China (BEJ), (CEA) is thought to prefer the SkyTeam (STM) alliance. China Southern Airlines (GUN) joined (STM) in November 2007. (SAL) will lose Shanghai Airlines (SHA) as well if (CEA) opts for one of the other two alliances owing to their merger.

(CEA) signed a firm order late last month for 16 A330s worth CNY17.75 billion/$2.6 billion at list prices as it plots its international expansion. (CEA) expects to take delivery of the planes between 2011 and 2014 and will pay for them through bank loans. (CEA) has received a CNY106 billion credit line. The A330s will be operated mainly on routes to Europe, the USA and Australia. (CEA) Managing Director, Ma Xulun has noted that the airline intends to expand its long-haul offerings as the domestic market becomes increasingly affected by the growing high-speed rail network. It already has canceled some domestic routes.

Another factor is last month's approval of (CEA)'s merger with Shanghai Airlines (SHA) by the China Securities Regulatory Commission. (CEA) Chairman, Liu Shaoyong said a key component of the merger was building Shanghai's presence as an international hub. Most of (CEA)'s and (SHA)'s combined international network consists of short- and medium-haul routes to neighboring Asian countries like Japan and South Korea.

The 16 A330s are part of an order for 50, sealed between the Chinese government and Airbus (EDS) in 2007. Air China (BEJ) signed a purchase agreement for 20, worth $3.82 billion, last June. It is noteworthy that (CEA) postponed the delivery of 13 airplanes scheduled to arrive in 2009.

February 2010: China Eastern Airlines (CEA) is moving forward with its efforts to recruit a strategic investor as it finalizes the merger process with Shanghai Airlines (SHA), according to (CEA) General Manager and (SHA) Chairman, Ma Xulun.

"We are quite open to introducing a strategic investor and welcome any strategic investor or financial investor as long as they are interested in promoting development," Ma noted.

An internal source said that (CEA) has been in touch with Singapore Airlines (SIA) regarding further cooperation, including a possible stake sale.

It is noteworthy that Meng Jianmin, Deputy Director of the state-owned Assets Supervision & Administration Commission (SASAC), pointed out at the ceremony celebrating the (CEA)/(SHA) merger that the new (CEA) "should introduce a proper strategic investor to enhance its management level and reduce its debt ratio, which is as high as 95% now." (SASAC) is (CEA)'s controlling stakeholder.

Meantime, (CEA) is progressing with joining an alliance. Chairman, Liu Shaoyong revealed that he talked with all three alliances last month. "Currently we are conducting an internal evaluation and hopefully we can announce our decision this month," Ma said. It is widely speculated that (CEA) prefers the SkyTeam (STM) alliance.

The merged (CEA)/(SHA) is expected to hold about 50% of the Shanghai market and operate a total fleet of 331 airplanes to 151 destinations. "Shanghai needs a strong Shanghai-based carrier that can take up more than a 50% share of the Shanghai market, as Shanghai is targeting becoming an international aviation hub. The merger between (CEA) and (SHA) is an important step toward this target," Shanghai Vice Mayor, Ai Baojun noted at the ceremony.

Honeywell (SGC) will provide APU repair and overhaul services for China Eastern Airlines (CEA)'s 331-350 APU on 20 A330s and five A340s over the next 10 years.

March 2010: China Eastern Airlines (CEA) starts three times a week, Nanjing - Singapore with A319s. Singapore already connects to 21 Chinese mainland cities.

China Eastern Airlines (CEA) has taken a 51% stake in Great Wall Airlines (GWZ). The stake, formerly held by China Aerospace Science and Technology Corporation (CASTC), reportedly was transferred at the behest of the state-owned Assets Supervision & Administration Commission, which is the controlling shareholder of both (CEA) and (CASTC). (CEA) said it will integrate Great Wall (GWZ) with its China Cargo Airlines (CKK) subsidiary, as well as with Shanghai Airlines Cargo. (GWZ) was established in 2005 with CNY1.2 billion/$175.5 million from (CASTC) subsidiary Beijing Aerospace Satellite Applications Corporation, Singapore Airlines Cargo and Temasek Holdings subsidiary Dahlia Investments. It operates three 747-400Fs out of Shanghai Pudong (PVG).

Shanghai Hongqiao International (SHA)'s new Terminal 2 became operational as the city prepares for "Expo 2010" scheduled to run from May to October. Eleven carriers: - - China Eastern Airlines (CEA), Shanghai Airlines (SHA), Air China (BEJ), China Southern Airlines (GUN), Xiamen Airlines (XIA), Shenzhen Airlines (SHZ), Shandong Airlines (SHG), Hainan Airlines (HNA), Tianjin Airlines (GCR), Sichuan Airlines (SIC) and Juneyao Airlines (JYA) - - have transferred to the new terminal. The old T1 will continue to house Spring Airlines (CQH) and charter flights to Japan and South Korea.

Total investment in T2 was approximately CNY11.5 billion/$1.7 billion. It can accommodate 30 million passengers annually, triple the intended number for T1, which was overloaded in 2009 with 25 million passengers and nearly 190,000 airplane movements. Hongqiao (SHA)'s new second runway, which can handle the A380, also entered operation. With the greater capacity at (SHA) airport, China Eastern (CEA) is expected to increase its slot holding there by +50%, which General Manager, Ma Xulun has said will boost (CEA)'s Shanghai market share by +3 points to 50%. Spring (CQH) Chairman, Wang Zhenghua said his airline will add five slots.

737-86N (39388, B-5501), (GECAS) (GEF) leased.

April 2010: China Eastern Airlines (CEA) reported a 2009 net profit of +CNY539.7 million/+$79.2 million, a big turnaround from a net loss of -CNY13.93 billion in 2008, on a -4.8% decrease in operating revenue to CNY39.83 billion.

Operating expenses lowered -13.5% to CNY37.25 billion owing to lower fuel prices. (CEA) said "fuel hedge gains" and "Beijing's favorable policy of returning civil aviation construction funds" were largely responsible for the return to profitability. (CEA) in 2009 posted a net gain of +CNY3.78 billion on fuel hedges and received CNY403 million from the Chinese government.

Passenger boardings climbed +18.3% to 44.04 million with load factor up +1.4 points to 72.2% LF. Cargo traffic rose +6.1% to 943,890 tonnes. During the year, it took delivery of 23 airplanes comprising 10 A320s, seven 737-700s and six 737-800s. It phased out five 737-300s and one 737-800. It operated a fleet of 257 airplanes as of December 31.

Looking ahead, (CEA) said it expects to benefit this year from global economic recovery and expected synergies from merging with Shanghai Airlines (SHA). It forecasts transporting 67.1 million passengers in 2010, which would be a +52.3% increase over 2009. It projects that cargo volume will climb +49.8% to 1.4 million tonnes.

(CEA) signed a letter of intent (LOI) in Shanghai to join the SkyTeam (STM) alliance, a move industry analysts said would allow it to establish a closer relationship with China Southern Airlines (GUN) and better position it to compete against Air China (BEJ).

(CEA) is expected to sign a formal alliance agreement with (STM) in June, setting its official entry into the airline grouping for mid-2011. Its decision to join the (STM) alliance is a disappointment to the Star Alliance (SAL) and the Oneworld (ONW) alliance, both of which had been wooing (CEA), seen as a valuable partner owing to its 50% market share at its Shanghai base.

(CEA) Chairman, Liu Shaoyong described the (LOI) signing as an "engagement ceremony," explaining, "It is time for the 22-year-old (CEA) to get married to the (STM) alliance." He said joining the alliance would expand (CEA)'s global reach and raise its service standards.

Liu guided China Southern (GUN) to formal SkyTeam (STM) alliance membership in 2007 when he served as (GUN)'s Chairman. (GUN) is (CEA)'s sponsor to join the alliance. The two carriers already cooperate on ground handling services and code share on some domestic routes.

SkyTeam (STM) alliance Chairman, Leo van Wijk said in Shanghai that (CEA)'s "1,253 daily flights can increase (STM) alliance daily flights by +10% and add +25 more destinations" to the alliance's network. (CEA)'s joining will "enable (STM) to play a leading role in the Chinese market," he added.

"China Southern (GUN) already covers China through its hubs in Guangzhou and Beijing," (STM) added in a statement. "Together with China Eastern (CEA) and its hub in Shanghai, (STM) will be able to offer service out of three major Chinese markets." (CEA) subsidiary, Shanghai Airlines (SHA) is expected to withdraw from the Star Alliance (SAL) in the coming days.

(CEA) signed a strategic cooperation agreement with China Airlines (CHI) to explore jointly the fast-growing cross-strait market. Under the accord, both carriers would deepen cooperation in ground handling, cabin service, Maintenance Repair & Overhaul (MRO) and cargo. "We expect to enhance our service level and boost our international competitiveness to better serve passengers across the Taiwan Strait through cooperation with China Airlines (CHI)," (CEA) Chairman, Liu Shaoyong said.

(CEA) also plans to make Shanghai, its home base, into a hub to connect Taiwan to Western countries through its cooperation with (CHI). (CEA) currently operates 29 weekly cross-strait flights from Shanghai, Nanjing, Kunming, Wuhan, Xi'an, Qingdao, Hefei, Ningbo, and Nanchang. It also operates four weekly cargo flights to Taipei. In 2009, the total number of passengers carried by all airlines across the Taiwan Strait rose +16.3% to 5.41 million. (CEA) is the leader with 425,000, a sixfold year-over-year increase. Its cross-strait flights have an average load factor of 78.1% LF. Liu emphasized that (CEA) - (CHI) cooperation will be confined to operations and will not include sales.

(CEA) launched a Sichuan branch company in Chengdu to explore further the market potential in western China. From Chengdu, (CEA) has launched routes to Jiuzhai, Kunming, Lijiang, Lhasa, Linzhi, Sanya, Wenzhou, and Kangding. It is the fourth domestic airline to open a base in Sichuan Province; the other three are Air China (BEJ), Sichuan Airlines (SIC), and Chengdu Airlines (UEG).

(CEA) plans to launch a shuttle service between Chengdu and Shanghai this year and open additional routes to major Chinese cities, as well as international destinations in Southeast Asia in the next few years. It is expected to add capacity in line with the expansion of Chengdu Shuangliu and said it plans to base 30 airplanes at the airport by 2015.

(CEA) Chairman, Liu Shaoyong said that in launching the branch company, (CEA) is undertaking a strategic shift to take advantage of economic growth in Sichuan stimulated by Beijing's Western Development Drive policy several years ago. "Also we can avoid high-speed rail competition in the Sichuan market owing to its complicated geographical location," he added.

(BEJ) has the biggest share of the Sichuan market in terms of passenger boardings with 35%, while Sichuan Airlines (SIC) has 25% and (CEA) accounts for 12%.

737-79P (36767, B-5265), and A320-232 (4252, B-6639), deliveries.

May 2010: Japan Airlines (JAL) and China Eastern Airlines (CEA) expanded their code share agreement to include daily (CEA)-operated flights from Shanghai Pudong to Xi'an, Wuhan, and Shenzhen, as of June 3. They also will increase the frequency of existing Shanghai code share routes to Chengdu and Chongqing, from four-times-daily to nine-times-daily.

(CEA) will sign a binding agreement with the SkyTeam Alliance (STM) next month, according to (STM) alliance Managing Director, Marie-Joseph Male.

(CEA) signed a letter of intent (LOI) to join the (STM) alliance last month. "We have formed a special team to help (CEA) meet (STM)'s various requirements regarding Information Technology (IT) systems, frequent-flyer program and marketing so that it will be in line with the standards of the other (STM) member carriers," Male said.

He predicted (CEA) will gain formal membership in 12 to 16 months. Air China (BEJ) and Shanghai Airlines (SHA) are Star Alliance (SAL) members and China Southern (GUN) is a member of the SkyTeam (STM) alliance. (GUN) is (CEA)'s sponsor to join the (STM) alliance. With (CEA) in the process of merging with (SHA), it is widely expected that (SHA) will withdraw from the (SAL) alliance and join the SkyTeam (STM) alliance. Male said he hoped (SHA) will join the (STM) alliance.

Delta (DAL) TechOps signed a three-year contract with China Eastern Airlines (CEA) to provide maintenance and repair services to "various airplane engine types," initially to three (CFM56-7)s.

737-79P (36768, B-5267), and A320-232 (4186, B-6671), deliveries.

June 2010: China Southern Airlines (GUN) said it remains on track to join the SkyTeam (STM) Cargo alliance formally in November, and sources indicate that it is contemplating a possible merger of its cargo business with that of China Eastern Airlines (CEA).

(GUN), which joined the SkyTeam (STM) passenger alliance in 2007, signed a letter of intent (LOI) to become the first Chinese airline to join a global cargo alliance. Currently, it operates two 747-400Fs and two 777-200Fs from Shanghai Pudong (PVG) to Amsterdam, Frankfurt, and Chicago O'Hare. Cargo Director, Luo Laijun noted that (GUN) is scheduled to take delivery of three new 777Fs in July and August and plans to operate them from (PVG) to Vienna, New York, and Dallas.

Meanwhile, (GUN) has not ruled out merging its cargo business with (CEA)'s. It long has been speculated that Beijing intends to merge the cargo operations of China's big three carriers into one cargo company that would be better positioned to compete against foreign airfreight players. But it may be impossible for Air China (BEJ) to merge its cargo business with (CEA) and (GUN) because (BEJ) has signed a framework agreement with Cathay Pacific Airways (CAT) to launch a cargo joint venture (JV) based in Shanghai. It is still waiting for government approval for the (JV).

Foreign airlines currently have a dominant position in the Chinese air cargo market, in which domestic carriers hold less than a <20% share of traffic. (CEA) Chairman, Liu Shaoyong said that (CEA) plans to introduce a strategic investor in its cargo business by year end and it is widely speculated the partner will be (GUN). (CEA) has agreed to join the SkyTeam (STM) passenger alliance under the sponsorship of (GUN).

(CEA) has a new cross-Strait route, Taipei - Shijiazhuang.

China's big three carriers plan to offer in-flight mobile phone service, according to the China Air Transport Association, which said the airlines signed a framework agreement with cellular technology development companies last year. Air China (BEJ), China Southern Airlines (GUN) and China Eastern Airlines (CEA) have submitted an application to the (CAAC) (CAC) seeking permission to offer in-flight mobile phone service but are still waiting for approval from the regulator. Passengers reportedly will be charged CNY15/$2.21 per minute to use the service, a proposed fee that has drawn complaints from some quarters in China as too high. In 2007, Shenzhen Airlines (SHZ) signed a contract with OnAir to equip its airplanes for in-flight mobile phone service, but the initiative was grounded when the (CAAC) declined to grant approval.

737-86N (39389, B-5516), (GEF) leased, 2 737-89Ps (29653, B-5517), (CGP) leased and (36769, B-5515), delivery and 2 A320-232s (4220, B-6672; 4340, B-6673), deliveries.

July 2010: China Eastern Airlines (CEA) is a major Chinese airline operating international, domestic and regional routes. (CEA) has a strong presence on routes within Asia and to Australia, Europe and North America. Domestic services link 90 towns and cities.

Employees = 44,153.

(IATA) Code: MU - 781. (ICAO) Code: CES (Callsign - CHINA EASTERN).

Parent organization/shareholders: China Eastern Air Holdings Corporation (42.84%); publicly held (29.4%); and CES Global (CEA Holdings subsidiary) (17.09%).

Airline subsidiaries/shareholdings: China Eastern Airlines Jiangsu (63%); China Cargo Airlines (CKK); Xingfu Airlines (40%); and China Eastern Airlines Wuhan (WUH) (96%).

Main base: Shanghai Hongqiao International airport (SHA).

Hub: Shanghai Pudong International airport (PVG).

(CEA) is moving forward with the integration of its China Cargo Airlines (CKK) subsidiary and the cargo subsidiary of merger partner Shanghai Airlines (SHA), Shanghai Airlines Cargo International, according to (CEA) General Manager, Ma Xulun. (CEA) acquired (SHA) last year. Ma said the companies are in discussions on how to apportion the original shareholders' respective shareholdings in the combined cargo company. He revealed that the investors, including China Ocean Shipping Company and (EVA) Air, are reluctant to sell their stakes. (CEA) Chairman, Liu Shaoyong said previously that (CEA) expects to introduce a strategic investor for its cargo subsidiary this year, with implications for the holdings of China Ocean and (EVA).

But Ma rejected widespread speculation that the cargo operations of China's big three carriers will be merged into a single freight airline. "Currently we are still busy with our internal cargo merger," he said. He pointed out that (CEA) has completed its integration with (SHA) in the areas of marketing, Maintenance Repair & Overhaul (MRO), ground service and Information Technology (IT). The merger is expected to save -CNY680 million/-$99.9 million annually. Owing to the synergy effect, and strong domestic market rebound, (CEA) is expected to report a bigger profit for the first half of this year than in the year-ago period, when it earned +CNY1.173 billion.

(CEA) parent, China Eastern Air Holding Company (CEAH) posted a net profit of +CNY2.21 billion/+$326.7 million for the first half of 2010, a better-than-threefold increase over the +CNY600 million earned in the prior-year period.

(CEA) cited a strong domestic market rebound and synergies achieved through its merger with Shanghai Airlines (SHA). (CEAH) General Manager & (CEA) Chairman, Liu Shaoyong previously had said the company needed to "survive first" through the down-turned economy then could "stand up" and eventually "run" again.

(CEAH) reported that its first-half operating revenue climbed +46.5% year-over-year to CNY35.4 billion. Its total capital reached CNY101.75 billion as of June 30 and it operated a fleet of 338 airplanes serving 153 destinations domestically and internationally.

Citibank said that Chinese carriers’ collective net income in the first half of this year will exceed their total net income for full-year 2007.

China Eastern Airlines (CEA) launched a Yunnan subsidiary (YUN) based on a framework agreement the Shanghai-based carrier signed with the Yunnan local government in May 2009. In a statement released via the Shanghai Stock Exchange, (CEA) said its initial investment will be CNY2.38 billion/$35 million to hold a 65% stake in the new entity. The Yunnan local government holds the remaining 35%. The deal still needs approval from (CEA)’s minority stakeholders. The (CEA) Board Secretary, Luo Zhuping said it will be able to expand its market share in Yunnan (it now has about a 50% share) by launching the subsidiary.

China Eastern Airlines (CEA) also selected the (CFM56-5B) to power 30 new A320 family airplanes with deliveries beginning in March 2011 valued at approximately $600 million at list price.

August 2010: China Eastern Airlines (CEA) parent, China Eastern Air Holding Company reported net income of +CNY1.76 billion/+$259.3 million for the six months ended June 30, up +78.7% over a +CNY985 million profit in the year-ago period.

(CEA)'s six-month operating revenue climbed +92% to CNY33.6 billion, while operating expenses rose +63.6% to CNY27.58 billion, mainly owing to higher fuel prices and costs associated with its merger with Shanghai Airlines (SHA). (CEA) credited "robust growth of the domestic market" and the "synergy effect" achieved by the merger for the improved performance.

(CEA) introduced 19 airplanes during the January - June period, comprising eight A320s, two A321s, three 737-700s, four 737-800s and two 777Fs. It phased out 12 airplanes: Eight MD-90s, one MD-11, two A320s and one 737-300. It operated a fleet of 338 airplanes as of June 30. (CEA) plans to introduce 20 new airplanes in the second half of the year and 25 in 2011.

First-half passenger boardings rose +45% year-over-year to 30.1 million with an average load factor of 75.8% LF, up +5 points. Cargo traffic volume increased +73.9% to 719,000 tonnes.

Looking ahead, (CEA) said it expects to reap benefits from the "continuous growth of domestic market demand" but also cautioned there are "many uncertainties" in the airline sector, including a "European economy recovery slowdown . . . [and] fluctuation of the fuel price and exchange rate . . . [and] the possibility of rising interest rates."

Chinese carriers earned collective net income of +CNY5.52 billion/+$815 million for the month of July owing to robust domestic demand growth, according to the (CAAC) (CAC).

The country's airlines transported 25.5 million passengers in the month, up +21% over the year-ago month, producing a load factor of 83.6% LF, up +6.8 points, while cargo traffic volume climbed +23.6% to 445,400 tonnes.

Air China (BEJ) transported 3.6 million passengers on domestic routes in July, up +20.2% over the year-ago month, while its passenger boardings on international routes jumped +30.3% to 582,200. For regional routes, the figure rose +59.7% to 143,600. The (CAAC) (CAC) said China Eastern Airlines (CEA)'s July passenger boardings on domestic routes rose +52.8%, while passengers carried on international routes climbed +80.1% and on regional routes grew +74%.

Chinese carriers earned collective net income of +CNY10 billion in the first half of 2010.

September 2010: SkyTeam (STM) alliance members China Southern Airlines (GUN) and Air France (AFA) signed an agreement to launch a joint venture (JV) on the Paris – Guangzhou route beginning November 1 that includes revenue sharing. (AFA) said in a statement that the two airlines will have “joint governance” of the (JV) and a “management committee, with five working groups, will be in charge of implementing it in the fields of network management, revenue management, sales, produces and finance.”

Air France/(KLM) Group CEO, Pierre-Henri Gourgeon said, “This (JV) agreement strengthens the links which already exist between (AFA) and (GUN). It consolidates our position in one of the most buoyant regions of the world and enables us to offer our customers improved service while maintaining costs. In this way, the Air France (AFA)/ (KLM) Group is confirming its rank as European airline leader to China.”

(GUN) President & CEO, Tan Wan Geng added, “The (JV) will enable both airlines to improve their competitiveness on a very buoyant market.”

Since 2004, (AFA) and (GUN) have been operating code share flights between Paris and Guangzhou, thanks to an agreement signed in 2003, according to (AFA). Within the framework of this (JV), “several other connecting destinations beyond these two cities will gradually be introduced on a code share basis,” said (AFA).

China Eastern (CEA) is also expected to become a formal member of the SkyTeam (STM) alliance next year and is negotiating with (AFA)/(KLM) about forming a (JV) on its Shanghai – Paris and Shanghai – Amsterdam routes. It is reported that (AFA) would sign a similar (JV) agreement with (CEA) on the Shanghai – Paris route at the end of 2011.

(KLM) has been placing its code on (GUN)’s daily, Guangzhou – Amsterdam service on board a 777-200 since 2001. (KLM) has also operated a (JV) with (GUN) on its Beijing – Amsterdam route since June 2006.

(GUN) signed a framework agreement with Air France (AFA)/(KLM) to launch a cargo (JV) in 2008, which was postponed owing to the global financial crisis. (KLM) Senior VP Route Network, Pieter Elbers noted in May that both carriers would formally launch the cargo (JV) once market conditions are appropriate. He also didn’t rule out the possibility of seeking a cargo (JV) with (CEA).

China Eastern (CEA) will be the first operator to offer Rockwell Collins’ dPAVES Boeing Sky Interior in-flight entertainment (IFE) system following an order to install the product on 30 737s. “With more than >130 of (CEA)’s airplanes already operating with our dPAVES family of products, we can confidently say our relationship with (CEA) is based on trust and continued innovation,” says Tommy Dodson, the supplier’s VP & General Manager for cabin and electromechanical systems. “It seems only right to have our first installation of the dPAVES 737 Sky Interior solution with such an important, long-standing customer of our (IFE) offerings.”

The system, which was unveiled in July, features retractable 12" liquid crystal display (LCD), high-definition screens, a touch-screen flight attendant entertainment control panel, and 160 gigabytes of storage capacity. The (IFE) system will enter service in 2011, says Rockwell Collins.

China Eastern Airlines (CEA) said its new subsidiary cargo carrier, comprised of the assets of China Cargo Airlines (CKK), Great Wall Airlines (GWZ) and Shanghai Airlines Cargo, will commence operations on January 1, 2011 from its base in Shanghai.

(CEA) General Manager, Ma Xulun noted that (CEA) will be the controlling stakeholder in the new entity. (CEA) acquired Shanghai Airlines (SHA) last year and signaled it would combine the two carriers' cargo subsidiaries. Earlier this year it took a 51% stake in Great Wall (GWZ), which operates three 747-400F freighters, based at Shanghai Pudong.

Ma said other shareholders in China Cargo (CKK), Great Wall (GWZ) and Shanghai Airlines Cargo (SHA) will also hold minority stakes in the new cargo carrier, though he didn't reveal the share proportion breakdown.

Great Wall (GWZ)'s stakeholders include Singapore Airlines (SIA), while China Ocean Shipping Group and Taipei-based Eva Airways (EVA) hold stakes in China Cargo (CKK) and Shanghai Airlines Cargo (SHA), respectively.

Shanghai is China's largest domestic air cargo market, but it is dominated by FedEx (FED), (UPS) and (DHL), rather than domestic operators. In addition to the new (CEA) carrier, Air China (BEJ) is expected to launch a joint venture (JV) cargo airline based in Shanghai in conjunction with Cathay Pacific Airways (CAT); the (JV) must still gain regulatory approval.

Separately, (CEA) signed a strategic cooperation framework agreement with Shanghai Airport Group, which controls both Hongqiao and Pudong. The parties said they intend to build Shanghai as an international aviation hub. Under terms of the agreement, (CEA) will allocate more capacity to Pudong to open more international routes and boost flight frequencies on existing international and domestic trunk routes.

(CEA) Chairman, Liu Shaoyong has said that (CEA) will embark on an ambitious international expansion plan starting next year. It hopes to change the ratio of international to domestic routes in its system from 3:7 currently to 4:6 by 2015.

2 A320-232 (4309, B-6696; 4342, B-6713), deliveries.

October 2010: China Eastern (CEA) reported net income of +CNY3.15 billion/+$470 million in the third quarter, significantly widened from +CNY23.16 million earned in the year-ago period.

(CEA) cited “the synergy effect achieved through [its] merger with Shanghai Airlines (SHA)” and “robust growth of the domestic market demand, especially stimulated by the Shanghai World Expo” as reasons for the much-improved performance.

Operating revenues climbed +91.4% to CNY21.83 billion, while operating expenses jumped +61% to CNY18.73 billion. It didn’t disclose the relevant figure for passenger boarding and cargo traffic volume.

(CEA) had a net profit of +CNY5.10 billion for the first nine months of this year, a more than fourfold increase over net income of +CNY1.19 billion posted in the same period of last year.

Looking ahead, Managing Director, Ma Xulun predicted domestic market demand would continue its strong growth. For this reason, (CEA) is deepening its exploration of domestic market potential as it boosts flight frequencies from Shanghai to Chengdu, Ganzhou, and Huai’an, as announced in the new winter and spring flight schedules.

(CEA) is also accelerating the pace of international expansion by increasing flight frequencies to Sydney and Melbourne. In addition, (CEA) is planning to launch service to Rome. (CEA) Chairman, Liu Shaoyong said that (CEA) is planning an ambitious international expansion next year and hopes to open more routes to Europe, the USA and Australia.

November 2010: China Eastern Airlines (CEA) said that its wholly owned subsidiary, Shanghai Airlines (SHA) has withdrawn from the Star Alliance (SAL) to join the SkyTeam (STM) alliance along with (CEA) next year.

(CEA) signed a formal agreement with the (STM) alliance in June and is scheduled to gain membership in 2011. Shanghai (SHA)'s departure had been expected after it agreed to merge with (CEA). (SHA)'s network will add +32 destinations to the grouping's network.

SkyTeam (STM) Alliance Managing Director, Marie-Joseph Male said, "The addition of the combined networks of China Eastern (CEA) and Shanghai Airlines (SHA) gives new opportunities for the SkyTeam (STM) alliance customers to access cities in all regions of China using Shanghai's Pudong and Hongqiao airports." (CEA) acquired (SHA) last year.

The SkyTeam (STM) alliance also counts China Southern Airlines (GUN) as a member. China Airlines (CHI), based in Taipei, is additionally expected to join the alliance in 2011.

Without (SHA), the Star (SAL) alliance's only Chinese member is Air China (BEJ). The Oneworld (ONW) alliance has no mainland Chinese participants but Hong Kong-based Cathy Pacific (CAT) is a member.

Rolls-Royce (RRC) announced it received an order for (Trent 700) engines from China Eastern Airlines (CEA) to power its 16 A330 airplanes. The deal is worth $1.2 billion, it said. The A330s are scheduled to go into service from 2011. (RRC) and (CEA) also announced formation of a Carbon Partnership, which aims to reduce CO2 emissions by 190,000 tonnes in its first year and provide a fuel management service for the airline’s fleet of more than >300 airplanes. (CEA) Chairman, Liu Shaoyong said the airline anticipates the partnership will “reduce fuel consumption by at least -2% in its first year alone, the equivalent of a -190,000-tonne reduction in CO2, which equates to the amount of CO2 produced by 80,000 cars over the same period.”

China Eastern Airlines (CEA) is considering canceling its order for 15 Boeing (TBC) 787s owing to the airplane program's continuous delays, according to a (CEA) insider. "Most probably we [will] cancel," the source said. "We are negotiating with Boeing (TBC) about choosing [a] replacement airplane type now."

The cancellation would be another blow for the troubled 787 Dreamliner program, on which flight testing was indefinitely suspended following a November 9 in-flight fire that began as either a short circuit or an electrical arc on the P100 electrical panel, according to (TBC). (TBC) is widely expected to delay first delivery to (ANA), currently slated for the 2011 first quarter, by another six to nine months.

On November 24, (TBC) said it was developing "minor design changes" to power distribution panels on the 787 and updates to the systems software that manages and protects power distribution on the airplane. It added that a revised 787 program schedule "is expected to be finalized in the next few weeks."

Bernstein Research has moved its projection for the first delivery of the 787 back six months to August 2011 and forecasts that Boeing (TBC) will only deliver eight airplanes in 2011 instead of the 29 it had planned. Bernstein believes that (TBC) will deliver 61 787s in 2012, 78 in 2013 and 107 in 2014.

(CEA) placed its 787 Dreamliner order in 2005. Its wholly owned subsidiary, Shanghai Airlines (SHA), also has nine 787s on order; it is unclear whether (CEA) will cancel (SHA)'s 787 orders if it decides to axe its own.

(CEA) is planning an aggressive expansion of international services starting next year, and had planned to facilitate the growth in part through the addition of the 15 787 Dreamliners. (CEA) ordered 16 A330s at the end of last year to ensure it could expand even if the 787s arrived later than expected. The A330s are expected to be delivered from 2011 to 2014. (CEA) General Manager, Ma Xulun said (CEA) will operate the airplane on routes to Europe.

December 2010: China Eastern Airlines revealed its plan to consolidate its cargo subsidiaries as the merger process with Shanghai Airlines accelerates (ATW Daily News, Sept. 30).

CEA’s three cargo subsidiaries—China Cargo Airlines, Shanghai Airlines Cargo and Great Wall Airlines—will be consolidated into one cargo venture. CEA, with a 51% share, will be the controlling stakeholder. The other stakeholders include China Ocean Shipping (Group) Co., Eva Air and Singapore Airlines Cargo.

Eva noted it would invest CNY328 million ($49.1 million) to purchase a 16% stake in the new cargo venture. An industry insider told ATW that China Ocean Shipping (Group) Co. may hold a 17% stake and SIA Cargo would hold the remaining 16%.

December 2010: China Eastern Airlines (CEA) revealed its plan to consolidate its cargo subsidiaries as its merger process with Shanghai Airlines (SHA) accelerates. (CEA)’s three cargo subsidiaries: — China Cargo Airlines (CKK), Shanghai Airlines Cargo (SHA) and Great Wall Airlines (GWZ) — will be consolidated into one cargo venture. (CEA), with a 51% share, will be the controlling stakeholder. The other stakeholders include China Ocean Shipping (Group) Company, Eva Air (EVA) and Singapore Airlines Cargo (SQC).

(EVA) noted it would invest CNY328 million/$49.1 million to purchase a 16% stake in the new cargo venture. An industry insider said that China Ocean Shipping (Group) Company may hold a 17% stake and SIA Cargo (SQC) would hold the remaining 16%.

Airbus (EDS) has received an order from China Eastern Airlines (CEA) for 50 A320 series airplanes. The agreement is worth up to $3.2 billion.

January 2011: China Eastern Airlines (CEA) said it expects its 2010 net income to increase tenfold over a +CNY540 million/+$81.6 million net profit reported in 2009 owing to robust domestic market demand. The information was contained in a statement released by the Shanghai Stock Exchange this month. In discussing the factors leading to the earnings improvement (CEA) also cited the "synergy effect" achieved through its merger with Shanghai Airlines (SHA), travel stimulation attributable to the Shanghai World Expo and “improvement in operations and management that increased efficiency.”

China Eastern Airlines (CEA) had an excellent 2010, in part thanks to the Shanghai Expo, which stimulated demand in its largest market.
Acquiring Shanghai Airlines (SHA) also left it with significantly less competition, although it remains exposed to two private airlines: business oriented Juneyao Airlines (JYA) and the ultra-Low Cost Carrier (LCC), Spring Airlines (CQH).

737-86N (39393, B-5550), delivery for Shanghai Airlines (SHA) operations.

March 2011: China Eastern Airlines (CEA) reported a record net profit of nearly +CNY5 billion/+$761 million in 2010, based on international accounting standards, a massive increase over +CNY168.8 million earned in 2009. The increase can be credited to strong traffic demand, synergies gained through its merger with Shanghai Airlines (SHA) and traffic stimulated by the Shanghai World Expo.

Operating revenue lifted +89.3% to CNY74 billion, while operating expenses climbed +79% to CNY68.8 billion, in large part owing to a +76.3% increase in fuel costs to CNY21.6 billion.

Passenger boardings in 2010 rose +47% to 65 million, producing an average load factor of 78% LF, up +5.8 points. Traffic grew +53% to 93 billion (RPK)s on a +41% increase in capacity to 119 billion (ASK)s. Cargo carried heightened +55.2% to 1.5 million tonnes.

(CEA) took delivery of 39 airplanes in 2010, comprising 14 A320s, three A321s, five 737-700s, 13 737-800s and four 777F freighters and phased out 15 airplanes, comprising two A320s, one 737-700, three MD-11F freighters and nine MD-90 airplanes. As of December 31, (CEA) operated 355 airplanes comprised of 337 passenger airplanes and 18 freighters.

Going forward, (CEA) projects it will continue to reap benefits from robust growth in domestic demand generated by a fast-growing Chinese economy. It predicted it will transport 71 million passengers in 2011 with cargo volume expected to reach 1.6 million tonnes. But (CEA) also pointed out that challenges remain, citing the rapid construction of domestic high speed rail, a shortage of airspace, rising fuel prices and high inflation.

China Eastern Airlines (CEA) plans to aggressively expand its fleet, growing it +74% — or 250 airplanes — by 2015. (CEA) points to rising demand stimulated by the rapid growth of the Chinese economy and the global economic recovery.

(CEA) Chairman, Liu Shaoyong said that by 2015, the fleet will total 588 units comprising 531 passenger airplanes, 30 freighters and 27 utility airplanes.

Liu noted (CEA) will focus mainly on exploring the international market and improving its global competitiveness. He said (CEA) is scheduled to formally join the SkyTeam (STM) alliance on June 21. He emphasized that, “so far there is no timetable for introducing a strategic investor.”

Last year, Chinese carriers earned a record net profit of +CNY35.1 billion/+$5.28 billion, owing in large part to surging domestic growth. Liu commented that 2010 was "a special year and won't be repeated again in the future."

A320-214 (4659, B-6756), delivery.

May 2011: China Eastern Airlines (CEA) reported first-quarter net income of +CNY1.01 billion/+$155.8 million, up +31.5% over a +CNY770 million net profit posted in the year-ago period. In a statement released by the Shanghai Stock Exchange, (CEA) credited the result to the "continuous recovery of market demand stimulated by strong domestic economic growth, improvement of (CEA)'s operating efficiencies and strengthening revenue management."

Operating revenue jumped +16.6% to CNY18.16 billion, which (CEA) said was mainly attributable to synergies achieved through its merger with Shanghai Airlines (SHA) and increases in fuel surcharges. Operating expenses climbed +17.8% to CNY15.27 billion. Passenger load factor (LF) improved +2.2 points to 76.9% LF.

Looking ahead, Guosen Securities said it expects the aftermath of Japan's earthquake and tsunami to affect (CEA)'s performance in the international market; revenue generated on Japan routes accounts for 5% of (CEA)'s total operating revenue. Changjiang Securities said the (CEA)'s 2011 performance will improve over 2010 if international oil prices don't rise too high. Also, it predicted (CEA) will be boosted by its formal entry into the SkyTeam (STM) Alliance in June.

(CEA) inked a cooperation agreement with Liaoning province in northeast China, seeking to enhance its position in North China by adding capacity and boosting flight frequencies on routes from the provincial capital, Shenyang (SHE), to Shanghai, Xian (XIY) and Kunming (KMG).

According to the agreement, (SHE) - Shanghai service will increase to nine-times-daily in coming days. Flights from (SHE) to (XIY) and (KMG) will increase from three to five-times-daily on each route over the next two years.

Meanwhile, other carriers are also boosting their presence in North China. China Southern Airlines (GUN) also signed a cooperation agreement with Liaoning in February and Shanghai-based Spring Airlines (CQH) is considering establishing an operating base at (SHE).

The Chinese government raised domestic jet fuel prices to CNY7,640/$1,175 per ton, up +11.7% from CNY6,840 per ton in April, despite the decline of international oil prices since May. This is the third price hike this year. Fuel costs comprise more than >40% of Chinese carriers’ operating expenses. China Southern Airlines (GUN), which operates 80% of its flights on domestic routes, could see its fuel costs increase by +CNY2.11 billion annually owing to the change. Air China (BEJ) and China Eastern Airlines (CEA), which operate 70% of their flights on domestic routes, could see their annual fuel costs rise by +CNY1.79 billion and +CNY1.84 billion, respectively.

As a short-term solution, most Chinese carriers announced they have increased fuel surcharges on domestic routes. China’s big three carriers are reportedly considering restarting fuel hedging but first must receive government approval.

Japan Airlines (JAL) will expand its partnership with China Eastern Airlines (CEA) to increase the number of eligible flights under (JAL)'s Mileage Partnership Agreement. From June 1, (JAL) Mileage Bank members can earn mileage on all flights operated by (CEA) on Japan - China routes as well as China domestic routes, including non-code share flights that were not applicable.

(JAL) and (CEA) entered into a mileage agreement in 2008 and have also been code share partners since 2002. Currently, (JAL) code shares on (CEA)-operated flights, flying 18 routes between China and Japan and on five Chinese domestic routes.

June 2011: China Eastern Airways (CEA) and its subsidiary, Shanghai Airlines (SHA) officially joined the SkyTeam Alliance (STM) on June 21st - - SEE ATTACHED "AIRLINER WORLD" ARTICLE - - "CEA-2011-06-SKYTEAM ALLIANCE."

Chinese carriers facing pressure from the Beijing - Shanghai high-speed train (HST) rail service scheduled to start this month, are slashing air fares and making other adjustments to remain competitive. The Beijing - Shanghai air route is popular with business travelers. With an average load factor of more than >85% LF, it is the most profitable city-pair for domestic airlines, including China Eastern Airlines (CEA) and Air China (BEJ), the route's two biggest carriers.

(BEJ) Chairman, Kong Dong has expressed concern about the Beijing - Shanghai high-speed train (HST) rail service, noting that the route "is our lifeblood." However, he said (BEJ) is responding by adjusting capacity, simplifying the boarding process, enhancing service levels and improving on-time performance.

(CEA) is taking a similar approach by implementing a series of measures, including simplifying the boarding process, coordinating with air traffic controllers to guarantee on-time performance and improving cabin service. (CEA) Managing Director, Ma Xulun predicted that the Beijing - Shanghai high-speed train (HST) service will reduce air passenger traffic by -15% to -20% initially but that traffic will recover in six months when the (HST) and airline customer groups stabilize.

In addition, both carriers are expected to switch from an A330 to an A320 on the route to maintain high load factors.

An interesting comment by a reader of the above "(HST) vs Airplane" (who signed his name as "Autolycus") follows:

"Train or airplane, which is better, A to B?

Trains: - They have few delays, run on rails, depart almost immediately after doors close, virtually unaffected by weather, comfy (depending on ticket) seats, no baggage restrictions or fees for excess weight, more room to move around during journey, quicker passenger throughput at terminals, no delay waiting for baggage at destination, higher security for and access to baggage during journey, no communication (phone/computer) connection issues - though quiet cars & network coverage will affect these. The final point to consider in the railway's favor is city center-to-city center journey times - which are usually quicker by rail.

Airplanes: They have a lot of catching up to do in terms of passenger comfort and convenience. This includes the unacceptable personal intrusions (particularly by ill-suited "security" apes at USA airports), exorbitant excess baggage - and now other - additional fees, overall journey time from A to B and the cramped cabin conditions in economy (Y) class.

Conclusion: As rail travel improves globally and air travel stagnates, airlines - and airports - are going to have to compete on an equal footing or lose passengers to well-catered, clean, high-speed, Mag-Lev, reliable railway systems . . . And watch the rush increase when first-class (F) rail travel includes a similar range of interactive In-Flight Entertainment (IFE) (perhaps that should be (IJE)), as are enjoyed by even "cattle-class" air travellers now . . .

What happens across China this month will spread across the world next year."

Delta Air Lines (DAL) and China Eastern Airlines (CEA) launched a code share agreement under which (DAL) will place its code on 49 (CEA)-operated domestic flights in China, as well as nonstop transpacific flights connecting Shanghai with Los Angeles and New York (JFK). (CEA) will place its MU code on 38 (DAL)-operated USA domestic flights as well as on transpacific service connecting Detroit and Atlanta to Shanghai.

(GE) Aviation (GEC) has been selected to deploy a Required Navigation Performance (RNP) program at Jiuzhai Huanglong Airport in the Sichuan province of China. The cornerstone of the program is a network of (GE)-designed (RNP) paths that will improve access and maximise operational efficiency for airlines serving the airport. This significant contract marks the first airport-sponsored (RNP) program implementation in China.

(GE), in coordination with the airport and the Civil Aviation Administration of China (CAAC) (CAC), will design and deploy highly-precise approach and departure flight paths with custom-engineered vertical paths for each of the eight (RNP)-capable airlines that operate to Jiuzhai. This will enable Jiuzhai Airport to provide a common (RNP) path for all airlines while giving each airline the best performance possible for their fleet-type. (GE) also will provide (RNP) operations approval support and validation for two launch airlines, Air China (BEJ) (A319) and China Eastern (CEA) (737-700), followed by operations approval and validation support for six subsequent airlines.

In total, (GE) will deploy (RNP) procedures and provide maintenance and support services for eight airlines, operating five different airplane types from three airplane families at Jiuzhai.

Furthermore, (GE) will cooperate with the (CAAC) to support the local establishment of expertise through a package of tutoring and on-the-job training to qualified (CAAC) procedure design personnel to demonstrate effective methodologies for designing and validating flight procedures. (GE) also is working with the airport to identify terrain obstacles north of the airport that currently limit aircraft operations. The (RNP) program will solve limitations presented by the obstacle, improving accessibility for the eight operators.

"This joint undertaking marks a significant milestone in airspace modernization efforts in China," said Giovanni Spitale, General Manager for (GE)'s Performance Based Navigation (PBN) Services. "(GE) is proud to work with such forward-thinking organisations around the world that are working toward a common goal of improving airplane and air traffic management (ATM) operations."

Jiuzhai Airport, located at 11,311 feet/3,448 meters in the Himalayan Mountains, is the third highest airport in China. Delays and diversions are common at Jiuzhai due to inclement weather and poor visibility. (RNP) procedures can be deployed at any airport enabling airplanes to fly very precise paths with an accuracy of less than a wingspan. This precision allows pilots (FC) to land the airplane in weather conditions that would otherwise require them to hold, divert to another airport, or even cancel the flight before departure.

"In order to improve operational efficiencies at Jiuzhai, it was essential to be able to offer this solution to not just one airline that serves the airport, but to all the airlines," said Yang Hong Hai, Director of Flight Operations Management Division, (CAAC) Flight Standards Department. "We are confident that this (RNP) program will improve both airline operations and passengers experience when flying to and from Jiuzhai."

Chinese airlines and the (CAAC) are working with (GE) to deploy (PBN) solutions that align with China's (PBN) Implementation Roadmap. Since 2004, (GE)'s (PBN) Services has completed 16 (RNP) (AR) implementations for four Chinese airlines at six airports.

"Air China (BEJ) first began flying (GE)-designed (RNP) paths in 2005 at Lhasa to improve access to the airport," said Captain Chen Dongcheng, Vice General Manager of Operations Quality & Management department of Air China (BEJ) Southwest branch. "Since then, we have deployed (RNP) with (GE) at five other Chinese airports, improving access, schedule performance and lowering fuel usage. We are pleased to now be able to take advantage of similar benefits at Jiuzhai."

"Our daily operations into Lhasa and Yushu have improved significantly since deploying (RNP) in 2009," said Captain Zhao Jinyu, VP of China Eastern Airlines (CEA). "It's crucial to our business and to the communities we serve to provide consistent, reliable flights - - and (RNP) helps ensure this is possible."

(RNP) procedures, an advanced form of (PBN) technology, are very precise flight paths that can be designed to shorten the distance an airplane has to fly en-route, and to reduce fuel burn, exhaust emissions and noise pollution in communities near airports. Because of (RNP)'s precision and reliability, the technology can help air traffic controllers reduce flight delays and alleviate air traffic congestion. (GE) has designed and deployed more than >345 (RNP) flight paths around the world since 2003.

August 2011: Strong domestic demand helped fuel a +26.1% jump in China Eastern Airlines’ (CEA) net profit for the first half of the year. (CEA) reported a net profit of +CNY2.452 billion/+$384 million compared with net income of +CNY1.944 billion for the same period last year.

(CEA) said robust growth of domestic market demand and the synergy effect of its merger with Shanghai Airlines (SHA) were driving factors.

Operating revenue jumped +18.06% to CNY36.35 billion, while operating expenses increased +17.46% to CNY32.394 billion because of rising fuel costs that increased by +33.51% to CNY13.377 billion.

Passengers carried rose +10.38% to 33.245 million with load factors averaging 77.95% LF, up +2.14 points. Traffic (RPK)s increased +13.62% to 48.56 billion and capacity (ASK)s grew +10.49% to 62.3 billion. However, cargo traffic volume was down -7.31% to 666,490 tonnes.

(CEA) Chairman, Liu Shaoyong said “more uncertainties still remain” because of the unstable global economic situation and volatile fuel prices. He predicted (CEA)’s full-year performance would be slightly less than the +CNY5.38 billion in net income earned in 2010.

737-79P (39719, B-5276 - - SEE PHOTO - - "CEA-2011-08-1ST HOT AND HIGH 737-79Y"), equipped with High Altitude High temperature Airport Operations Feature Package and Boeing (TBC)'s Sky Interior will be based at Chengdu International Airport and will fly on routes in Western China. A new thrust rating for the jet's two (CFM56-7) engines will give it additional payload capability at high altitude, especially in hot weather. The package also includes an extended duration oxygen system and equipment to utilize the enhanced en route navigational requirements for flying in mountainous terrain.

China Eastern Airlines (CEA) Sichuan Company will operate the airplane at high altitude airports in western China.

September 2011: China Eastern Airlines (CEA) has awarded (IAE) International Aero Engines an order for (V2500) engines to power a new fleet of 50 A320-family airplanes. The agreement also includes a long-term (IAE) engine maintenance agreement. The value to Pratt & Whitney of the order and aftermarket agreement is approximately $400 million.

October 2011: China Eastern Airlines (CEA) announces new domestic route: Hefei to Air China (BEJ)’s Chengdu hub.

(CEA) has canceled an order for 24 787 Dreamliners and replaced it with an order for 45 737s, citing delivery delays and a weakening economy. (CEA) placed its 787 Dreamliner order in 2005. In November, an agency insider said (CEA) was considering canceling 15 787s because of the airplane’s continuous delays.

The "Wall Street Journal" reported that the 787 cancellation was revealed in a regulatory filing in Hong Kong.

Chinese carriers have ordered a total of 57 787s, including 24 by (CEA), 15 by Air China (BEJ), 10 by China Southern Airlines (GUN) and eight by Hainan Airlines (HNA).

2 A320-214s (4748, B-6803; 4877, B-6805), ex-(B-505L) & (F-WWDZ).

November 2011: China Eastern Airlines (CEA) reported a third-quarter profit increase owing to the continuous robust growth of domestic market demand. (CEA) posted a third-quarter net income of +CNY3.31 billion/+$523 million, up +4.9% over a net profit of +CNY3.16 billion in the year-ago quarter. Operating revenue climbed +12% to CNY24. 45 billion, while operating expenses rose +13.6% to CNY21.27 billion.

In the first nine months of the year, (CEA) earned a net income of +CNY5.76 billion. (CEA)’s operating revenue grew +14% to CNY63.23 billion from January to October, while its operating expenses also increased +14% to CNY 58.07 billion.

(CEA) General Manager, Ma Xulun, was promoted to Secretary of the Party Leadership Group of China Eastern Airlines (CEA) Air Holding Company.

737-79P (39720, B-5282), ex-(N1786B, 3 A320-214s (4769, B-6829; 4776, B-6830; 4799, B-6831), and 2 A330-243s (1262, B-6537; 1267, B-6538), A330-243, (1267) delivery painted in corporate grey and blue colors of the Skyteam Alliance (STM).

January 2012: China Eastern Airlines (CEA) parent, China Eastern Air Holding (CEAH) reported 2011 net income of more than >+CNY5 billion/+$793 million, a slight increase over a net profit just under +CNY5 billion in 2010.

Though earnings didn't grow significantly in 2011, (CEA) was able to maintain the large profit jump achieved in 2010. Speaking at the company's annual conference, (CEAH) General Manager & (CEA) Chairman, Liu Shaoyong credited the continued profitability to a “hub effect.” (CEA) is building Shanghai as its multi-point international hub while Kunming serves as its regional hub, a strategy Liu believes is serving (CEA) well. Also, he said, its SkyTeam (STM) Alliance membership enabled (CEA) to enjoy “a remarkable route network effect through cooperation with other member airlines.” (CEAH) said other subsidiaries also contributed to the result.

(CEAH) did not disclose 2011 operating revenue and expenses. Annual (CEA) passenger boardings rose +5.7% year-over-year to 68.8 million with an average load factor of 78.8% LF, up +0.8 point compared to 2010, while cargo traffic volume stayed flat at 1.5 million tonnes. Average daily airplane utilization increased +0.1 hours to 9.84 hours.

Looking ahead, Liu warned that the worsening global economic outlook would increase uncertainties in the airline industry. “In China, it won’t be easy for Chinese carriers to maintain consecutive growth in [the] domestic air transport market in 2012, which would lead to reduction of net profit reported by domestic carriers [this year],” Liu said. He expects (CEA)’s international routes and cargo business to be negatively impacted by global economic sluggishness in 2012.

SkyTeam (STM) Alliance airlines have co-located their check-in counters at Beijing airport’s old terminal.

A320-214 (4844, B-6870), ex-(B-515L), and A330-243 (1280, B-6543), ex-(F-WWKM) deliveries.

February 2012: China Eastern (CEA) has launched flights between Kunming (KMG) and Chiang Rai (CEI) in northern Thailand. Flights operate three times weekly using CRJ200 airplanes. This is currently Chiang Rai’s only regular scheduled international service. Last year, passenger numbers at Chiang Rai Airport grew by +12.7% to 818,163 passengers of which less than <10,000 were on international services.

Delta Air Lines (DL) has expanded code share agreements with SkyTeam (STM) Alliance partners China Eastern (CEA) and China Southern (GUN) airlines, allowing both Chinese carriers to place their codes and flight numbers on (DAL)-operated flights between Seattle and Beijing (PEK). In addition, (CEA) will place its code and flight numbers on (DAL)-operated flights between Detroit and (PEK).

The Civil Aviation Administration of China (CAAC) (CAC) has granted approval for China Eastern Airlines (CEA) to a launch a business jet aviation company based on the assets of subsidiary, China Eastern Airlines Executive Air (CEAEA).

(CEAEA) was established in 1995 as a ground handling company for business jets. The new entity would operate five airplanes and is expected to expand its fleet to 10 this year, according to (CEAEA) Managing Director, Wang Taiping.

All major Chinese carriers have been exploring the burgeoning business jet aviation market in China.

The Chinese government has raised domestic jet fuel prices to CNY7,465/$1,186 per ton, up +1.43% from CNY7,360 per ton in January, dealing another blow to Chinese carriers that have already suffered from a decline in domestic market demand and air fares following the Chinese Spring Festival.

This is the first fuel price hike this year. In January, the Chinese government cut domestic jet fuel prices by -3.83%. Since July 2011, Beijing has made monthly adjustments to domestic fuel prices based on fluctuating international fuel prices.

Fuel costs comprise more than >40% of Chinese carriers’ operating expenses. China Southern Airlines (GUN), which operates 80% of its flights on domestic routes, could see its fuel costs increase by +CNY273 million annually. Air China (BEJ) and China Eastern Airlines (CEA), which operate 70% of their flights on domestic routes, could see their annual fuel costs rise by +CNY234 million and +CNY242 million, respectively.

Despite the increase of domestic fuel price, Chinese airlines cannot raise fuel surcharges to offset rising fuel costs.

China has prohibited its airlines from participating in the (EU) Emission Trading Scheme (EU ETS), escalating the row over the new and controversial carbon emissions tax. According to a "Reuters" report, the Chinese government’s State Council issued a statement on its website that said Chinese carriers were prohibited from participating in (EU ETS) without government approval, and they were also barred from using (ETS) as a reason to raise fares.

The Association of Asia-Pacific Airlines (AAPA) Director General, Andrew Herdman told "Reuters" the ruling put Chinese carriers in a difficult position because they have to comply with (EU ETS), or risk large fines, while also being told by their government that they must not comply. “We’re now at the stage that it’s absolutely clear that a whole host of foreign governments are not going to allow the (EU) to do this,” Herdman said.

Chinese carriers are supporting Beijing’s decision to prohibit its airlines from participating in the European Union Emissions Trading Scheme (EU ETS), while still reserving the right to file a lawsuit.

“We are quite supportive of our central government’s decision and we think the real solution should be a global approach through [ICAO],” China Eastern Airlines (MU) Chairman, Liu Shaoyong said. He emphasized that domestic carriers are reserving the right to file a lawsuit against the (EU ETS).

China Air Transport Association (CATA) Director General, Wei Zhenzhong said that “Beijing’s decision reflects Chinese carriers’ wishes and also is quite helpful to protect the real interest of domestic airlines and air travelers.” (CATA) estimates operating expenses of Chinese carriers will increase by +CNY800 million/+$127.2 million annually because of (EU ETS). Air China (BEJ), which operates the most European routes, is expected to see the largest rise in expenses (+CNY200 million). (CEA) is expected to follow at +CNY100 million.

Expenses associated with the (EU ETS) are predicted to keep rising as Chinese carriers open more international routes to Europe to compete with the high speed rail. This year, (BEJ) is scheduled to launch service from Shanghai - Paris and China Southern Airlines (GUN) plans to open a Guangzhou - London route.

Wei said that Beijing’s decision was just the first step in the escalating row over the new controversial carbon emissions tax, as Chinese carriers will most likely be suspended from flying to Europe, a consequence of “not joining (EU ETS).” As a result, the Chinese government is considering counter measures against the (EU ETS) with Russia, India, Brazil, and other countries.

March 2012: China Eastern Airlines (CEA) reported a net profit of +CNY4.58 billion/+$722 million in 2011, down -7.7% from +CNY4. 96 billion in 2010, due to rising fuel prices and competition from China’s high speed rail system.

Operating revenue climbed +11.65% to CNY82.4 billion, while operating expenses increased +15.3% to CNY79.29 billion. Fuel expenses jumped +35.3% to CNY29.23 billion. (RPK)s rose +8.31% to CNY100.89 billion against a +7% increase in (ASK)s to 119.45 billion. Passenger boardings increased +5.84% to 68.7 million and load factor was 78.89% LF, up +0.91 points over the prior year. Cargo traffic volume decreased -1.49% to 1.443 million tonnes.

As of December 31, 2011, (CEA)’s fleet included 377 airplanes, comprising 358 passenger airplanes and 19 freighters. In 2011, (CEA) added 31 airplanes, comprising 17 A320s, two A321s, two A330-200s, two 737-700s, three 737-800s, two 777F freighters and three 747s. It phased out nine airplanes, including four MD-11F freighters, two Bombardier CRJ200s and three 767s.

(CEA) plans to introduce 200 airplanes by 2015. This year, (CEA) is scheduled to take delivery of 49 airplanes, comprising seven A319s, 19 A320s, five A321s, six A330-200s, two 737-700s and 10 737-800s.

Etihad Airways (EHD) signed a Memo of Understanding (MOU) with China Eastern Airlines (CEA) to develop a code share agreement.

China Eastern Airlines (CEA) and the Qantas (QAN) Group are planning to launch a low-cost carrier (LCC) subsidiary, Jetstar Hong Kong. The Hong Kong-based joint venture (JV) is expected to launch in 2013.

The new (JV), subject to regulatory approval, will make (CEA) the first state-owned Chinese carrier with an (LCC). According to (CEA), the new (JV) will have a registered capital of $115 million; each airline will own a 50% share of the (LCC).

“The low-cost airline market in Hong Kong has a significant development potential and room for growth, which provides the company with opportunities for investing and developing the businesses in [a] low-cost airline,” (CEA) said.

(CEA) Chairman, Liu Shaoyong said, "Cooperation with the Qantas (QAN) Group is a key step in (CEA)'s international expansion strategy and an excellent opportunity for (CEA) to develop low-cost carrier (LCC) operations to complement its existing business model.”

“Establishing Jetstar Hong Kong in the heart of Asia and on the doorstep of mainland China is a historic opportunity to continue the successful expansion of the Jetstar brand in this region,” (QAN) (CEO), Alan Joyce said.

Jetstar Hong Kong is expected to operate three A320s, initially on intra-Asian routes starting from Hong Kong, and plans to expand its fleet to 18 A320s by 2015.

Jetstar (IMU) Group (CEO), Bruce Buchanan said the new airline will “trigger new travel demand” because it will offer fares at -50% less than full-service carriers.

An industry insider said that if Jetstar Hong Kong is successful, (CEA) will consider launching a new company called “Jetstar China to further explore the low-cost airline market in China.” China has only one (LCC), Spring Airlines (CQH).

In recent years, the number of (LCC)s in the Asia/Pacific region has been growing.

Peach Airlines (PCH), the (JV) established by (ANA) and Hong Kong First Eastern Financial Investment Group began operations in March. AirAsia Japan, a (JV) between All Nippon Airways (ANA) and AirAsia (ASW), will launch in August. Singapore Airlines (SIA) has launched its low-cost subsidiary, Scoot (SCT), this month.

(QAN)’s new (LCC) Jetstar Japan has pushed up the launch of its domestic services to July 3, several months ahead of schedule.

April 2012: China Eastern Airlines (CEA) and Cathay Pacific Airways (CAT) have downgraded their first-quarter profit forecasts citing the slowdown of market demand and high fuel prices. They also pointed to increasing global economic uncertainties and political turmoil in the Middle East for the forecast downgrade.

(CEA) expects its first-quarter profit to drop by more than half from CNY1.01 billion/$155.8 million reported in the year-ago quarter.

(CAT) said it may have to park airplanes and reduce the number of flights if weakening demand and high fuel costs persist, according to Dow Jones. (CAT), which had already warned of a very challenging 2012, said business has worsened over the last month with falling passenger yields for its economy-class (Y) products as well as its more profitable first- (F) and business-class (C) cabins.

“Fuel prices remain at crippling highs and our cargo business still shows no sign of any sustained pick-up,” (CAT) (CEO), John Slosar said. “The recent turmoil in the euro zone reinforces the fact that the world is still balancing on a knife edge.”

China Southern Airlines (GUN) earlier this month predicted a sharp first-quarter decline, citing similar reasons

(CEA) has announced plans to operate non-stop scheduled services from Wuhan Tianhe aiport (WUH) to Japan and South Korea over the next couple of years. It currently operates some charter services to both Osaka Kansai International airport (KIX) and Shizuoka Mount Fuji airport (FSZ) but plans to implement scheduled flights as part of a plan to grow its Wuhan based division partially funded by the regional government.

(CEA) plans to launch a thrice weekly, Wuhan - Singapore service on 19 April. (CEA) will compete with SilkAir (SLK) on the route when (SLK) launches its service on 24 May.

(CEA) has agreed to buy 20 777-300ERs as (CEA) expands capacity to meet growing demand in Asia-Pacific and China. The agreement must be approved by the Chinese government.

In March, Airbus (EDS) said China was blocking a potential (CEA) deal to purchase A330s in protest of the European Union Emissions Trading Scheme (EU ETS) carbon tax that was imposed on airlines at the beginning of this year.

May 2012: The Chinese government has cut domestic jet fuel prices to CNY7,932/$1,257) per ton, down -1.6% from CNY8,061 per ton as international fuel prices keep fluctuating.

This is the second time the Chinese government has reduced domestic jet fuel prices this year. Beijing cut domestic fuel prices -3.8% to CNY7,360 per ton in January from CNY7,653 per ton in December. The Chinese government has raised fuel prices three times this year.

Fuel costs comprise more than 40% of China’s big three carriers total operating expenses, so it is expected the reduction will give some relief to Chinese carriers.

China Southern Airlines (GUN), which operates 80% of its flights on domestic routes, could see its fuel costs decrease by -CNY335.4 million annually. Air China (BEJ)) and China Eastern Airlines (CEA), which operate 70% of their flights on domestic routes, could see their annual fuel costs reduce by -CNY287.26 million and -CNY297.2 million, respectively.

June 2012: Jetstar Hong Kong, the joint venture (JV) low-cost carrier (LCC) being set up by China Eastern Airlines (CEA) and the Qantas Group subsidiary Jetstar (IMU), is on track to formally launch by the end of 2012 or early next year, according to (CEA) Chairman, Liu Shaoyong.

The (JV), which will have a registered capital of $115 million with each partner owning 50%, was announced in March. The company has applied for its air operator’s certificate (AOC) from the Hong Kong government.

(CEA) General Manager, Ma Xulun asserted that (LCC)s have great potential in the Chinese market. “(LCC)s account for more than a >25% share of the global air transport market and the figure is more than >33% in Southeast Asia, while comparably speaking, this figure is less than <5% in China,” Ma said.

Industry analysts pointed out that challenges remain for Chinese carriers developing (LCC) business models, including high import taxes for foreign-made airplanes and a shortage of pilots (FC) and airports. Liu conceded that “the operating environment for domestic carriers still needs to be improved,” but added he is confident Jetstar Hong Kong can make a profit by its third year of operation.

The only (LCC) in China is Shanghai-based Spring Airlines (CQH), which has been profit-making since its launch in 2004. It reported net income of +CNY500 million/+$79 million) in 2011. Spring (CQH) is preparing to launch an Initial Public Offering (IPO).

July 2012: China Eastern Airlines (CEA) expects to post improved results in the second half, due to the recovering market demand and falling fuel prices, according to (CEA) (CEO), Ma Xulun.

Ma said (CEA) has faced big operating pressures (the reduction of premium traffic, high fuel prices, the slowdown of Chinese export volume and yuan appreciation) in the first half.

Chinese carriers reported a collective net loss of -CNY 1.37 billion/-$216 million in May.

Ma said (CEA) will allocate more capacities to West China and North China in the second half due to the more robust growth of market demand. It also plans to resume fuel hedging.

737-86N (39400, B-5683), (GEF) leased, 737-89P (40949, B-5589), Avolon leased, A320-214 (2182, B-6029), repainted into special "Magnificent Qinghai" colors, 2 A321-231s (3969, B-6591; 4374, B-6668), ex-(D-AVZH & AVZX), and A330-343X (777, B-6126), repainted into special "www.people.cn" colors.

August 2012: China Eastern Airlines (CEA) has purchased a 20% stake in China United Airlines (CUL) from parent company, China Eastern Air Holding, giving it 100% ownership of (CUL).

Through this transaction, (CEA) aims to further expand into the Beijing market, according to industry analysts.

Beijing-based (CUL) was launched in 2004 with a registered capital of CNY100 million/$15.8 million. (CEA) held an 80% stake and China Aviation Supplies International held the rest. In May, the State-owned Assets Supervision and Administration Commission of the State Council required China Aviation Supplies International to give its 20% stake to China Eastern Air Holding.

(CUL) operates eight airplanes, comprising six 737-800s and two 737-700s, on more than >20 domestic routes. (CUL) plans to open two new routes from Beijing to Guiyang and Yinchuan from September 1.

September 2012: China Eastern Airlines (CEA) has reported a first-half net income of +CNY806.9 million/+$127.2 million, down -64.6% compared to a net profit of +CNY2.28 billion in the year-ago period.

Operating revenue rose +4.63% to CNY38.04 billion against a +9.6% increase in operating expense to CNY35.52 billion. Fuel costs, which climbed +9.7% to CNY14.67 billion, accounted for 41.3% of total operating expenses.

(CEA) cited the global economic downturn, high fuel prices, increased competition from high speed rail and a slowdown of yuan appreciation for the results.

Passenger boardings increased +4.12% to 34.61 million with an average load factor of 79% LF, up +1.12 points over the year-ago period. (RPK)s grew +6.14% to 51.54 billion, while (ASK)s increased +4.6% to 65.19 billion.

Cargo traffic grew +2.37% to 6,823 tonnes. (RFTK)s climbed +18% to 2.27 billion against a +14.9% increase in (AFTK)s to 3.67 billion.

(CEA) is expected to raise CNY3.6 billion/$568 million by selling nearly 1.4 billion new shares on the Hong Kong and Shanghai stock exchanges to its parent company, China Eastern Air Holding. The transaction will ease its heavy debt burden, enabling (CEA) to pay off loans and add to its working capital, paving the way for an ambitious fleet expansion.

(CEA) Chairman, Liu Shaoyong said previously (CEA) was planning to reduce its debt ratio to less than <70% by 2015. As of June 30, (CEA)’s debt ratio was 80.5%, which will be reduced to 78.6% after the share sale.

Through this transaction, China Eastern Air Holding will increase its stake in (CEA) to 64.35% from 59.94%, which industry analysts say can pave the way for (CEA) to introduce a strategic investor.

China’s other major carriers have also raised funds by circulating new shares to cut their high debt ratio. Air China (BEJ) raised CNY1.05 billion in April, China Southern Airlines (GUN) raised CNY2 billion in June, and Hainan Airlines (HNA) raised CNY8 billion in August.

Chinese carriers are trying to increase capacity as quickly as possible. (CEA) plans to boost capacity +4% to +5% by introducing 21 airplanes in the second half, while (BEJ) expects to raise domestic capacity +13% and international capacity +5% to +6% in the same time frame.

In October, (CEA) will begin flying from Shanghai (PVG) to Sendai, Japan, using A320s.

Etihad Airways (EHD) has signed a code share agreement with China Eastern Airlines (CEA) that will initially see the (CEA) code appearing on (EHD) flights between (AUH) and (SHA). Subsequent phases of cooperation will see the (CEA) code appearing on all (EHD) flights to destinations not included on (CEA)’s network, with (EHD) planning to code share on (CEA)’s domestic services beyond its (SHA) hub.

For the first six months, (CEA) took delivery of 24 airplanes and phased out six airplanes. As of June 30, (CEA) operates a total fleet of 395 airplanes.

October 2012: China Eastern Airlines (CEA) commenced thrice-weekly services on the 1,950 km route from Kunming (KMG) in the south-western Chinese province of Yunnan to the popular Thai holiday island of Phuket (HKT). (CEA) has operated the route on and off since April 2009 and now returns with services operated with 737-700.

(GE) Capital Aviation Services Limited (GECAS) (GEF), announced delivery of two new 737-800s to China Eastern Airlines (CEA). Deliveries were completed in July and September and were part of (GEF)’s existing order book with Boeing (TBC).

(CEA) operates a fleet of more than >300 airplanes to more than >100 destinations.

November 2012: China Eastern Airlines (CEA) launched its third route to Australia on 30 October, when (CEA) connected its Shanghai Pudong (PVG) hub with Cairns (CNS) in northern Queensland. (CEA), which already serves Melbourne and Sydney in Australia, now flies the new route three times weekly with 264-seat A330-200 airplanes. This is notably the first route between Mainland China and Cairns. Cairns Airport’s CEO, Kevin Brown, commented: “Our aim is to make this a year round service to provide even greater benefit to the region. Rob Giason, Tourism Tropical North Queensland’s (CEO), said: “The arrival of (CEA) marked a symbolic part of the region’s journey to attract 200,000 Chinese visitors by 2015.”

(CEA) launched a new route across the Taiwan Strait on 13 November. From Nanjing (NKG) in eastern China, (CEA) now flies twice a week to Kaohsiung (KHH), Taiwan’s second-largest city, using A320 airplanes. This is (CEA)’s second route to Kaohsiung after its route from Wuhan.

(CEA) said it plans to open new routes from Shanghai to Amsterdam and San Francisco, California by 2015.

China Eastern Airlines (CEA) has relaunched China United Airlines (CUL) after purchasing a 20% stake from parent company China Eastern Air Holding in August. Through this transaction, (CEA) consolidated the assets of its former Beijing-based (CUL) subsidiary with the Hebei Branch Company to further expand into the Beijing market.

(CUL) was launched in 2004 by Shanghai Airlines (SHA) and China Aviation Supplies Holding Company. Its main operating base was Beijing Nanyuan Airport, a former military airport. When Shanghai Airlines (sha) merged with (CEA) in 2009, (CUL) became a wholly owned subsidiary.

A (CEA) insider said, “As Hebei province is quite near to Beijing geographically, it is necessary to consolidate our Hebei Branch Company with Beijing-based China United Airlines (CUL) to better explore the Beijing market.” The deal expands (CUL)’s fleet from eight to 23 airplanes.

Beijing is widely believed the best market in China due to the fast growth of passenger traffic, especially premium traffic. Beijing Capital Airport handles an estimated 8 to 10 million passengers annually.

Rockwell Collins signed a 10-year agreement with China Eastern Airlines (CEA) to renew their joint venture, Collins Aviation Maintenance Services Shanghai Limited (CAMSSL). (CAMSSL) provides service and support for communication, navigation, sensor, display, flight control computer, weather radar and in-flight entertainment systems.

China Eastern Airlines (CEA) has agreed to buy 60 airplanes from Airbus (EDS) as it expands its fleet and shifts its focus away from international routes toward meeting growing domestic demand. The A320 order is valued at $5.4 billion at list prices. 60 A320 passenger planes will be delivered from 2014 to 2017.

(CEA) also said it has agreed to sell 18 regional jets (10 from Embraer (EMB) and eight from Canadair) worth CNY1.54 billion/$245 million to Airbus (EDS) in a bid to streamline its fleet and reduce operating costs. (CEA) (CEO) Ma Xulun said earlier (CEA) plans to cut its 20 fleet types in half by 2015.

Earlier this year, (CEA) sealed a $5.94 billion deal for 20 777-300ERs. The 777s, which are scheduled to be delivered between 2014 and 2018, will operate on the Sino - USA routes.

“Although domestic and international market demand has declined this year compared with last year, we expect to see gradual recovery in market demand starting from next year, and thus we need to prepare for it beforehand,” a company insider said.

December 2012: China Eastern Airlines (CEA) started flying from Kunming (KMG) in the South-Western Chinese province of Yunnan, to Foshan (FUO) in the central Guangdong province of China. Daily 737-800 departures will be operated by China United Airlines (CUL).

(CEA) continued its expansion in Kunming (KMG) following the previous week’s launch of services to Foshan, and now offers daily flights to Xining (XNN), the capital of Qinghai province located on the Qinghai-Tibet Plateau in the west of the country. Flights on the 1,300 km domestic route are operated with A320s.

January 2013: China Eastern Airlines (CEA) continues its Australian expansion with the thrice-weekly flights from Nanjing (NKG) to Sydney (SYD), which it launched on 21 December. Operating with 298-seat A330-300, the airline is the first to connect Australia with this historic Chinese city located 300 km west of Shanghai. Sydney Airport’s (CEO), Kerrie Mather, said: “Earlier this year, China overtook the USA to become our second largest inbound nationality market, second to only New Zealand and we want to show that we are ‘China-ready”. (CEA) also expanded its international network from its Kunming (KMG) hub in southwest China, from where, on 28 and 29 December respectively, it commenced flights to the Vietnamese capital of Hanoi (HAN) and the capital of Cambodia, Phnom Penh (PNH). Offering two weekly frequencies on each route, China Eastern (CEA) is the solo carrier in both markets. In addition, (CEA) launched two domestic routes. On 27 December, it stepped into the previously un-served Hefei (HFE) to Yinchuan (INC) market. (CEA) now offers thrice-weekly departures from this eastern city to the capital of autonomous region Ningxia Hui with a stopover in Xi’an (XIY). On 1 January it then inaugurated seven-weekly flights from Chengdu (CTU) in the southwest of the country to the north-eastern city of Changchun (CGQ), competing with Air China (BEJ)’s five-weekly frequencies.

(CEA) launched a twice weekly Huai'an - Hong Kong service on 23 December using A320s. Huai'an is located in the eastern Jiangsu province.

(CEA) returned on its only Thai route from Chengdu (CTU) on 26 January, and now operates daily services to Phuket. While Sichuan Airlines (SIC) and City Airways already operate the route, with six and twice-daily frequencies respectively, Thai Airways (TII)’s five-weekly services to Bangkok are the only other route to Thailand from the Sichuan city. Flights on the route, which was last operated by China Eastern (CEA) in October 2012, are operated using A320s.

(CEA) plans to launch a daily, Shanghai Pudong - San Francisco service on 26 April using A330-200 airplanes on the route, says the SkyTeam (STM) alliance member. (CEA) will compete with United Airlines (UAL) and Air China (BEJ) on the Shanghai Pudong - San Francisco route.

Four SkyTeam (STM) Alliance airlines have launched a new program to strengthen their ties on services between China, Taiwan, and Hong Kong. Taiwan's China Airlines (CHI) and mainland Chinese carriers: China Southern Airlines (GUN), China Eastern Airlines (CEA), and Xiamen Airlines (XIA) have launched the Greater China Connection program, in which the airlines will jointly develop marketing and product strategies for travellers throughout greater China.

The program will give members of each carrier's frequent flyer programs mutual privileges and lounge access, while the combination of code shares across the four carriers will allow passengers more flexibility, say the airlines. They add that the program will extend across 41 airports and include more than >270 cross-strait flights per week.

The program will enhance the positions of the four carriers in the important cross-strait market, which has grown considerably since first direct flights between China and Taiwan started in 2009 on the back of strong business and leisure traffic.

In December 2012, the two countries were scheduled to hold talks that are expected to lead to an increased number of flights across the straits.

737-89P (40951, B-5731), Avolon (AZV) leased, A320-232 (5461, B-9900), ex-(F-WWBC) and A330-343E (1375, B-5920), ex-(F-WWYD), deliveries.

February 2013: China Eastern Airlines (CEA) inaugurated services from its Shanghai Pudong (PVG) hub to Sendai (SDJ) in the Japanese Miyagi Prefecture, making it the 17th destination it serves in the country. Four-weekly flights are operated on the 1,900 km route using A320s.

SkyTeam (STM) Alliance member carriers that currently operate out of Beijing Capital Airport are planning to move to the new airport in Daxing. The new airport, currently under construction, is expected to be completed by October 2017; formal operations are scheduled to begin in 2018.

China’s (STM) Alliance members (including China Southern Airlines (GUN), China Eastern Airlines (CEA) and Xiamen Airlines (XIA)) currently operate in Beijing Capital Airport’s Terminal 2. (STM) Alliance Managing Director, Michael Wisbrun has reportedly discussed the plan to move to the new airport with the Civil Aviation Administration of China (CAAC) (CAC).

The new airport, which was approved at the end of last year, will have six runways for civilian use and will be located in southern Beijing’s Daxing district. It has not officially been given a name yet.

Once the airport is operational, the Beijing Nanyuan Airport (which serves as a military and civilian base for China United Airlines (CUL) in the southern Fengtai district) will be closed. China United Airlines (CUL), a wholly owned subsidiary of China Eastern Airlines (CEA), is also expected to move to the new airport.

The new airport, which has been in the planning stage for years, will shoulder part of the traffic at Beijing Capital Airport. Last year, Beijing Capital handled 80 million passengers, exceeding its planned capacity of 76 million passengers by 2015. The planned capacity for the Beijing Daxing airport is 70 million passengers a year, but will initially handle 45 million passengers a year after the first stage is completed.

Honeywell Aerospace (SGC) extended a strategic partnership with China Eastern Airlines (CEA) to provide avionics (weather radar, traffic alert and collision avoidance systems, enhanced ground proximity warning system) for 58 new 737NGs as well as wheels and brakes for 15 new A330s. Under the terms, (SGC) will also provide a suite of aftermarket repair and maintenance programs for the braking systems.

See video on Shanghai narrated by Piers Morgan - -

March 2013: China Eastern Airlines (CEA) reported a net profit of +CNY3.43 billion/+$543 million in 2012, down -29.8% compared with the net income of +CNY4.89 billion in 2011, according to (CEA)’s statement released by the Shanghai Stock Exchange.

Operating revenue rose +1.9% to CNY85.57 billion against an increase of 6.04% in operating expense to CNY74.7 billion. (CEA) attributed the profit decline to the global economic recession, higher fuel prices, the impact of domestic high speed rail and “different external shocks."

Passenger boardings jumped +6.33% to 73.08 million with an average load factor of 79.8% LF, improved +0.92 points over the prior year. Passenger revenue grew +2.61% to CNY71.708 billion. Cargo traffic volume dipped -1.84% to 1.42 million tonnes. Cargo revenue decreased -1.4% to CNY8.031 billion.

Last year, (CEA) introduced 49 airplanes and phased out 10 older types. It operated a total of 428 airplanes comprised of 397 passenger airplanes, 19 freighters and 12 business jets.

This year, (CEA) is expected to take delivery of 42 airplanes through which it plans to boost overall capacity by +8% to +10%, (CEA)’s (CEO), Ma Xulun said. (CEA) plans to attach more importance to international markets as it is scheduled to open Shanghai - San Francisco in April and will boost flight frequencies on its international routes to Paris, Vancouver and Rome from Shanghai.

(CEA) plans to speed up its international expansion pace this year as international market demand gradually recovers and domestic market demand slows.

(CEA) (CEO), Ma Xulun predicted international market demand will improve over last year. He noted the global economy is slowly recovering, while domestic economic growth is slowing down, leading to the slowdown of domestic market demand. Also, the rapid construction of China’s high-speed rail is negatively impacting domestic market demand, although market demand in the central part of China and West China continues to grow.

It also plans to open more new routes with continuous deliveries of its medium- and long-haul airplanes.

Ma said international capacity accounts for 47% of (CEA)’s total capacity; international transfer passengers make up more than >80% of its transfer passengers.

However, Ma said (CEA)’s Sino-Japan routes, one of its traditional golden routes, has been hit hard by political tensions with no signs of recovery.

Boeing (TBC) and China Eastern Airlines (CEA) celebrated the delivery of the 1,000th Boeing airplane for China, one of the world’s most dynamic markets for commercial airplanes. Boeing forecasts that China will need 5,260 new airplanes, valued at $670 billion, in the next 20 years.

The 1,000th airplane, a Next-Generation 737-800 with the Boeing Sky Interior painted in special peacock livery, will join China Eastern Yunnan Airlines. (CEA) currently operates the largest 737 fleet among Chinese airlines.

Boeing airplanes comprise the majority of commercial jetliners operated in China, providing dependable, efficient service to more than >20 different Chinese airlines. Chinese suppliers contribute parts and components to every current Boeing commercial airplane model, including 737, 747, 767, 777 and 787. Today, more than >7,000 Boeing airplanes operating throughout the world use major parts and assemblies from China.

Headquartered in Shanghai, (CEA) is one of the three major airlines in mainland China. Flying a fleet of more than >400 long-haul and short-haul airplanes with an average age of less than <7 years, (CEA) serves nearly 70 million travelers annually and ranks among the world’s top five airlines in terms of passenger transportation volume.

April 2013: China Eastern Airlines (CEA) expanded its network with two new routes. On 23 April, (CEA) inaugurated low-frequency flights on its 15th route to Taipei Taoyuan (TPE), which it now serves with single weekly frequency from Yinchuan (INC) in the Ningxia Hui Autonomous Region. The A320-operated service faces competition from Far Eastern Air Transport (FAT)’s schedule of the same frequency. In addition, on 26 April, China Eastern (CEA) returned to the market from Shanghai Pudong (PVG) to San Francisco (SFO) following 13 years of absence. Daily flights are now offered on the 9,900 km route, on which (CEA) challenges the incumbent United Airlines (UAL)'s service, also offered on a daily basis. (CEA)'s A330-200s are deployed to operate the route, which is (CEA)’s fourth USA service from Shanghai. (CEA) already flies to Los Angeles, and New York (JFK) (daily flights each), as well as thrice-weekly to Honolulu in Hawaii.

Shanghai Pudong expects its fourth runway to be completed at the end of 2013 but new slots are unlikely to be available until some point in 2014. It is not clear (not even to Chinese carriers) how many new slots will be available, but an early estimate of 242 additional movements (121 round trips) between 7 to 22 each day could be possible. A more deciding factor will be how much additional airspace is opened by China's military for the runway.

The majority of the new slots at Shanghai Pudong Airport (and even upwards of 75%) will likely be allocated to China's domestic carriers. China Eastern (CEA), based at Shanghai, will have to battle Air China (BEJ), which is based at Beijing but looking to establish a hub at Shanghai. As the national flag carrier, Air China (BEJ) and its lobbying network may do well. Private carriers Juneyao (JYA) and Spring Airlines (CQH) will also look to expand their home bases.

A number of carriers, including low cost carriers (LCC)s, will seek to move midnight services to daylight hours, while any number of foreign carriers will seek to expand their presence or enter Shanghai for the first time. Strategic allocation will help Pudong, but the decision will be heavy, almost entirely, political.

The use of head-up displays (HUDs) in Chinese commercial airplanes has made a key advance in China with the decision by one of the country’s three biggest airlines, China Eastern (CEA), to introduce the technology into its narrow body airplanes.

With the Civil Aviation Administration of China (CAAC) (CAC) targeting near-universal use of (HUD)s by 2025, (CEA) has ordered Rockwell Collins (HUD)s for 58 737s, with deliveries due from mid-2013 to 2015.

Okay Airways (OKA), a much smaller carrier, has ordered the same equipment for 10 737s, with similar delivery dates to (CEA)’s.

(HUD)s are becoming steadily more common in commercial aviation globally because they increase safety and landing opportunities in bad weather by keeping pilots (FC)’s attention outside of the airplane, and they also can help guide the landing. But the (CAAC)’s policy is making manufacturers optimistic that the Chinese market will mature early.

Thales (THL) and Rockwell Collins are well positioned as the suppliers for the A320 family and the 737, respectively.

The Chinese market alone is considerable. Rockwell Collins, for example, says its (HUD), the Head-up Guidance System (HGS), has a catalog price of about $350,000 per set. On that basis, the two contracts announced on April 2 are worth about $24 million, before discounts.

Shandong Airlines (SHG) appears to have been the first Chinese carrier to begin using (HUD)s. It ordered the (HGS) for 737s around the middle of last decade, says Rockwell Collins Commercial Systems in China.

China Southern (GUN) ordered its five A380s with Thales (THL) (HUD)s. Xiamen Airlines (XIA) uses Rockwell Collins (HUD)s on its 737s.

May 2013: China Eastern Airlines (CEA) reported a first-quarter net loss of -CNY132.4 million/-$21.3 million, reversed from a net profit of +CNY266.5 million in the year-ago.

June 2013: China Eastern Airlines (CEA) will introduce a local investor for Jetstar Hong Kong, paving the way for approval from the Hong Kong government.

China Eastern Airlines (CEA)’s subsidiary, China Cargo Airlines (CKK) officially joined the SkyTeam (STM) Cargo alliance as it aims to expand its international route network. (CKK) signed a letter of intent (LOI) in June 2012.

“With liberalization of global aviation industry and growing trend of alliance development, it conforms to long-term strategic interest of China Cargo Airlines (CKK) to join SkyTeam (STM) Cargo, which can help (CKK) not only to benefit from scale economy but also be able to improve global competitiveness,” China Eastern (CEA) Senior VP, Shan Chuanbo said. (CKK) is moving forward with its strategic transition plan to become a logistics enterprise in addition to a cargo carrier.

(CKK) operates a fleet of 10 airplanes, comprising six MD-11Fs, two 747-400Fs and two A330-600Fs. It plans to gradually introduce 777F freighters to replace the MD-11F freighters. By 2015, (CKK) expects to use mainly 777Fs, 747-400Fs and A300-600Fs.

SkyTeam (STM) Cargo has nine member carriers, comprising Aeroflot (ARO), AirFrance (AFA) - (KLM) Cargo, Alitalia (ALI) Cargo, Delta (DAL) Cargo, Aeromexico (AMX) Cargo, China Airlines (CHI) Cargo, Czech Airlines (CSA) Cargo, China Southern (GUN) Cargo and Korean Air (KAL) Cargo.

Boeing Shanghai Aviation Services and Shanghai Civil Aviation College have signed a college-enterprise cooperation agreement to cultivate airplane maintenance talent. The agreement focuses on majors in aviation electrical maintenance, mechanical equipment maintenance and airplane structure design. After graduation, the students are provided the opportunity to compete for internships and employment with Boeing Shanghai.

737-89P (39726, B-5779), A321-231 (5705, B-9947), ex-(D-AZAI), and A330-243 (1421, B-5926), ex-(F-WWTQ), deliveries.

July 2013: China Eastern Airlines (CEA) increased daily, Shanghai - Vancouver service to 2X-daily. (CEA) increased its offering from Tibetan Lhasa (LXA) with the launch of its fifth route to the city on July 1 and now offers seasonal services of variable frequency from Shanghai Pudong (PVG) in addition to the existing routes. A330s are deployed to operate the route.

A320-214s (5668, B-9950), ex-(FWWBT), (SMBC) Aviation Capital leased,
(5691, B-9941), ex-(F-WWDK); (5710, B-9942), ex-(D-AVVK), (ICBC) Leasing leased, and A330-243 (1429, B-5930), ex-(F-WWCJ) deliveries.

September 2013: China Eastern Airlines (CEA) reported a first-half net profit of +CNY763.3 million, down -23% compared to a net income of +CNY995.1 million in the year-ago period.

China Eastern Airlines (CEA), China’s second largest airline by weekly flights and seats, has commenced operations on August 30 from Yinchuan (INC) to Hong Kong (HKG). The 1,930 km route, will be flown on (CEA)’s 158-seat A320s, with twice-weekly rotations (Mondays and Fridays). Currently, there is no competition on the city pair. Yinchuan becomes the 20th Chinese point connected to Hong Kong by China Eastern (CEA).

October 2013: China Eastern Airlines (CEA) launched daily service on October 18 on the 1,844 km route between Shanghai Pudong (PVG) and Manila (MNL) using A320s. The route is already served by three Philippine-based carriers, all operating daily flights: AirAsia Zest (RIT) (formerly known as Zest Air), Cebu Pacific Air (CEB), and Philippine Airlines (PAL). (CEA) now operates around 150 daily departures from Shanghai’s international airport, to some 90 destinations worldwide, including three in the USA (Los Angeles, New York (JFK), and San Francisco), and several in Europe, including Frankfurt, London, Paris, and Rome.

(CEA) plans to launch new services and raise frequencies on a number of international routes, as part of its winter schedule, which begins on October 27th. (CEA) said it will start a daily, Yinchuan - Kunming - Bangkok service on October 27th. This will be followed by Nanchang - Nanning - Singapore and Xian - Qingdao - Seoul Incheon services on October 29th and November 25th, respectively. On December 24th, a twice weekly, Wenzhou - Rome service will be launched.

It will resume thrice weekly seasonal, Shanghai Pudong - Cairns service, and raise frequencies on the Shanghai Pudong - London Heathrow and Shanghai Pudong - Honolulu routes to five times weekly each.

(CEA) will also double the Shanghai Pudong - Kuala Lumpur service to twice daily, add a ninth daily, Shanghai - Hong Kong service and increase the Changsha - Seoul Incheon frequency from four to six times weekly.

On the domestic front, (CEA) intends to increase frequencies on routes such as Shanghai - Haikou, Shanghai - Zhuhai, Kunming - Xiamen, Kunming - Shanghai, Shanghai - Dalian - Chaoyang, Shanghai - Shijiazhuang - Zhangjiakou, Kunming - Zhengzhou - Hohhot, Kunming - Guiyang - Wuhan, and Hangzhou - Wuhan - Zunyi, it added.

November 2013: China Eastern Airlines (CEA) has started serving Bangkok Suvarnabhumi (BKK) from its Chengdu (CTU) base. The daily flights on the 1,880 km route began on October 29 using (CEA)’s A320s. The route is already served by Thai Airways (TII) with daily flights. This is China Eastern (CEA)’s fourth service to Bangkok, as it already serves the airport from Jinghong, Kunming, and Shanghai. (CEA) also launched thrice-weekly flights between Nanchang (KHN) and Singapore (SIN) on October 29, using A320s.

December 2013: China Eastern Airlines (CEA) plans to convert its subsidiary, China United Airlines (CUL) into a low-cost carrier (LCC). The transformation should be completed next year.

China United (CUL) was launched in 2004; its main operating base (Beijing Nanyuan Airport) is a former military airport. Last year, (CEA) relaunched China United Airlines (CUL) by consolidating it with the Hebei Branch Company to be better positioned in the North China market.

China Eastern (CEA) also plans to set up two operating bases for China United (CUL) in Foshan (Guangdong Province) and a city in West China, in addition to Beijing Nanyuan.

China United (CUL) operates a single fleet of 25 Boeing 737s and plans to introduce two more airplanes in 2014. It is scheduled to expand its fleet to 50 airplanes by 2015. The subsidiary operates more than >50 domestic routes; passenger boardings are expected to exceed >5 million this year, up +43% compared to 3.5 million last year.

More and more (LCC)s are springing up in China after the Civil Aviation Administration of China (CAAC) (CAC) adopted more favorable policies to lower standards and simply procedures to take advantage of China’s domestic market potential and continuous economic growth.

(CEA)’s joint venture (JV), Jetstar Hong Kong, has not yet received approval from Hong Kong’s aviation regulator.

737-89P (39730, B-1907), 2 A330-2433s (1468, B-5937; 1479, B-5938), ex-(F-WWKT & F-WWYU), deliveries.

January 2014: SEE ATTACHED - - "CEA-2014-01-TOP 2013 WORLD AIRLINES-A/B."

China Eastern Airlines (CEA) has introduced three new international routes to its network during the last few weeks. On December 17th, it started flights between Ningbo (NGB) and Bangkok Suvarnabhumi (BKK) using A320s. Initially the schedule is a little erratic on the 2,780 km route, before peaking around Chinese New Year with daily flights and then settling down to a thrice-weekly schedule from mid-February onwards. A seasonal, twice-weekly (Tuesdays and Thursdays) service from Wenzhou (WNZ) to Rome Fiumicino (FCO) began on December 24th using A330s, and will operate until February 18th, after which the service will operate via Shanghai. Finally, on December 18th (CEA) began four times weekly flights from Wuxi (WUX) to Singapore (SIN). The 3,760 km route will be served by the (CEA)’s A320s.

Owing to low passenger load factor, China Eastern Airlines (CEA) announced that it will suspend its Shanghai - Matsuyama route till the end of March, extending two months from previous schedule. It is learned from that (CEA) will resume the service in April, with two flights weekly.

Opened in July 2004, passenger load factor on the international route was affected by worsening of Sino-Japanese relations, China's environmental issues and bird flu, resulting in a downturn around November 2012 with load factor of about 30% LF in general and 50% LF in peak seasons like summer holidays.

In order to meet passengers' travel needs to Thailand, China Eastern Airlines (CEA) will launch Shanghai Pudong - Chiang Mai route on February 1. The new service will be operated twice a week on Wednesdays and Saturdays, using an A320. The outbound flight MU205 is scheduled to take off from Shanghai Pudong International Airport (PVG) at 5:55 pm and arrive in Chiang Mail at 9:40 pm; while the return flight MU206 will depart from Chiang Mail at 10:40 pm and land in Shanghai at 03:10 am the next day (all local time).

Located in Thailand's northern mountainous region, Chiang Mai is Thailand's second largest city and also northern Thailand's political, economic and cultural center. This city, celebrated for its Buddhist traditions, beautiful natural scenery, historical and cultural sites and monuments, attracts visitors from all over the world year by year.

China Eastern Airlines (CEA) returned on its only Thai route from Chengdu (CTU) on January 26th, and now operates daily services to Phuket. While Sichuan Airlines (SIC) and City Airways already operate the route, with six and twice-daily frequencies, respectively, Thai Airways (TII)’s five-weekly services to Bangkok are the only other route to Thailand from the Sichuan city. Flights on the route, which was last operated by China Eastern (CEA) in October 2012, are operated using A320s.

China Eastern Airlines (CEA)'s new Airbus (EDS) single aisle fleet will feature surveillance systems, flight management systems and head up displays' from Thales (THL). (CEA) will add (THL)'s latest avionics solutions to a fleet of 60 A320s that it purchased for $5.4 billion in 2012. Delivery of those A320s is scheduled to begin this year.

According to Daniel Malka, VP & General Manager Avionics Services worldwide at Thales (THL), said the purchase should prepare the airline for future Air Traffic Management (ATM) requirements in China. Airbus (EDS) signed a partnership in September to modernize the nation's air traffic system, focusing on air traffic flow management and the implementation of Required Navigation Performance Authorization Required (RNP AR) approaches at Chengdu Airport and Instrument Landing Systems at Beijing Capital Airport.

“China Eastern, already one of our main customers for (FMS) systems, has now become our largest customer for (T3CAS) Surveillance Systems and Head-Up Displays (HUD) in China, which we feel will lay the foundations for future (ATM) requirements in this region," said Malka.

Among the (THL) solutions selected by (CEA) is the company's (ACSS) (T3CAS) surveillance platform, which is compliant with future (ATM) requirements in Europe. The system features a performance based Terrain Awareness and Warning System (TAWS) and an (ADS-B) capable transponder in a 6 (MCU) package, along with a full range of (ADS-B) In functions; which would prepare (CEA) for (ADS-B) future airspace mandates in the region, should regulations follow USA (FAA) directives.

(CEA) will also likely use the new Thales (THL)-equipped aircraft on several new routes that were introduced using A320s in December, including flights between Ningbo (NGB) and Bangkok Suvarnabhumi (BKK), and Wuxi (WUX) to Singapore (SIN).

China is expected to lead the global increase in passenger demand on domestic routes through 2016 with an additional +193 million passengers projected to travel domestically on Chinese carriers over the next three years.

February 2014: China Eastern Airlines (CEA) began twice-weekly flights (Wednesdays and Saturdays) on February 1st between Shanghai Pudong (PVG) and Chiang Mai (CNX) in Thailand. The 2,670 km sector is already served by Juneyao Airlines (JYA), who operates the route six times weekly at present, though this reduces to four times weekly from mid-February. (CEA), which already serves Chiang Mai twice-daily from Kunming, will operate the route with A320s. Last year, Chiang Mai International Airport handled over five million passengers.

Announcers at Pudong International Airport have begun broadcasting greetings messages and some boarding information in the Shanghai dialect, the airport authority said. The welcome announcements can be heard by all passengers in Terminals 1 and 2 after those delivered in Mandarin and English, while the local (shanghai) dialect will also be used for boarding information for flights between Shanghai and Hong Kong, it said.

The new system was introduced on a trial basis during the Chinese Spring Festival, but might become a regular feature if passengers are in favor of it, an official said. Meanwhile, Shanghai Airlines (SHA) said it too is trying to promote local culture by printing the lyrics to Shanghai-dialect folk songs on its meal boxes.

The new containers, which also offer tips on pronunciation, will be used on all flights from next month, it said.

China Eastern Airlines (CEA) and Shanghai Airlines (SHA) said they have also begun making broadcasts in the Shanghai dialect on selected flights into the city.

The local dialect is used to promote some of the city's main attractions, though English and Mandarin are still used for key safety messages and service announcements, the airlines said.

On the roads, the operators of the No 49 bus route, which runs across the downtown area via Nanjing Road and People's Square, have also introduced the Shanghai dialect for announcements, though not everyone thinks it's such a good idea. "Local people don't need to listen to the announcements, while out-of-towners can't understand them," local white-collar worker, Huang Yizhou said, adding that the messages should just be delivered in Mandarin and English.

Others said if every province started using its own dialect on airline flights, the communication system would get very confusing.
According to a report by the Shanghai Statistics Bureau, more people in the city speak Mandarin than the local dialect.

The survey of about 1,000 people found that 97% could speak Mandarin, while just 81.4% could speak the Shanghai dialect. It also found the popularity of the local tongue is diminishing, with fewer young people able to speak it than their older peers.

China Eastern Airlines (CEA) has ordered 70 Airbus A320neo airplanes, making the (CEA) the first Chinese airline to order the type. According to a filing released by (CEA) through the Shanghai Stock Exchange, the deal is worth $6.37 billion at current list prices.

The airplanes are scheduled to be delivered from 2018 to 2020 and will be operated on short- and medium-haul routes. The deal, which still needs Chinese government approval, would enhance the carrier’s competitiveness by increasing its capacity by about +12.7%.

Separately, (CEA) also said it signed a deal with Airbus (EDS) to sell back seven used A300-600s that would be phased out in 2014.

March 2014: China Eastern Airlines (CEA) plans to launch its long-awaited Shanghai - Toronto service from June 25, to meet the increasing travel demand on one of the most popular North America routes. The Shanghai - Toronto service is (CEA)'s second route to Canada. (CEA) will operate Airbus A340-600 airplanes on the route, with 3 flights weekly on Wednesdays, Thursdays and Saturdays.

Flight MU207 is scheduled to take off from Shanghai Pudong International Airport (PVG) at 12:40 pm and arrive at Toronto Pearson Airport (YYZ) at 2:25 pm, with the return flight MU208 departing Toronto at 4:25 pm and arriving at Shanghai Pudong at 6:40 pm +1 (all local time).

According to a report earlier this year, Hainan Airlines (HNA) will launch Shanghai - Toronto service in May, a move to compete with its rivals China Eastern (CEA) and Air China (BEJ). (CEA) plans to operate its Boeing 787 Dreamliner on the route with two flights weekly on Mondays and Thursdays.

April 2014: China Eastern Airlines (CEA) reported net income of +CNY2.38 billion/+$386 million in 2013, down -25% compared to net profit of +CNY3.17 billion in 2012. Full-year operating revenue rose +1.9% to CNY88 billion, while expenses increased +6% to CNY80.34 billion. Fuel costs were up +2.7% to CNY30.68 billion in 2013.

(CEA) said the profit decline was due to the slow recovery of the global economy, high fuel prices, the slowdown of domestic economic growth, weak premium market demand, and intensified domestic market competition.

Passenger boardings rose +8.23% to 79.09 million with an average load factor of 79.21% LF, down -0.6 point compared to the year-ago period. Passenger traffic climbed +10.4% to 120.46 billion (RPK)s against a +11% increase in capacity to 152.08 billion (ASK)s. Cargo volumes dropped 0.44% to 1.41 million tonnes. Cargo traffic rose +3.32% to 4.86 billion (RFTK)s, while capacity increased +8.25% to 8.028 (AFTK)s.

Last year, (CEA) took delivery of 58 passenger airplanes and phased out nine airplanes, comprising four passenger airplanes and five freighters. The carrier has 478 airplanes in its fleet, comprising 451 passenger airplanes, 14 freighters and 13 business jets.

On April 21st, China Eastern Airlines (CEA) began daily flights between Lijiang (LJG) and Hangzhou (HGH). This is (CEA)’s 10th destination from Lijiang and 19th from Hangzhou. The 1,990 km route will be served by (CEA)’s 737s and faces direct competition from Air China (BEJ) and Beijing Capital Airlines (DER), who both operate daily flights as well. In addition, (CEA) on April 20th also introduced a new weekly (Sunday) service between Nanchang (KHN) and Kaohsiung (KHH) in Taiwan. This 810 km route is flown by (CEA)’s A320 fleet, and will face competition from China Airlines (CHI)’s weekly service.

Hubei Shennongjia Airport (HPG), the highest civil airport in Central China, announced that it will officially start commercial operation on May 5, with China Eastern Airlines (CEA)'s Shanghai - Wuhan - Shennongjia flight, Xinhua reported.

According to the airport, the Shanghai - Wuhan - Shennongjia flight will be operated thrice weekly in May and daily in June using Airbus A319 airplanes, which would shorten the trip to the provincial capital Wuhan from the current 9-hour drive to a 50-minute flight. In the future, the airport will be connected with other major cities in China.

Located at Hongping town of 2,580 meters above sea level and 16 km away from a national 5A-Class scenic spot Shennongjia Nature Reserve, Shennongjia Airport was built with a total investment of 1.13 billion yuan. Built in line with the 4C standard, the new airport is able to handle about 250,000 passengers, 1,130 tons of cargo & mail, plus 2,900 airplane movements annually.

Shennongjia enjoys a good reputation for its beautiful scenery and rare or endangered plants and animals, but its remote location makes it inconvenient for tourists to visit.

June 2014: China Eastern Airlines (CEA) has committed to purchase 80 737s, including Next-Generation 737 and 737 MAX airplanes. When finalized, the order will become China’s largest-ever purchase by an airline for single-aisle airplanes, worth more than >$8 billion at current list prices - - SEE ATTACHED - - "CEA-2014-06-737 ORDER/A."

(CEA) said it would sell 15 737-300s and 757s with an average fleet age of 17.2 years and 9.6 years, respectively, which are worth CNY1.52 billion/$247 million at book value.

July 2014: China Eastern Airlines (CEA) expects to report first-half net income of less than <+CNY50 million/+$8.1 million, down -90% from net profit of +CNY763 million in the year-ago period. (CEA) cited exchange rate fluctuations and yuan depreciation for the sharp first-half profit decline.

China Eastern Airlines (CEA) has enhanced its presence in North America with the introduction of service to a second Canadian city. On June 25th, (CEA) introduced thrice-weekly flights on the 11,440 km sector between Shanghai Pudong (PVG) and Toronto Pearson (YYZ) using its A340-600s. The route is already operated daily by Air Canada (ACN). China Eastern (CEA)’s other Canadian route is a double-daily service from Shanghai to Vancouver. In addition, it operates non-stop flights from Shanghai to Honolulu, Los Angeles, New York (JFK), and San Francisco.

(CEA) introduced its 16th destination in Japan with the addition of twice-weekly flights (Thursdays and Sundays) from Shanghai Pudong (PVG) to Asahikawa (AKJ) on July 10th. The 2,287 km sector will be operated until October 10th, utilizing the SkyTeam (STM) Alliance member’s 158-seat A320s. There is no competition on China Eastern (CEA)’s new route.

China Eastern Airlines (CEA) has transformed its wholly owned subsidiary, China United Airlines (CUL) into a low-cost carrier (LCC), becoming the first state-owned carrier to do so.

(CEA) has begun offering broadband connected flights over China using China Telecom Satellite aeronautical service and Panasonic Avionics Corporation’s eXConnect system. An Airbus A330 will be the first of 27 (CEA) air[lanes equipped with a system and service tailored to the unique requirements of China. (CEA) has also selected China Telecom Satellite’s service and Panasonic’s eXConnect system for an additional six Boeing 767s and 20 777 airplanes.

August 2014: China Eastern Airlines (CEA) and its subsidiaries Shanghai Airlines (SHA) and China United Airlines (CUL) are implementing Boeing Airplane Health Management (AHM) to improve Maintenance & Engineering Operations efficiency across (CEA)'s rapidly growing fleets.

Boeing (TBC) and China Eastern (CEA) teams have deployed the Boeing Airplane Health Management (AHM) system on 157 Next-Generation 737 airplanes. The contract extends to eventually cover (AHM) deployment for a total of 250 737s. Additionally, 20 777-300ER (Extended Range) airplanes on order by (CEA) will also use Boeing (AHM).

Boeing (AHM) is currently used by more than >70 airline fleets worldwide to collect and evaluate airplane operations data, while the airplane is in flight. Designed to interface with existing airplane systems and communication infrastructure, the (AHM) system captures real-time data and notifies ground crews of any potential maintenance issues before the airplane lands, minimizing schedule disruptions and maintenance delays, resulting in significant efficiencies and cost savings for airlines.

(AHM) is part of an integrated suite of aviation services marketed as the "Boeing Edge." These include Parts, Training, Engineering, Maintenance and Software Solutions that increase the efficiency and profitability of airlines and leasing companies.

China Eastern Airlines (CEA) has launched an online seat reservation service to let passengers decide where to sit - - SEE ATTACHED - - "CEA-2014-08 - ONLINE SEAT RESERVATION SYSTEM." Customers are allowed to reserve a seat online after booking a ticket through any of the airline's sales channels. The new service is free of charge.

Passengers can choose and reserve a window seat to enjoy the views of the white clouds in the blue sky, an aisle seat to access their luggage easily or a a seat together with friends and family to have a chat with them during the journey.

Customers can log in to (CEA)'s official website for seat reservation by entering their ticket number and passenger name. In order to reserve a seat, the online booking must be made before check-in is available.

The service is only available for the flights operated by China Eastern (CEA), rather than the code-share flights sold by the airline.

The airline said it will combine its online seat reservation system with the check-in system to provide customers with more intelligent and convenient services.

Recently, the Shanghai Municipal Finance Bureau and the Shanghai Municipal Development & Reform Commission have issued a notice to offer financial subsidies to aviation sectors for adding new medium-to-long-haul international flights.

Aiming to boost the overseas expansion of Shanghai aviation hub, the local government plans to grant subsidies for aviation projects during the period of 2013 - 2015, which is applicable in launching, resuming and increasing frequencies of a medium- and long-haul route from Shanghai to North America, Europe, Oceania, Africa, South America, and other long-haul international flights with more than >6 hours' journey.

According to the notice, on the basis of 2012, the base airlines can receive a subsidy of 30 million yuan for every newly-introduced medium- and long-haul international route, and will be awarded 20 million yuan for resuming a medium- and long-haul international service and 10 million yuan for adding a regular medium- and long-haul international flight departure from Shanghai.

Moreover, taking the transfer rate of 2012 as the standard, the base airlines will be granted 5 million yuan to 50 million yuan for the month-on-month growth of every percentage point in transfer rate. As for cargo volume, on the basis of 2012, the government will offer 5 million yuan for base airlines above 100,000 tons of annual cargo volume, for the monthly increase of every percentage point in cargo volume.

Driven by awarding measures and favorable policies in aviation sectors, Shanghai Airport Authority saw a steady growth in traffic volume, especially that on Hong Kong, Macao, and Taiwan, and international routes.

Shanghai's two airports handled more passenger traffic than Beijing in the first six months of the year. According to the latest data from the operators of Beijing Capital International Airport, the airport recorded 41.57 million passengers in the first half of 2014.

But the East China Regional Administration of the (CAAC) has confirmed that Shanghai's Pudong and Hongqiao airports handled 24.47 million and 18.74 million passengers, respectively, in the same period, for a total of 43.17 million (+4% more than Beijing).

Shanghai's two airports also handled 315,187 flights in the first half of the year, compared to Beijing Capital's 283,960. Beijing Capital is currently the busiest airport in Asia and the second busiest in the world, in terms of passenger traffic. But expansion projects at both Pudong and Honqiao are expected to boost Shanghai's airport capacity to 120 million passengers per year by 2020. By this time, Beijing is also expected to have launched a new second airport.

Since Hefei Xinqiao International Airport (HFE) was put into operation in 2013, China Eastern Airlines (CEA) has continuously expanded airplane deployment in its Anhui Branch. At 7:40 am, August 10, a brand new Airbus A320 performing flight MU9667 took off from (HFE) and headed toward Sanya, marking the 12th A320 airplane of its branch company and the inaugural flight of the Hefei - Sanya route.

The new A320, registration number (B-6832), is (CEA)'s 8th overnight airplane at (HFE), which created a new record for development of its Anhui Branch. (CEA) Anhui Branch will introduce another two airplanes in the second half of this year, which will bring its fleet size up to 14 airplanes. With (CEA)'s comprehensive global network, the branch company plans to launch more domestic and international services departing from Hefei.

(CEA) currently operates the largest 737 fleet among Chinese airlines, and is continuing to expand its fleet. In June, (CEA) committed to order 80 737s, including Next-Generation 737 and 737 MAX airplanes. The order represents the largest purchase ever by an airline in China for single-aisle airplanes.

China Eastern Airlines (CEA) is scheduled to take delivery of the first of 20 Boeing 777-300ERs in September.

The upgraded hardware layout and excellent cabin service on the 777-300ER will provide customers with a perfect "5-Star" travel experience in the air. (CEA) will configure its 777-300ER with 318 seats in three classes - 4F in first class, 56C in business class and 258Y in economy class. (CEA) is the first carrier in North Asia with a 10 abreast 3-4-3 configuration in economy (Y) on the 777-300ER.

The first class (F) suites offer customers complete privacy with a small coat closet. The private suites also feature separated seats that can be easily transformed into a fully flat double bed, making passengers feel like home at 30,000 ft in the air. Overhead bins are removed and replaced by individual storage compartments, allowing passengers to have more space and comfort during their flight.

The business (C) class employs a 1-2-1 seat configuration (all with aisle access). Each seat can be reclined a full 180 degrees into a flat bed. The reverse fishbone layout for the flat bed seats is very private for female customers.

The 777-300ER will also feature the popular passenger-inspired Boeing Sky Interior, with 23 scenes created by (LED) lighting, such as sunrise, sunset, leisure, meals, and so on, providing passengers with a wonderful travel experience on long-haul flights.

In addition, in-flight Wi-Fi service will be available on the airplanes. Passengers will be able to enjoy fresh food and have diverse choices for meals during their flight.

The Boeing 777 is the world's most successful twin-engine, long-haul airplane. The 777-300ER extends the 777 family's span of capabilities, bringing twin-engine efficiency and reliability to the long-range market.

(CEA) is due to receive up to four 777-300ERs in 2014 and operate them on long-haul flights.

China Eastern Airlines (CEA) has taken delivery of a new A319 at the Airbus Tianjin Delivery Center (ATDC). It is (CEA)'s 50th A320 Family airplane from Tianjin and the 184th to be assembled in the A320 Family Final Assembly Line in China (FALC) since its inauguration in 2008.

The newly delivered airplane is configured for high altitude operations. It is equipped with (CFM56-5B7) engines and 122 passenger seats, including 8F first class seats and 114Y economy class seats.

The A319 features several "Firsts" for (FALC), (ATDC) and (CEA). It is the first Head of Version airplane assembled by the (FALC) and delivered from the (ATDC). The A319 is the first for (CEA)with Seller Furnished Equipment (SFE) galley, which helps reduce cost and increase efficiency. The A319 is also the first airplane assembled in the (FALC) to be equipped with Head Up Display (HUD), being the first line-fit (HUD) in China. The (HUD) displays airplane parameters and guidance in the pilot (FC)'s field of vision. It is also the first airplane painted at (FALC) featuring a new environmentally friendly process.

737-79P (39737, B-5821), 737-89P (41478, B-1981), A319-112 (1303, B-2332), A319-115 (6116, B-6459), 2 A320-214s (6127, B-1862, 6213, B-1860), 2 A320-232s (6062, B-1859; 6137, B-1863), A330-343E (1551, B-5893), deliveries.

A300B4-605R (746, B-2325) ferried to Dresden for cargo conversion.

September 2014: China Eastern Airlines (CEA) reported a first-half net profit of +CNY14 million/+$2.3 million, down -98% from net income of +CNY624 million in the year-ago period. (CEA) had predicted the profit drop in July.

First-half operating revenue increased +2.7% to CNY42.59 billion, while operating expenses grew +2.7% to CNY39.27 billion. Industry analysts cited exchange losses as the main reason for the sharp profit decline. (CEA) reported -CNY660 million in exchange losses, reversed from exchange gains of +CNY1.17 billion in the year-ago period.

First-half passenger boardings increased +7% to 40.42 million, with an average load factor of 80% LF, up +0.63 point over the year-ago period. Passenger capacity increased +5.5% to 76.93 billion (ASK)s, while passenger revenue rose 6.3% to 61.5 billion (RPK)s. Cargo traffic volume dropped -0.91% to 6.6 million tonnes.

(CEA) introduced 23 new airplanes and phased out 17 airplanes in the first half. As of June 30, it operated a total fleet of 485 airplanes.

Looking forward, (CEA) expects China’s air transport market to keep growing in the second half as China’s economy stabilizes. However, it warned, “A lot of uncertainties still remain as the global economic recovery and market competition are increasingly fierce.”

Authorities in Shanghai are planning to subsidize airlines to increase their international capacity from the city.

In an effort to build Shanghai as a global aviation hub, the Shanghai Municipal Finance Bureau has announced that it will offer millions of yuan in subsidies to airlines adding extra capacity from Shanghai to North America, South America, Europe, Australia, and Africa.

The municipal government will offer 30 million yuan/US$4.9 million to any Shanghai-based airline for the launch of a single long-haul route, classed as having a flight time longer than >6 hours.

The authority will also provide 20 million yuan if any carrier resumes an international flight after a hiatus. For an increase in the frequency of an international route, the government will offer a 10 million yuan bonus.

In addition, Shanghai is planning to reward Shanghai-based airlines for attracting more transit passengers and carrying more cargo.

In the first half of this year, the combined passenger traffic at Shanghai's two airports (Pudong and Hongqiao) reached 43.2 million, exceeding Beijing for the first time.

China Eastern Airlines (CEA) has once again taken up service on the 538 km route between Beihai (BHY) and Hong Kong (HKG). Twice-weekly flights (Mondays and Fridays) were resumed on September 1st using a 737. When (CEA) last operated the route (in March 2013) it used a smaller 50-seat CRJ. (CEA) already operates to Beihai from Kunming and Shanghai Pudong. This new route becomes (CEA)’s 19th route to Hong Kong, and the shortest in terms of sector length. In 2013, Beihai Fucheng Airport handled almost 850,000 passengers making it China’s 65th busiest airport.

China Eastern Airlines (CEA) opened a regular service linking Lanzhou, Kunming and Singapore on September 19, which is its first international route out of Lanzhou.

The new round-trip service will be operated four times weekly using Airbus A320s. The outbound flight MU5093 is scheduled to take off from Lanzhou at 6:45 pm on Tuesdays, Wednesdays, Fridays and Saturdays and arrive in Singapore at 2:00 am the next day, with a stopover at Kunming; while the return flight MU5094 will depart Singapore at 3:00 am on Wednesdays, Thursdays, Saturdays and Sundays and arrive in Lanzhou at 10:00 am (all local time).

With the reputation as a "Garden City," Singapore is ranked as one of top 10 tourist destinations for the Chinese.

The soon-to-be-launched route will provide more convenience for tourists from Northwest China, traveling to Singapore and other Southeast Asian countries, and promote the economic and trade development in Gansu and Singapore.

China Eastern Airlines (CEA) has unveiled a new look after 25 years, which includes a new logo featuring the shape of a swallow consisting of two capital letters, C and E, the initial letters of the carrier’s name.

Chief designer, Liu Tao said the new logo uses more curves and circles compared to the old one, giving a more international flair.

The Shanghai-based carrier said the new logo and paint job will be first applied to a Boeing 777-300ER to be delivered this month; it will take five years for the entire fleet to receive the newly painted livery. (CEA) configured its new 777-300ER to feature three distinct cabins, comprising 6F first class suites, 52C business class seats in a 1-2-1 configuration, and 258Y economy seats in a 3-4-3 configuration.

(CEA) is scheduled to take delivery of four 777-300ERs this year and will introduce +10 more between 2015 and 2016. By 2018, it is expected to have 20 of the type, more than any other carrier in China.

(CEA) will operate the 777-300ERs on transpacific routes between China and North America, which will be a major market for (CEA) over the next three years.

(CEA) Vice General Manager, Tang Bing said (CEA) plans to boost frequencies on routes from Shanghai to Los Angeles, New York, San Francisco, Vancouver, and Toronto; it will also open more new routes to North America.

Shanghai Pudong International Airport (PVG)'s fourth runway is set to open for business, the airport said. The fourth runway and fifth runway project proposals received approval from China's National Development and Reform Commission in November 2011.

The fourth runway, along with an auxiliary taxiway and traffic control facilities, has been finished in late 2013 and will be put into service in the near future. With the new runway, (PVG) will be able to handle 80 million passengers a year. At 3,800 meters long, the fourth runway can cope with the world's largest commercial plane (the Airbus 380 superjumbo).

The 3,400 m fifth runway, which will be used for the flight tests of the (COMAC) C919 airliner, is still under construction.

In July 2014, (PVG) was approved by the Civil Aviation Administration of China (CAAC) to expand its capacity to 74 flights per hour, and as many as 1,300 flights per day. The airport is expected to see its passenger and cargo traffic grow rapidly.

(PVG) is celebrating its 15th anniversary. The airport has grown hugely since it opened for business in 1999. Last year, it handled 47.19 million travelers, 371,200 flight movements, as well as 2.91 million tonnes of cargo and mail. (PVG) has been the world's third busiest airport by cargo traffic for six years in a row.

Currently, the airport serves 24 domestic airlines and 70 international (regional) airlines, with connections to 85 domestic destinations and 109 international (regional) destinations.

October 2014: News Item A-1: China Eastern Airlines (CEA) is scheduled to launch direct flights between Shanghai and Auckland, New Zealand on December 9. The new route will use Airbus A330-200 airplanes to make four round-trip flights each week on Tuesdays, Thursdays, Saturdays and Sundays.

From January 16 to March 2 of next year, the service will rise to daily. The new service will add an extra 47,000 seats on the route. Looking at the year ending June 2014, almost 36,000 visitors arrived from Shanghai, an increase of +20% when compared to the same period the year before.

Currently, Air New Zealand (ANZ) is the only carrier providing a scheduled service between Shanghai and Auckland. Guangzhou-based China Southern Airlines (GUN), the country's largest airline by fleet size, operates direct flights between Guangzhou and Auckland.

China is New Zealand's second-largest tourist market after Australia.

News Item A-2: A brand new Airbus A321 (B-1858), landed safely at Xi'an Xianyang International Airport (XIY) on October 18 and joined the fleet of the Northwest Branch of China Eastern Airlines. It is the 8th new airplane delivered to the branch company in 2014 but the first one painted in the new look of the airline.

The new A321 is configured with a two-cabin layout accommodating 8F first-class seats and 168Y economy-class seats. After necessary preparations, it will be put into operation servicing domestic trunk flights from Xi'an to Beijing and Hangzhou.

China Eastern (CEA) launched its new visual identity system (VIS) in September of 2014. The new logo retains the key element from the previous logo- the "Swallow", symbolizing auspiciousness. The "Swallow" is also a transfiguration of the word "(CE)", short for "China Eastern", which is now more easily recognizable. (MU) will change its airplanes livery in a cost effective approach by using a phased rollout. The Northwest Branch has already completed the livery change on an A320 registration (B-6376) during a "4C" check process. However, this newly introduced (B-1858) is the first airplane with brand new livery when rolled out.

Due to the geographical importance of Xi'an, China Eastern (CEA) continuously increases the capacity in the Xi'an market and plans to introduce 9 new airplanes in total within this year. With the arrival of new the A321, the fleet size of the branch company reaches 43.

News Item A-3: Shanghai Pudong International Airport Cargo Terminal (PACTL) has achieved year-on-year tonnage growth of +20.31%, reaching a total of 134,322 tonnes of freight in September. Overall, the cargo terminal saw tonnage rise by +16.55% to 1,078,811 tonnes in the first three quarters of 2014. (PACTL) has thus achieved the best monthly result in the company's history as well as the strongest result for the first nine months of any year.

(PACTL)'s domestic cargo volume grew by +2.96% year-on-year to 68,967 tonnes in the first nine months of 2014. International cargo volumes rose by +17.61% to 1,009,844 tonnes. Imports increased by +16.85% to 431,126 tonnes, while exports grew by +16.35% to 647,685 tonnes in comparison with the previous year.

"With a monthly growth rate of up to +27% throughout the third quarter, international imports are increasing considerably at the moment. This is mainly due to a growth in cargo volumes of several American airlines on the one hand and the expansion of Air China Cargo (CAO) at Shanghai Pudong International Airport on the other hand. Domestic business is not increasing as strongly anymore. However, I still see a positive trend for the next months," said Lutz Grzegorz, VP of (PACTL).

"Moreover, we were also able to continuously expand our client base, which enabled us to increase our market share further," he continued. 47.5% of the air cargo handled at Shanghai Pudong International Airport in the first eight months of 2014 was processed by (PACTL), signifying a +2.6% increase in the market share of the cargo terminal compared with the previous year.

Shanghai Pudong International Airport Cargo Terminal (PACTL):

(PACTL) is a Sino-German joint venture (JV) based at Shanghai Pudong International Airport (PVG). It brings together three shareholders ( Shanghai Airport (Group) (51%), Lufthansa Cargo (LUB) (29%), and JHJ Logistics Management Company (20%). (PACTL) offers handling services to airlines and forwarders transporting domestic and international air-freight via Pudong. Founded in 1999, the company has become one of the leading cargo terminal handlers in the world and has played a key role in establishing Pudong as one of the major cargo hubs in China. Based on recent figures, (PACTL) employs 2,200 people and serves 52 permanent and several charter customers. (PACTL) handled about 1.3 million tonnes of air-freight in 2013.

News Item A-4: Shanghai currently has 24,150,000 people living there, which means the city has the world's largest population.

News Item A-5: In order to meet the increasing overseas travel demand for citizens in Southwest China, China Eastern Airlines (CEA) announced to launch an international non-stop flight connecting Kunming with Paris, France, which will be the first intercontinental long-haul route in the Yunnan Province.

(CEA) will operate the Kunming - Paris service three times a week on Mondays, Thursdays and Saturdays, using Airbus A330-200 airplanes.

The Paris-bound flight MU773 is scheduled to take off from Kunming Changshui International Airport (KMG) at 0:50 am and arrive in Paris at 5:50 am; while the return flight MU774 will depart Paris Charles de Gaulle Airport (CDG) at 11:50 am and land in Kunming at 6:00 am next morning (all local time).

China Eastern (CEA) stated it will continue to deepen its cooperation with SkyTeam (STM) Alliance members and is currently working with Air France (AFA) to expand its network within France and Europe, providing more convenience for Kunming citizens traveling to Europe.

November 2014: News Item A-1: China Eastern Airlines (CEA) has introduced twice-weekly (Thursdays and Sundays) flights from Changzhou (CZX) to Seoul (ICN) in South Korea. The first service on the 901 km route was operated on November 20th with one of the airline’s A320s and faces no direct competition. (CEA) now serves Seoul with 95 weekly flights spread across 10 Chinese airports. The SkyTeam carrier is the largest at Changzhou Benniu Airport with almost 40% of scheduled seat capacity. This is the airport’s first international service, with others expected to follow in 2015. Last year, the airport, located on China’s east coast on the southern bank of the Yangtze River, handled 1.53 million passengers, ranking it 51st among Chinese airports. However, with growth of +42% in 2013, a place in the top 50 is a distinct possibility in 2014.

News Item A-2: China Eastern Airlines (CEA) will start a new joint venture (JV) with Qantas (QAN) on certain routes between China and Australia in an effort to boost passenger flow onto their respective international networks. This five-year joint agreement, which is subject to regulatory approval, will commence in mid-2015.

Both carriers are expected to conduct a closer cooperation on Shanghai - Sydney, Shanghai - Melbourne and Beijing - Nanjing - Sydney routes. The two carriers hope to ultimately open up new routes between Australia and mainland China, such as between Brisbane and Perth to Shanghai.

In addition, both carriers’ operations at Shanghai International Airport’s Terminal 1 will also be collocated, which will cut transit times by about an hour, open up a better range of onward connections and provide more choice for customers.

(QAN) noted the new (JV) will complement the (QAN) - Emirates (EAD) partnership for Europe, the Middle East and North Africa; and the (QAN) - American Airlines (AAL) partnership for the USA.

China is Australia’s most valuable inbound tourism market, which is projected to contribute up to $9 billion annually to the Australian economy by 2020.

December 2014: News Item A-1: China Eastern Airlines (CEA) on November 27th launched the first intercontinental service from Fuzhou (FOC), to New York (JFK). The 12,492 km route will be flown twice-weekly (Tuesdays and Thursdays) by (CEA)’s 318-seat 777-300ERs and operate via Shanghai Pudong. The route is designed to serve the large community of Chinese expats in the New York region, who originate in the Fujian province. Fuzhou Changle International Airport, serving the capital of the Fujian province on China’s east coast, handled 8.93 million passengers in 2013 (+13.7%) making it China’s 25th busiest airport. On November 28th, (CEA) added another international link, this time between Wuxi (WUX) and Seoul Incheon (ICN). The 888 km route will be operated twice-weekly (Mondays and Fridays) utilizing (CEA)’s A320s, and will compete with Asiana Airlines (AAR)’s twice-weekly services, which fly on Tuesdays and Saturdays.

China Eastern Airlines commenced service between Shanghai Pudong (PVG) and Auckland (AKL) on December 9th, operating four times weekly with its A330-200s. The SkyTeam (STM) Alliance member will face competition on the 9,347 km route as Star (SAL) Alliance carrier, Air New Zealand (ANZ) already serves the market with daily flights. The inaugural seasonal flight was welcomed with a water arch salute and a powhiri at Auckland Airport. Norris Carter, General Manager Aeronautical Commercial, Auckland Airport said: “The new service from China Eastern Airlines will see direct flights operating between Shanghai and Auckland during the peak New Zealand period of December 2014 to March 2015. The service will initially operate four flights per week and will increase to seven flights per week in January 2015. Shanghai is China’s largest city and we have been experiencing impressive growth from this market recently. In the year ending June 2014, we saw a +20% increase in passenger numbers arriving from Shanghai when compared to the year before. This equates to a remarkable 36,000 visitors arriving from Shanghai over the 12 month period and indicates the strong potential for the future expansion of this market.” Ms Kathy Zhang, General Manager Oceania, (CEA) said: “During the 2014 Chinese New Year, we operated two charter flights on the Shanghai to Auckland route. This proved very successful and it was off the back of this venture that we decided to introduce the new seasonal operation.”

News Item A-2: China Eastern Airlines (CEA) has launched its Aviation Technology Company to further explore the Maintenance Repair & Overhaul (MRO) market.

The new company is based on the assets of China Eastern Engineering & Technology Company and has a registered capital of CNY4.3 billion/$7 million.

(CEA) deputy General Manager, Feng Liang said the Shanghai-based carrier (CEA) would integrate the new venture with its other relevant airplanes and engine (MRO) joint ventures (JV) established with Pratt & Whitney (PRW), Singapore Technologies Aerospace, Honeywell (SGC) and Boeing (TBC) to enhance its competitiveness.

Industry analysts point out the domestic airplanes (MRO) market holds great potential as Chinese airlines have been expanding their fleet rapidly over the past 10 years. It is estimated that China’s airplane (MRO) market value would be worth CNY45 billion by the end of 2015.

Air China (BEJ) set up an airplane (MRO) joint venture (JV) (AMECO) with Lufthansa (DLH) in 1989 in which Air China (BEJ) holds a 60% stake and (DLH) holds the rest. Besides (AMECO), (BEJ) has its own Engineering & Technology company. Recently, the Beijing-based carrier (BEJ) is exploring the possibility of consolidating (AMECO) with Engineering & Technology to be better positioned in the domestic (MRO) market.

January 2014: News Item A-1: China Eastern Airlines (CEA) handled 84 million passengers and 16.1 billion tonnes of cargo and mail in 2014, with 1.63 million hours of safe operation. With steady growth in traffic, (CEA), the Shanghai-based carrier achieved being profitable for the last six consecutive years.

In September 2014, (CEA) launched its new visual identity system (VIS) and received its first Boeing 777-300ER airplane, marking an important milestone for (CEA) in its development history and a bold step toward its global expansion. In December 2014, (CEA) set up its first E-Commerce company, a move in the airline's overall reform and system innovation, as well as its transformation and innovative breakthrough.

Currently, (CEA) owns a fleet of over >500 aircraft, operating about 2,000 flights daily to 1,052 destinations in 177 countries and regions around the world.

News Item A-2: China Eastern Airlines (CEA) has extended its international operations with the addition of new services to Fukuoka (FUK) in Japan and Busan (PUS) in South Korea. The new flights began on January 26th and will all be flown by (CEA)’s A320s. The two new Fukuoka routes will face no competition but Air Busan (ABN) and Korean Air (KAL) provide alternatives on the Busan routes.

News Item A-3: With the arrival of 2015 New Year, Shanghai Airport Authority witnessed the 15th consecutive safe year and the 27th for Shanghai Hongqiao International Airport (SHA) since the civil aviation structural reform in 1988.

In the past year, Shanghai Airports have maintained a steady growth in passenger throughput, airplane movement and cargo traffic. According to relevant statistics, a total of 89.62 million passengers traveled through Shanghai Pudong International Airport (PVG) and (SHA) in 2014, up +8.25% over a year earlier. The two airports handled a combined 3.61 million tonnes of cargo and mail, up +7.33% year on year, which expected to list on the third place among the worldwide airports. Besides, (PVG) and (SHA) reported 655,500 airplane movements in the past 12 months, up +6.56% year on year.

(PVG) celebrated its 50 million annual passenger throughput at the end of 2014, marking a new milestone for the airport in traffic performance. In 2014, the airport introduced +10 more domestic and foreign airlines and added +6 destinations, with more transit passengers.

At present, 27 domestic airlines and 67 international (regional) airlines are operating at the two airports, with connections to 142 domestic destinations and 114 international (regional) destinations.

Air traffic demand will continue to grow in the coming years. Shanghai airports are expected to handle more than >110 to 120 million passengers annually by 2020, to be listed in third place in the world.

News Item A-4: Airbus (EDS) delivered two A319ceos and an A330-300 to China Eastern Airlines (CEA).

News Item A-5: 737-89P (41470, B-1772), A319-115 (6307, B-6470), ex-(B-501L), A319-132 (6298, B-6427), EX-(B-520L), and A330-343E (1595, B-5969), ex-(F-WWYJ), deliveries.

February 2015: News Item A-1: China Eastern Airlines (CEA) expects its 2014 net profit to rise +40% to +60% compared to 2013, due to lower fuel prices, according to a carrier statement released by the Shanghai Stock Exchange.

(CEA) reported a net income of +CNY2.38 billion/+$386 million in 2013. (CEA) credited management improvements, lower fuel prices and adjustment to its welfare policy as main reasons for the improved financial performance.

Looking ahead, industry analysts predict fuel prices will continue to drop this year, which will improve the financial performance of China’s domestic carriers in 2015. As a result, most Chinese carriers are now adjusting their respective profit goals upward for 2015.

News Item A-2: China Eastern Airlines (CEA) has launched four new international routes from four different Chinese airports to four different countries (Japan, South Korea, Taiwan and Vietnam). None of the new routes are operated with more than four weekly flights and none of them face any direct competition at this time. Three of the routes are under 750 kms in length, the exception being the 2,960 km service from Chengdu (CTU) to Osaka Kansai (KIX) which operates via Nanjing. All four routes will be operated by the (CEA)’s A320s.

China Eastern Airlines (CEA) launched Changzhou - Taipei Taoyuan service on February 1st. The launch came after (CEA) began a Chengdu - Nanjing - Fukuoka service on January 26th. Both services will be operated thrice weekly. "FlightMaps Analytics" shows that (CEA) will be the only operator on the Changzhou - Taipei Taoyuan and Nanjing - Fukuoka routes.

News Item A-3: China Eastern Airlines (CEA) says its Jiangsu operation has applied to the Civil Aviation Administration of China (CAAC) to expand the parameters of its Air Operators Certificate (AOC).

According to WCARN news, (CEA) wants to include the operation of domestic cargo and passenger services (including Hong Kong Chek Lap Kok, Macau International and Taiwan) as well as international cargo and passenger services into its licence.

Currently, (CEA)'s (AOC) is restricted to domestic cargo and passenger services.

News Item A-4: China Eastern Airlines (CEA) has selected (AMECO) Beijing (BEJ) for cabin modification of its Boeing 767 fleet. This 767 fleet belongs to Shanghai Airlines (SHA), a wholly owned subsidiary of China Eastern (CEA).

(SHA) transferred a 767 to (AMECO) (BEJ) for cabin modification in January, and the further cabin modifications on other 767s will be scheduled from April to June.

The deal covers cabin refurbishment and business (C) class modification, and the latter one is designed by (AMECO) including engineering design, airworthiness certificate and interior material package manufacture.

It has been many years of relationship with China Eastern (CEA). The Maintenance Repair & Overhaul (MRO) specialist is well experienced in providing modifications on Boeing 737, 747, 767, 777 and Airbus A330, A340 and A380, with a portfolio of the cabin, system, winglet and wing rib.

In addition, the (MRO) provider has been dedicated into (VIP) and business jet completion services since the 1990s in capabilities of 737, 747 and A330, outfitted with a cabin interior manufacture workshop as well as a hangar which can accommodate a wide-body airplane or three narrow-body airplanes at the same time.

News Item A-5: China Eastern Airlines (CEA) currently operates 392 airplanes to 31 countries, 205 destinations, on 834 routes, and 1,751 daily flights.

March 2015: News Item A-1: China Eastern (CEA) said its net profit rose +44% in 2014 from a year earlier, as fuel costs fell and passenger numbers increased. Net profit at the Shanghai based firm was +3.4 billion yuan/+US$548 million last year. "This result was also primarily due to the continuous improvement of the Group's operating abilities and the decrease of jet fuel prices, as well as adjustments to the retirement benefit policies of our employees," China Eastern (CEA) said.

The number of passengers traveling with (CEA) rose about +6% to reach nearly 84 million, it added.

(CEA) is China's third largest airline, operating 485 passenger airliners and 12 freighters at the end of last year, the "South China Morning Post" newspaper reported.

China's gross domestic product (GDP) grew +7.4% last year, the slowest pace in nearly a quarter of a century

News Item A-2: China Eastern Airlines (CEA) announced that it will launch the Chengdu - Nanjing - Los Angeles service from June 30, which will be the first non-stop flight from East China's Jiangsu province to North America.

(CEA)'s Jiangsu subsidiary is set to introduce an A330 jetliner in the first half of 2015, which is capable of operating long-haul intercontinental flights. There will be three flights weekly from Nanjing to Los Angeles. A one-way trip will take about 12 hours.

Since economic and trade exchanges between China and the USA have become more and more frequent in recent years, travelers from East China usually choose to fly from Shanghai to the USA. Meanwhile, the existing Sino - USA services can no longer meet the increasing need for travelers from Southwest China.

The to-be-launched service can not only increase China Eastern (CEA)'s market share in East and Southwest China on the Sino - USA routes, but also enrich and optimize (CEA)'s route network in these two regions.

Located in China's second-tier city of Nanjing, Nanjing Lukou International Airport (NKG) is one of China's major trunk airports and also East China's main cargo airport. It operates over >130 flight routes to 60 domestic destinations, 20 international destinations and Hong Kong, Macao, and Taiwan, with up to 2,800 takeoffs and landings weekly.

News Item A-3: China Eastern Airlines’ (CEA)'s wholly owned subsidiary China United Airlines (CUL) is expected to formally adopt a low-cost carrier (LCC) business model on March 29.

(CUL), The Beijing-based (LCC) said it will offer promotional airfares for as low as CNY8/$1.30.

China Eastern (CEA) (CEO), Ma Xulun said (CUL)’s airfares would be an average of -20% lower than that of traditional network carriers. It will also provide no-frills service, which means it would charge for in-flight food, checked luggage and seat choice. In addition, it would not offer compensation for flight delays and cancellations.

In July 2014, (CEA) announced it had transformed China United Airlines (CUL) into an (LCC). (CUL) operates a single fleet of 31 Boeing 737 airplanes in an all-economy (Y) class configuration.

“Low-cost carriers’ (LCC)'s growth has gained momentum around the world in recent years. Currently (LCC)s account for 26% of shares in terms of passenger boardings in global market on average, and they even take up more than >40% shares of Europe’s market, which is much higher than a 7% share in China’s market. So there is big growth potential for China’s (LCC) market,” Ma said.

News Item A-4: Shanghai Pudong International Airport (PVG) is set to open its long-awaited 4th runway in early April. The new runway was scheduled to open on March 5, but the opening date might be delayed to April 4.

The 4th runway is 3,800 m long and 60 m wide. The project was completed in late 2013 and gained industry acceptance in December 2014. After the new runway opens, the airport will be capable of handling 60 million passengers, 555,000 flight movements, and 4.75 million tonnes of cargo and mail annually.

In addition, a 5th runway is being built next to the 4th. The 4th and 5th runways will provide a testing ground for the Chinese (CCC)-made C919 narrow-body airplane and the ARJ21 regional jet.

(PVG) hit a milestone in 2014 with up to 51.66 million passengers passing through the airport, an increase of +9.5% from a year earlier.

Statistics show that a total of 89.62 million passengers were handled by the two Shanghai airports in 2014, up +8.25% year on year (YOY). Shanghai is expected to overtake Beijing as China's largest aviation hub before the new Beijing airport is completed and opened.

737-79P (39741, B-5828), 777-39P (43272, B-2020), A319-115 (6368, B-6469), ex-(B-516l), and A321-231 (6499, B-1640), ex-(D-AVZU) deliveries.

April 2015: News Item A-1: China’s big three carriers have all reported a turnaround in the first quarter due to market demand growth and lower fuel prices.

According to financial pre-announcements, Air China (BEJ)’s first-quarter net income increased +CNY1.6 billion/+$262 million to +CNY1.8 billion, up from a net profit of +CNY93 million in the year-ago quarter. China Southern Airlines (GUN) reported a first-quarter net income of +CNY1.8 billion to +CNY2 billion, reversed from a net loss of -CNY306 million year-over-year. China Eastern Airlines (CEA) posted a net income of +CNY1.5 billion to 1.6 billion, reversed from a net deficit of -CNY205 million in the same quarter of 2014.

Air China (BEJ)’s passenger boardings grew +7.6% to 21.71 million with an average load factor of 80.2% LF, down -1.5 points over the year-ago period. Passenger revenue rose +8.1% to 40.6 billion (RPK)s against a +10% increase in passenger capacity to 50.6 billion (ASK)s.

China Southern (GUN)’s passenger traffic climbed +12% to 26.8 million with an average load factor of 81.37% LF, up +1.16 points over the same quarter last year. Passenger revenue grew +15.5% to 46.4 billion (RPK)s, while capacity rose +13.8% to 57 billion (ASK)s.

China Eastern (CEA)’s passenger boardings grew +9.43% to 22 million with an average load factor of 80% LF, down -3 points year-over-year. Revenue jumped +10.6% to 34.43 billion (RPK)s against a +11% capacity increase to 42.95 billion (ASK)s.

Looking ahead, industry analysts predict China’s big three will see a better 2015 owing to robust growth of market demand, capacity slowdown, lower fuel prices and stable exchange rates.

News Item A-2: China Eastern Airlines (CEA) said it plans to raise no more than 15 billion yuan/US$2.4 billion through a private placement in Shanghai.

In a statement filed to the Shanghai Stock Exchange, (CEA) said the offering price will be set at no lower than 6.44 yuan per share, or 90% of the average share price during the 20 previous trading days.

The money raised through the non-public stock sale will be used to expand its fleet and pay off bank loans. It will use 12 billion yuan to buy 23 passenger airplanes, like Airbus A321, Boeing 737-800 and 777-300ERs.

Low fuel price, global economic recovery and booming demand for air travel have driven China Eastern (CEA) to post strong profit growth.

A (CEA) forecast said its (Q1) net profit would be between 1.5 billion yuan and 1.6 billion yuan, versus a loss of -205 million yuan in the same period last year.

News Item A-3: See attached "CEA-2015-04 - TOP 25 WORLD TRAFFIC.jpg."

May 2015: News Item A-1: China Eastern Airlines (CEA) deployed its Boeing 777-300ER airplane on Shanghai Pudong - Toronto route starting May 1, 2015, in a bid to meet increasing travel demand between the two regions.

Officially launched in last June, the Shanghai - Toronto service was operated 3x weekly on Wednesdays, Thursdays, Thursdays and Saturdays, using Airbus A340-600 airplanes. The nonstop service will be increased to daily from July 10.

Flight MU207 takes off from Shanghai Pudong International Airport (PVG) at 12:05 pm and arrives at Toronto Pearson Airport (YYZ) at 2:25 pm, with the return flight MU208 departing Toronto at 4:25 pm and landing in Shanghai 7:10 pm next day (all local time).

(CEA)'s 777-300ER is configured with 318 seats in three classes - 4 in first (F) class, 56 in business (C) class and 258 in economy (Y) class. Currently, the Shanghai-based carrier has taken delivery of five 777-300ER airplanes.

News Item A-4: China's Civil Aviation Administration (CAAC) has unlocked a new capability for reducing delays and increasing efficiency at the country's most congested airports that could be ready for live operational use by the end of this year. A recent flight demonstration by Honeywell (SGC) and Hughes Aerospace showed the benefits of the SmartPath Ground Based Augmentation System (GBAS) for next generation, Ground Proximity System (GPS)-based precision landings.

Using a China Eastern Airlines (CEA) Airbus A321 and a Shangdong Airlines (SHG) Boeing 737-800, flight crews (FC) demonstrated the first ever Global Navigation Satellite System (GNSS) instrument approaches in China at the end of April. To enable these precision landings, SmartPath's four ground-based antennas take an airplane's (GPS) signals and sends them to a single box located on the airport, which then correlates the signals for a high degree of integrity before beaming it back up to the airplane for precision landing guidance.

"The (CAAC), knowing that they needed to have some very flexible alternatives to the legacy Instrument Landing System (ILS), they asked us to do some very innovative approaches with the system," said Brian Davis, VP Airlines, Asia Pacific at Honeywell Aerospace (SGC). “Honeywell (SGC) and our partner Hughes Aerospace, actually designed and created the flight paths into Pudong airport, not only for the standard approaches but we did four very flexible innovative approaches that have never been done by a commercial airline before. The first one was what we called a displaced threshold, the second was a variable glide-path."

Hughes Aerospace (CEO), Chris Baur also noted that the demonstrations were done in Instrument Meteorological Conditions (IMC), providing a real world flight environment for the airline pilots (FC).

"We built (GLS) approaches to all of the runways at Pudong," said Baur. "We built (GLS) approaches to 35L and 35R, plus 17L and 17R. Then we did something that hasn’t been done anywhere before, where we built multiple (GLS) approaches to one runway. For Runway 35L, we built a straight-in (GLS) approach and variable geometric path approaches, one with a 2.8 degree flight path angle and one with a 3.2 degree flight path angle.

Baur said the team also built two non-linear curved path, or (XLS), approaches for Runway 35L, and the approach was flown to an automatic landing in (IMC) conditions. The trial flights provided a demonstration that exploited all of the benefits of the SmartPath technology, such as the ability to merge (GLS) with Required Navigation Performance (RNP) procedures to create a custom path to the runway based on the type of airplane being flown.

Davis said the implementation of the new procedures at Pudong can provide a model for dealing with wake turbulence issues from different airplanes as well. With heavier airplanes such as Boeing 747s, 777s or Airbus A380s dispersing an enormous amount of wake turbulence from the wings, airplanes in trail behind them are often forced to maintain very lengthy, separation distances. An airport as busy as Pudong can face huge efficiency challenges when this happens.

"The variable glide-path allows the SmartPath station to send a signal to the airplane that will allow it to fly a 2.8 or 2.9 or basically any glide-path one would like. It allows pilots (FC) to fly a much shallower glide-path than they would with an (ILS)," said Davis. "SmartPath allows for up to 26 different approach combinations. That means for the same runway, one can have an approach at a 2.8 degree glide-path. That’s where one brings the A380s and the Boeing 777s in. To the exact same runway, one can actually have the SmartPath station send a signal on a different channel to the smaller airplane that will allow it to come in at a 3.1 degree glide-path, for example, so wake turbulence always disperses downward. If those larger airplanes are brought in at a shallow glide-path and the smaller aircraft in at a steeper glide-path, that means the 737 and A320 are always above the wake turbulence footprint of the larger airplane."

SmartPath has already been deployed in Australia, Brazil, Germany, Spain, and Switzerland, and the (CAAC) sees it as one of the key tools for managing future increases in air traffic. The International Air Transportation Association (IATA) expects China to have 415 million air travel passengers annually by 2016, which would be second only to the USA in domestic passenger volume.

According to Davis, the majority of airplanes coming off of production lines today are equipped with Multi-Mode Receivers (MMR) capable of performing (GBAS) landings, and the localizer guidance and glide slope guidance for a SmartPath approach, looks the same to a flight crew (FC) as if they were flying an (ILS) approach.

Going forward, the new procedures must now be certified by the (CAAC) and Air Traffic Management Bureau. "We should have this station up and certified by the end of 2015, or the early part of 2016, with many airlines ready to fly the new (GBAS) procedures shortly thereafter," said Davis.

News Item A-5: See video "Visit Shanghai (very quickly)" - -

737-89P (41509, B-1790), ex-(N-1786B), A319-115 (6469, B-6476), A320-232 (6578, B-1678), and A330-243 (1617, B-5973), ex-(F-WWKV) deliveries.

June 2015: News Item A-1: Beijing may merge the cargo subsidiaries of China’s big 3 carriers (Air China (BEJ), China Southern Airlines (GUN) and China Eastern Airlines (CEA) in an effort to improve the competitiveness of domestic cargo companies.

News Item A-2: China Eastern Airlines ((IATA) Code: MU, based at Shanghai Hongqiao) (CEA) has announced it has signed long term lease agreements with Air Lease Corporation (ALE) for 3 737-800s. Sourced from (ALE)'s order book with Boeing (TBC), the twinjets are scheduled for delivery in 2016.

“We have worked closely with (CEA)’ management team to develop long term jet airplane leasing programs to optimize their fleet," Michael Bai VP of Air Lease Corporation (ALE), said. "(CEA) has already leased 15 new Airbus and Boeing jets from (ALE), all of which have been delivered to (CEA). The +3 additional 737-800s bring the total to 18 airplanes."

(CEA) currently operates 393 airplanes, to countries and serves 201 destinations, 783 routes and 1,717 daily flights.

July 2015: News Item A-1: China Eastern Airlines (CEA) has made a preliminary estimate on the operating results for the first half of 2015, showing its (H1) net profit is expected to increase up to 263x times compared to the same period last year.

(CEA) predicted it would report a net profit between 3.5 billion yuan to 3.7 billion yuan in the first six months. (CEA) cited a robust growth of domestic market demand and lower fuel prices as main reasons for the much-improved performance.

China Southern Airlines (GUN) said it expects to post a net income of 3.4 billion yuan to 3.6 billion yuan for the six months ended June 30, after posting a loss in the same period last year.

Other Chinese carriers are also expected to report huge profits in the first half. According to the Civil Aviation Administration of China (CAAC), China's airline industry will report a much higher cumulative net income for the first six months of this year than the net profits reported in the whole year of 2014.

News Item A-2: "Delta (DAL) is to Buy 3.55% Stake in China Eastern (CEA) for $450 million" by (ATW) Aaron Karp, July 27, 2015.

Delta Air Lines (DAL) has agreed to invest $450 million to acquire a 3.55% stake in Shanghai-based China Eastern Airlines (CEA), and the SkyTeam (STM) Alliance members said they will launch a “commercial cooperation plan.”

In comments posted on (DAL)’s website, (DAL) Senior VP Asia Pacific, Vinay Dube said, “Delta (DAL) has nearly tripled the size of its China network in the past five years. Pairing up with China Eastern (CEA) increases our reach and further cements our commitment to the market and to our customers, who travel between China and the USA. (CEA) is the hub carrier in the leading Chinese business market, Shanghai, so this is a great opportunity to build a profitable, enduring business model.”

(CEA) Chairman, Shaoyong Liu said, “The cooperation of the parties is based on a global vision and joint strategic blueprint. The parties will take advantage of their respective route networks, flight services, relevant businesses and advantageous resources, to fully connect the world’s two top economies as well as two top air transportation markets.”

Dube added, “Our $450 million investment in (CEA) is only a part of our partnership. While the investment results in a 3.55% stake in (CEA) and an observer seat on the (CEA) board of directors, the true value in this agreement comes from our shared vision to build a long-term, profitable partnership by creating a world-class, customer-focused offering, and be the most successful franchise in the growing USA - China market.”

(CEA) and its subsidiary, Shanghai Airlines (SHA) code share with (DAL) on 30 domestic USA routes, 43 domestic Chinese routes and 7 China - USA transpacific routes. (CEA) operates 35x-weekly Boeing 777-300ER flights from Shanghai to Los Angeles, New York, San Francisco, and Honolulu. (DAL) operates 28x-weekly flights to Shanghai, Beijing, and Hong Kong from Seattle and Detroit. (DAL) recently moved to Terminal 1 at Shanghai Pudong Airport, co-locating with (CEA) and Shanghai Airlines (SHA).

Delta (DAL) said its goal to be “the most Chinese-friendly USA airline.”

Later, on the next day, July 28, however, the following downturn occurred:

"China Eastern (CEA) Shares Fall with Market, Despite Delta (DAL) Deal" by Bloomberg News, July 28, 2015.

China Eastern Airlines (CEA) shares tumbled July 28 in Shanghai and Hong Kong trading despite a US$450 million investment from Delta Air Lines (DAL), as shares resumed trading following a market rout.

(CEA) fell as much as -10% in both cities. The shares traded for the first time since July 22. The Shanghai Composite Index plunged -8.5% and opened later down -4.1%.

"The placement is actually positive for (CEA): it's at a good premium and a partnership that will help (CEA) expand. It's just that market sentiment is not good right now," said Castor Pang, Head of Research at Core Pacific Yamaichi in Hong Kong.

(CEA), China's 2nd-largest airline by market value said that (DAL) will take a 3.6% stake in (CEA), expanding a partnership that will allow the 2 airlines to better compete on routes across the Pacific.

(CEA) will sell about 466 million shares at HK$7.49/97 cents apiece, according to a statement to the Hong Kong stock exchange. The sale price is a premium of +8.6% over the stock's closing price in Hong Kong on July 22, before trading was halted pending this announcement.

The deal will help (DAL) grow in the world's 2nd-largest travel market by deepening a partnership with (CEA) at its Shanghai base through the Skyteam (STM) airline alliance. (DAL) has longstanding ambitions to grow in China, where it trails the leading USA carrier into the country, United Continental Holdings Inc (UAL).

(DAL) is expanding and strengthening overseas partnerships as a glut of available seats crimps carriers' ability to raise prices for USA flights. For (CEA), which is also seeking to deepen a partnership with Qantas (QAN), partnerships help work around regulations that limit its ability to fly on its own within foreign countries.

(CEA)'s move comes as rival Air China (BEJ) announced its own plans for a private share offering. Air China (BEJ) shares have been halted since June 30 and will resume trading July 29.

Earlier this year, (DAL) deepened ties with (CEA), with plans to move operations at Shanghai's Pudong International Airport to share a terminal with the Chinese carrier.

(CEA) and its Shanghai Airlines (SHA) unit operate code shares with (DAL) on 30 domestic routes in the USA, 43 in China, and 7 that cross the Pacific. (DAL) serves the 3 largest cities in China with 6 daily non-stop flights from the USA.

Earlier this month, (CEA) had forecasted a +263-fold increase in 1st-half profit and said it may report net income of as much as 3.7 billion yuan/US$596 million, according to regulatory filings.

(CEA) shares have surged this year, gaining +131% in Shanghai and 86% in Hong Kong, before they were halted July 23.

News Item A-3: A total of 446 flights in and out of Shanghai's 2 airports had to be canceled on July 11, as super Typhoon Chan-Hom, was the second typhoon to hit the city.

Shanghai also issued a typhoon alert on July 10, warning of gales starting July 10 afternoon and heavy rain on July 11. The takeoff and landing capacity was cut by -50% at the city's two airports between 8:00 am and 12:00 pm.

At Shanghai Hongqiao International Airport (SHA), 224 flights, including 109 arrivals and 115 departures, were canceled, while 222 flights were canceled at Pudong International Airport (PVG), the Shanghai Airport Authority said.

Influenced by the everlasting thunderstorm in South and East China and the consequent traffic control, (CEA) announced the cancellation of about 400 flights and asked passengers to check before traveling to the two airports. At 10:00 am, (CEA) said it had canceled all flights in and out of Shanghai before 6:00 am on July 12.

China Southern Airlines (GUN) said it canceled 31 flights on July 10 and canceled 69 flights bound for Shanghai. At 11:00 am, (GUN) announced cancellation all 140 flights in and out of 5 airports in Shanghai, Ningbo, Yiwu, and Hangzhou. As of 1:30 pm, (GUN) had canceled 339 flights totally in SE China.

Air China (BEJ) and Xiamen Airlines (XIA) canceled a total of 60 flights July 10 and planned to cancel 28 inbound flights to Shanghai. On July 11, (bej) said it had canceled all 146 arrival and departure flights at (SHV) and (PVG), expect flights CA178 and CA75. (XIA) also announced 80 flight cancellations on July 11.

Juneyao Airlines (JYA) said that most of its flights out of Shanghai to Shenzhen, Guangzhou, and Okinawa in Japan had been canceled July 11, as they were July 10 due to the bad weather.

Spring Airlines (CQH) canceled 15 flights on July 10 and 37 on July 11, with 2 cancellations of Lucky Air (LKY) at (SHA).

Other airlines including Shandong Airlines (SHG), China United Airlines (CUL) and Hebei Airlines (NTE) also announced to cancel all flights in and out of Shanghai and neighboring Hangzhou and Ningbo.

Meanwhile, the Shanghai Railway Bureau yesterday canceled all bullet train services scheduled for July 11 and July 12 from Hongqiao station to Fuzhou, Xiamen, Shenzhen, Guangzhou, and all high-speed train services to Cangnan and Wenzhou.

Its impact will be felt from July 10 and last through July 12, with a maximum hourly precipitation of between 40 and 80 millimeters. The heaviest rainfalls are forecast for between July 11 noon and July 12 afternoon, the Shanghai Meteorological Bureau said.

According to the weather bureau, the wind level may reach a high of 8 to 9 in central areas and as high as 10 or 11 in coastal districts.

News Item A-4: "China Eastern (CEA) to Increase >13,000 Flights During Summer Season" By Bella Wang, WCARN.com, July 8, 2015.

In order to optimize the route network and meet the soaring travel needs during the summer holiday season, China Eastern Airlines (CEA) is set to add +13,000 flights, up +10% year on year, which brings the total number of scheduled flights to 122,000.

(CEA) will on the one hand continue to extend its presence in Southeast Asia, especially in Japan and South Korea and operate more flights to Europe and the USA; on the other hand, (CEA) will deploy more capacity in the domestic market, focusing on NW, NE China and plateau areas.

As for the international market, (CEA) plans to operate >15,000 flights, up +21% year on year.

In response to its "Belt and Road" strategy, (CEA) plans to operate >5,600 flights on routes to countries and regions, especially some Southeast Asian regions. For example, new services that link Qingdao, Wuhan, and Taiyuan to Bangkok; Zhengzhou to Krabi, as well as Xi'an to Siem Reap will be launched in this summer, and frequencies of services that link Shanghai to Krabi, Phuket, Bali, and Chiang Mai; Beijing to Da Nang, as well as Ningbo to Bangkok will be enhanced.

Meanwhile, (CEA) will further enhance its connectivity to Japan and South Korea by opening up new routes and increasing flight frequencies on existing ones. (CEA) said it will launch Hangzhou - Shizuoka service.

Furthermore, (CEA) will gradually upgrade some North American services, deploying Boeing 777-300ER on its services. In order to optimize its network in the USA and Europe, (CEA) will resume service from Shanghai to Oakland in September. Flights to Los Angles and Vancouver are being increased to 2x-a week. So far, (CEA) has offered 56 flights weekly to 6 destinations in North America, namely Los Angles, New York, San Francisco, Hawaii, Vancouver, and Toronto, hitting a new high.

As for its domestic market, (CEA) plans to operate 105,000 flights, up >10% year on year, in which 42,000 flights will be added into the western and northern regions. For example, Shanghai - Tianjin - Hohhot, Shanghai - Harbin - Mohe, Xi'an - Ordos - Hailar, and Luzhou - Daocheng routes will be launched. (CEA) will operate 15,000 flights departing from the Yunnan Province, enhancing the construction of this regional hub.

News Item A-5: China Eastern Airlines (CEA) officially started the operation of its upgraded international check-in area for high-end passengers in Shanghai Pudong International Airport (PVG)'s Terminal 1 from July 14.

Located at the "E" Check-in Area at the 3rd floor of T1's departure hall, the new check-in area occupies 888 square meters with 26 counters and 2 self-check-in kiosks. A screen wall painted with China Eastern (CEA)'s logo separates this area from the surrounding area, leaving more private space for high-end passengers. Comfortable couch seats and beverage tables in front of each check-in counter will provide more experiences of comfort and privacy for high-end customers, including (CEA) and Shanghai Airlines (SHA) (VIP)s, first (F) class and business (C) class customers, and "Eastern Miles" gold and silver card members.

Airline insiders revealed that after upgrading the international check-in area for high-end passengers, next they will upgrade and improve facilities in the domestic check-in area for high-end passengers.

News Item A-6: "1st Nonstop Flight Links Fuzhou with Okinawa," by WCARN.com Michelangelo Ji, July 1, 2015.

At 1:30 pm on July 1, an Airbus A321 of China Eastern Airlines (CEA) took off from Fuzhou Changle International Airport (FOC) and headed towards Okinawa Naha Airport (OKA), marking the first scheduled non-stop service linking Fujian Province to Okinawa, Japan.

The new nonstop route is available on Wednesdays and Saturdays. The outbound flight MU209 is scheduled to take off from Fuzhou at 2:30 pm and arrive in Okinawa at 5:10 pm; while the return flight MU210 will depart from (OKA) at 6:10 pm and arrive in Fuzhou at 7:40 pm.

The nonstop service between Fuzhou and Okinawa is believed to boost tourism cooperation between the two cities, and turn Fuzhou airport into a transferring hub in Southeast Asia.

News Item A-7: China Eastern Airlines (CEA) announced July 7 it would launch a new round-trip service from its hub at Shanghai to Sabah, Malaysia starting July 15, to provide more choices for travelers.

(CEA) will operate the new service 3x-weekly, using a 737-800 airplane. The outbound flight FM867 is scheduled to take off from Shanghai at 7:25 pm and arrive in Kota Kinabalu, capital of Sabah at 11:55 pm on Mondays, Wednesdays and Fridays; while the return flight FM868 will leave Malaysia at 0:55 am and land in Shanghai at 5:15 am every Tuesday, Thursday and Saturday (all local time).

Sabah, one of two Malaysian states on the island of Borneo, has the most well-protected humanistic and historical features and natural scenery. As 1 of the famous tourist resorts in Asia, the capital, Kota Kinabalu attracts tourists from all over the world for its bright beaches, blue sea, and azure sky.

News Item A-8: (CEA) will launch the Kunming - Xishuangbanna - Luang Prabang (Laos) flight starting July 20, which is (CEA)'s 2nd Laos service and also the 2nd international service at Xishuangbanna airport.

The 3x-weekly service will be operated on Mondays, Wednesdays and Fridays, using a Boeing 737-700. The Laos-bound flight MU2561 is scheduled to take off from Kunming at 6:00 pm and land in Xishuangbanna at 6:55 pm, with the second leg leaving Xishuangbanna at 8:00 pm and reaching Luang Prabang at 7:50 pm. The return flight MU2562 is scheduled to depart from Luang Prabang at 8:50 pm and arrive in Xishuangbanna at 10:40 pm, with the 2nd leg leaving Xishuangbanna at 11:35 pm and reaching Kunming at 0:40 am the next day (all local times).

The new service will not only attract more tourists bound for Vientiane and Bangkok via Luang Prabang, but also help to promote the tourism in Xishuangbanna, speeding up economic, trade, tourism and cultural exchanges between China and Laos.

News Item A-9: "China Eastern Airlines (CEA) to Begin Shanghai - Tokyo Service from August 5" By Lena Ge, WCARN.com, July 15, 2015.

(CEA) will operate the new route through its subsidiary company Shanghai Airlines (SHA) from August 5. (SHA) will operate the new service with 3 flights weekly on Wednesdays, Fridays and Sundays, using Boeing 737-800s. The outbound flight FM835 is scheduled to take off from (PVG) at 8:00 pm and arrive in Tokyo at 11:55 pm, with the return flight FM836 departing from (HND) at 1:30 am and landing in Shanghai at 3:00 am (all local time).

Recently, 2 private carriers (Juneyao Airlines (JYA) and Spring Airlines (CQH)) announced their launch of nonstop services from Shanghai Pudong to Tokyo Haneda this August.

News Item A-10: Early this month, China Eastern (CEA) successfully validated new "Required Navigation Performance Authorization Required" procedures (RNP AR) at Yushu Airport with a demonstration flight at Yushu Airport. The Yushu airport sits at an elevation of 12,811ft with high surrounding terrain. This type of performance-based navigation (PBN) enhances safety in areas with challenging terrain.

China Eastern (CEA) partnered with Airbus (EDS) ProSky to design and implement the new procedures. It is the 6th airport that Airbus (EDS) ProSky has assisted (CEA) in (RNP AR) deployment.

"We are pleased to continue our partnership with Airbus (EDS) ProSky in Yushu. We’ve witnessed the efficiency and safety benefits in a number of airports and are pleased that this will expand to another airport," stated Xu Jiang, Safety Director of (CEA).

With the new procedures, the airline is able to improve payload by 1.5 metric tonnes for both runways, thanks to procedure optimization. New approach and departure are also developed to the south to connect Yushu with airports in Tibet.

"(PBN) procedures are key to enhancing efficiency and safety, particularly in challenging terrain. We know that China Eastern (CEA) (and its passengers) will benefit from the procedures demonstrated. We enjoy working with (CEA) and hope to continue our work together at other airports," stated Cunmei Li, Airbus (EDS) ProSky Regional Director.

News Item A-11: "China Aircraft Leasing Company (CALC) (CHD) Signs Strategic Cooperation Agreement with Eastern Airlines Technic Company, Ltd" by WCARN.com, July 27, 2015.

The largest independent aircraft lessor in China, China Aircraft Leasing Company (CALC) (CHD) has signed a strategic cooperation agreement with Eastern Airlines (EAL) Technic Company, Ltd ("Eastern Airlines Technic") regarding the maintenance and technical consulting services for (EAL)'s current fleet. Based on a mutual beneficial agreement with complementary advantages, (CALC) and Eastern Airlines Technic will explore and establish a long-term strategic cooperation along the aircraft value chain, with quality services.

Based on the agreement, (EAL) Technic will provide (CALC) with aircraft/engine maintenance services and technical advisory services that facilitate the lessor to meet applicable airworthiness requirements. Other services include on-site emergency support, aircraft maintenance cost analysis, parts solutions and training, etc. The cooperation agreement is valid for 3 years. The strategic partnership will promote (CALC)'s standards for aircraft asset management, and lay a foundation for the Group's expanding international business as well as for its aircraft dis-assembly center project which is progressing by stages. It will, in turn, further enhance (CALC)'s strategy to become a "full value-chain aircraft solutions provider" to offer 1-stop aircraft solutions for domestic and international airlines.

Stronger demand for maintenance and repair services for commercial aircraft is expected due to increasing fleet size and average aircraft age of the major Chinese airlines. Industry forecast shows that the aircraft maintenance industry should peak in 2015. By the end of 2015, the China aviation maintenance market will reach 45 billion yuan with considerable profits. However, this high growth market, in particular the high-end segment, is dominated by foreign capital.

Jerry Duan Senior VP Technical & Asset Management of (CALC) said, "Since our establishment, (CALC) has been pursuing professionalism and specialization, while developing into a full value-chain aircraft solutions provider. Leveraging the core competence of Eastern Airlines Technic in terms of a comprehensive aircraft portfolio and extensive maintenance experiences, the partnership will bring (CALC) better resources and will provide advanced and all-rounded technical support. In return, (CALC) will provide Eastern Airlines Technic with overseas market information, and bridge it with our overseas customers. (CEA) is an important customer which motivated us to create an innovative business model. Our partnership started in 2013, when (CALC) became the 1st company in China to complete a bundled package deal of new aircraft leasing and old aircraft trading. Not only does this maintenance and technical consulting collaboration deepen our cooperation with the (CEA) Group, but it also adds value to our positioning as a full value-chain aircraft solutions provider; and facilitates the further development of China's aviation industry. We look forward to further cooperation with (CEA) and to creating more win-win models."

Eastern Airline Technic Company Ltd was established in 2014. It was formerly known as Eastern Airlines Engineering Technology Company. Serving domestic and international customers, its main business includes airframe maintenance, line maintenance, affiliated parts repair, engine maintenance, maintenance training, engineering services, business jet maintenance, aircraft parts supply chain, aviation equipment maintenance, and other aviation maintenance services. It also offers aircraft maintenance related consulting, as well as agency and investment services. Eastern Airlines Technic aims to develop from an aircraft maintenance unit under China Eastern Airlines (CEA) to an independent and influential aviation maintenance company in the Asia Pacific with extensive presence in 3 to 5 years.

News Item A-12: Boeing (TBC) has confirmed an order from China Eastern Airlines (CEA) for 50 Next-Generation 737-800NGs as stated in its public disclosure to the Hong Kong Stock Exchange. The order has been valued at $4.6 billion at current list prices.

(CEA) will take delivery of the 737-800NGs between 2017 and 2019. According to Boeing (TBC), the airplanes will be operated by China United Airlines (CUL), a wholly owned subsidiary of China Eastern Airlines (CEA), and other branches and subsidiaries of (CEA).

2 737-89P (39744, B-6017; 41475, B-1792), 777-39PER (43274, B-2022), 1 A319-115 (6593, B-8017), AND A320-214 (6582, B-8227) deliveries.

August 2015: News Item A-1: As predicted, China Eastern Airlines (CEA) reported a 1st-half net profit of +CNY3.56 billion/+$556.4 million, up sharply from a net income of +CNY15 million in year-ago half. It credited strong travel demand and lower fuel prices for the much-improved performance.

First-half operating revenue rose +3.9% to CNY44.3 billion, while expenses dropped -6.04% to CNY36.94 billion.

Passenger boardings climbed +10.9% to 44.83 million, with an average load factor of 80.4% LF, up +0.45 point year-over-year. Capacity jumped +11.9% to 86.1 billion (ASK)s against a +12.6% increase in passenger revenue to 69.22 billion (RPK)s. Cargo traffic volume increased +3.4% to 678.07 million tonnes.

China Eastern Airlines (CEA) carried up to 8.62 million passengers in July 2015, up +12.11% from the same period a year earlier, according to (CEA)'s monthly operation statistics.

Specifically, domestic passengers registered a +11.22% year-on-year growth to 7.29 million, with international passengers rising +23.95% to 1.06 million and regional passengers decreasing -3.18% to 270,410.

The passenger load factor was up +1.13% points to 81.81% LF.

Cargo volume declined -1.91% to 107,280 tonnes. The freight load factor was 51.39% LF, down -9.40% points from a year earlier.

News Item A-2: China Eastern Airlines has added a second destination in Lao to its international network. On July 29 (CEA) began 3x-weekly flights from Kunming (KMG) to Luang Prabang (LPQ), via Jinghong (JHG). The 272 km sector between Jinghong and Luang Prabang is already served by Lao Airlines (LAO) with 2x-weekly flights. (CEA) will operate the route using its 737-700s and becomes the first Chinese carrier to serve the airport. (CEA) already serves Vientiane in Lao from Kunming (5x-weekly) and Nanning (2x-weekly).

News Item A-3: China Eastern Airlines (CEA) has filed an application for launching two international round-trip services, Dalian - Fukuoka and Dalian - Osaka services starting this August, according to an announcement on the website of the Civil Aviation Administration of China (CAAC) (CAC).

Pending government approval, (CEA) will use A320s or its equivalent types of aircraft on these 3x-weekly services.

News Item A-4: Australia’s Competition & Consumer Commission (ACCC) has dropped its previous opposition against China Eastern (CEA)’s planned alliance with Qantas (QAN), giving the carriers the green light to coordinate pricing and scheduling.

In March, the Australian regulator issued a draft determination intended to block the proposed alliance between (CEA) and (QAN), noting that both carriers would benefit from “an increased ability and incentive to limit capacity and/or increase airfares on the Sydney - Shanghai route.”

But the regulator said August 21 that (CEA) had agreed to increase frequencies on its Australia - China services and to introduce a new route if the deal was allowed. (CEA) proposed in June that it would launch an extra 3x-weekly service on Sydney - Shanghai and Melbourne - Shanghai routes from September, before changing into a 2x-daily schedule on both city pairs by November.

Meantime, both carriers noted that they will significantly expand the range of destinations covered by their existing code share deal. The 2 airlines already have a reciprocal code share agreement on 17 flights a week between Australia and China’s mainland in addition to a number of onward domestic destinations in both countries.

(ACCC) Chairman, Rod Sims said the regulator had imposed conditions requiring the 2 airlines to boost their capacity between Australia and (CEA)'s hub in Shanghai by +21% over the 5-year term of their approval. The regulator will also require the 2 carriers to report their average fares, month by month, on each route between Australia and China, on which they fly.

(CEA) is a SkyTeam (STM) Alliance member, while (QAN) belongs to the Oneworld (ONW) Alliance.

News Item A-5: (CEA) has signed a strategic cooperation agreement with the Shanghai Pudong district government to participate in the Zhuqiao Airport Industrial Zone, located just 10 km from Shanghai Pudong. Under the agreement, China Eastern Group will construct Maintenance Repair & Overhaul (MRO), staff training, research, and logistics-handling facilities in the free-trade area.

News Item A-6: China Eastern Airlines (CEA) took delivery of a brand-new Boeing 777-300ER airplane in Shanghai on August 12, which is the 8th of 20 777-300ERs (CEA) has on order.

The 777-300ER (B-2023), officially joined the fleet of (CEA) following a delivery flight from Everett to Shanghai.

The new 777-300ER will be deployed on Shanghai Hongqiao - Chengdu route starting August 14, operating flight MU5401 and MU5409.

(CEA) took delivery of its 1st 777-300ER in September 2014, becoming the 3rd 777-300ER operator in mainland China following Air China (BEJ) and China Southern Airlines (GUN).

(CEA) is scheduled to introduce 5 777-300ERs in 2015. The new 777 is the 4th one to be delivered this year, with another 5 pending delivery in 2016.

(CEA) has ordered 20 777-300ERs totally, with deliveries scheduled through 2018. To date, (CEA) has 8 airplanes of the type in its fleet, which are mostly deployed on the long-haul services to 2 destinations in North America.

News Item A-7: China Eastern Airlines (CEA) has placed an order for 15 Airbus A330s in a deal worth $3.63 billion at list prices. It will take delivery of 7 airplanes in 2017 and the rest in 2018.

(CEA) currently operates 31 A330-200s and 18 A330-300s.

As of June 30, (CEA) introduced 35 aircraft and phased out 21 older aircraft. It operated a fleet of 527 aircraft, comprising 501 passenger aircraft, 10 freighters and 16 business jets.

September 2015: News Item A-1: China Eastern Airlines (CEA) and Delta Air Lines (DAL) have finalized a partnership agreement unveiled in July to strengthen code share cooperation and extend network coverage.

According to the agreement, (DAL) would acquire 3.55% stakes in (CEA) with a $450 million investment. “(DAL) and (CEA) were always friends and now we are a family,” (CEA) Chairman Liu Shaoyong said at the signing ceremony. According to terms of the deal, both carriers will expand their code share cooperation on all the Sino - USA routes they operate. It includes all domestic routes they operate in each other’s home countries and all international routes to a 3rd country they operate, if approved by Chinese and USA regulators.

Currently, (CEA) and its subsidiary, Shanghai Airlines (SHA) code share with (DAL) on 30 domestic USA routes, 43 domestic Chinese routes and 7 China - USA transpacific routes.

In addition, they are also expected to conduct closer cooperation on revenue management, scheduling, Information Technology (IT), sales, and frequent-flyer programs. (DAL) recently moved to Terminal 1 at Shanghai Pudong Airport, co-locating with (CEA) and (SHA).

News Item A-2: China Eastern Airlines (CEA) is set to increase its capacity to Oceania by +20%. (CEA) will boost its capacity to Oceania by launching a Shanghai - Auckland route in September and a Shanghai - Brisbane route in January 2016, and increasing the frequency of other Oceanian services.

(CEA) will commence the Shanghai - Auckland service on September 26, which has been operated as a seasonal flight previously. Traveling to New Zealand has become more popular among the Chinese, with a growth of nearly +30% year on year. Shanghai has become the city with the most tourists heading to New Zealand. Accordingly, (CEA) has decided to operate a scheduled service to Auckland on Tuesdays, Thursdays and Sundays, and operate a daily flight starting January 2016. The new year-round service would add 175,000 permanent seats on the route and contributes an estimated NZ$212 million/US$135. 51 million to the New Zealand economy.

According to (CEA), the Shanghai - Brisbane service will be launched in January with four flights a week. In addition, (CEA) will increase the frequency of Shanghai - Sydney and Shanghai - Melbourne routes to 2 flights a day to meet the strong demand in the peak travel season in early 2016. Meanwhile, a seasonal service will link Shanghai with Cairns, Australia.

In August, (CEA) was cleared to establish a joint venture (JV) with Qantas (QAN), which allows each carrier to deliver expanded services, better departure and arrival schedules, shorter transit times, increased frequent flyer benefits, and a wider range of onward connections within China and Australia.

In addition, (CEA) is making progress in seeking new destinations in Europe.

News Item A-3: China Southern Airlines (GUN) has selected Thales (THL) Dual Head Up Displays (HUD) configuration across 30 of their new Airbus A320s, alongside the company’s Flight Management System (FMS) and Low Range Radio Altimeter (LRRA). The order represents (THL)'s largest contract for (HUD)s and the 1st for a dual configuration system since the Civil Aviation Authority of China (CAAC) made it mandatory for all Chinese registered aircraft to be equipped with (HUD)s.

The dual configuration developed by (THL) was certified by Airbus (EDS) in early 2015. (THL) will equip its (HUD)s across China Eastern (CEA), Sichuan Airlines (SIC), and China Loong Air (CDC), as well as Spring Airways (CQH.

News Item A-4: China Eastern Airlines (CEA) has taken delivery of its 50th Airbus A330 aircraft. Powered by Rolls Royce (RRC) (Trent 700) engines, the A330-200 features a 2-class cabin layout seating 30C passengers in business class and 203Y in economy.

3 737-89P (39746, B-6145; 41477, B-1513; 41488, B-6146), A320-214 (6661, B-8229), ex-(B-OOOL), A320-232 (6668, B-8018), ex-(B-OOOQ), A321-211 (6762, B-8232), ex-(D-AYAS), A321-231 (6774, B-8230), ex-(D-AYAY), 2 A330-243 (1655, B-8226; 1664, B-8231), ex-(F-WWCK & F-WWKI), deliveries.

October 2015: News Item A-1: "China Eastern >Doubles 9-month Profit" by (ATW) Katie Cantle, October 29, 2015.

China Eastern Airlines (CEA) reported a net profit of +CNY5.33 billion/+$837 million for the 1st 9 months of 2015, >doubling a net income of +CNY2.06 billion in the year-ago period.

(CEA) credited the continuous market demand growth and lower fuel prices for the profit increase.

Operating revenue increased +4.57% to CNY71.96 billion from January to September, while operating expenses dropped -6.53% to CNY 57.37 billion.

However, (CEA) reported a 3rd-quarter profit decline in the 3rd quarter with a net income of +CNY1.77 billion, down -13.4% (YOY).

Industry analysts cited yuan depreciation as the main reason for the 3rd-quarter profit decline. 3rd-quarter operating revenue rose +5.7% to CNY27.65 billion, while expenses fell -7.4% to CNY20.43 billion.

China Southern Airlines (GUN) and Air China (BEJ) are also expected to report big profit increases for the 1st 9 months.

News Item A-2: On the opening day of the Air Traffic Control (ATC) Global Show in Dubai, Thales (THL) announced its continued growth in China, with the signing of a contract to implement its latest Air Traffic Management (ATM) automation systems for the Shanghai Metroplex air space.

(THL) and Beijing Easy Sky Technology (BEST), a (THL) – (TEDC) joint venture (JV), have jointly signed a contract with the Civil Aviation Authority of China (CAAC), East Air Traffic Management Bureau (ATMB), in order to implement a new (ATM) automation system in Shanghai.

Through this contract, (THL), together with (BEST), will upgrade the Shanghai airspace and airport management systems. This will include the Shanghai terminal manoeuvering area and surface operations at Shanghai Pudong and Shanghai Hongqiao airports.

The contract includes implementation of Thales (THL) "TopSky-(ATC)." (THL) will also deploy "TopSky-Tower," its advanced, integrated tower automation suite, at both Shanghai airports. Airport and airspace traffic flows will be sequenced and balanced using (MAESTRO), (THL)'s fully integrated arrival and departure management system.

This is a crucial contract for the region, as collectively, the Shanghai Metroplex (incorporating both Shanghai airports) ranks just behind Beijing in China, and is in the top 10 in the world, in terms of air traffic movements. With air traffic in the region set to grow at a steady +20% over the next 10 years, the modernization program will be instrumental in maintaining the projected growth rate, while supporting excellence in air safety for the Shanghai Metroplex.

News Item A-3: China Eastern Airlines (CEA) and its subsidiary Shanghai Airlines (SHA) planned to reschedule their check-in counter closure time at Shanghai Pudong International Airport (PVG) starting October 25.

Check-in counters for these 2 airlines will be closed 40 minutes prior to the scheduled time of domestic departure flights. For international departure flights, the time ahead will be 50 minutes.

The adjustment only applies to (PVG), but not Shanghai Hongqiao International Airport (SHA).

The latest move is to provide customers with a safer, more punctual and smoother travel experience. Passengers are advised to arrive at the airport earlier than usual to leave enough time for their flights.

November 2015: News Item A-1: China Aircraft Leasing Group Holdings (CALC) (CHD) delivered the 1st of 6 A320 aircraft to China Eastern Airlines (CEA), marking the 58th delivered aircraft of (CALC)’s fleet.

December 2015: China Aircraft Leasing Group (CHD) delivered the 2nd of 6 A320 aircraft to China Eastern Airlines (CEA) in Toulouse, France, marking the 59th delivered aircraft of (CHD)’s fleet.

January 2016: News Item A-1: On January 22, China Eastern Airlines (CEA) has launched daily 737-800 flights between Beijing (PEK) and Bangkok Suvarnabhumi (BKK). The 3,314 km route is already served by Air China (4x-daily), Thai Airways (TII) (16x-weekly), Ural Airlines (6x-weekly) and Hainan Airlines (4x-weekly). The other new route is between Wenzhou (WNZ) and Rome Fiumicino (FCO). On January 23, (CEA) introduced 2x-weekly A330-200 flights on the 9,353 km route, which (CEA) operated for a brief period in early 2014 around the time of Chinese New Year. No other carrier operates this route, which is currently Wenzhou’s only direct service to Europe. In 2014, Wenzhou Yongqiang Airport handled 6.8 million passengers making it the 28th busiest in China.

News Item A-2: (CEA) has further grown its network to Thailand with the introduction on January 28 of a new 3x-weekly service on the 2,612 km route between Wenzhou (WNZ) and Bangkok Suvarnabhumi (BKK). No other carrier serves this route, which will be flown by (CEA)’s 737-800s. For (CEA), the SkyTeam (STM) Alliance carrier, this is its 34th route to Thailand, 2nd from Wenzhou (it already serves Surat Thani) and 11th to Bangkok’s biggest airport. It also operates 6 routes each to Chiang Mai and Krabi, 5 to Phuket, 4 to Surat Thani and 1 each to Chiang Rai and Utapao.

News Item A-3: "Hainan Airlines (HNA) to Reconfigure 100 Airplanes for Wi-Fi" by (ATW) Katie Cantle, January 15, 2016.

Hainan Airlines (HNA) plans to reconfigure 100 airplanes with in-flight Wi-Fi service in an effort to enhance its passenger experience. (HNA), in cooperation with Beijing Shareco Technology, will invest CNY1 billion/$152 million to install Wi-Fi over the next 2 years.

(HNA) General Manager Cabin Service, Xu Fei said it is committed to build a brand-new cabin ecosystem to promote Wi-Fi and provide more new in-flight entertainment (IFE) products with partners that also include Bose and Panasonic. (HNA) uses Bose’s noise-canceling earphones on some international routes and it would promote it on all international long-haul Airbus A330 and Being 787 routes in March.

Other Chinese carriers are also investing in (IFE) products. (CEA) has partnered with Panasonic to provide in-flight Wi-Fi service on international routes from Shanghai to New York, Los Angeles and Toronto since November 2015. Air China (BEJ) plans to invest CNY150 million/$23 million to promote in-flight Wi-Fi. (BEJ) currently provides in-flight Wi-Fi on some domestic business routes, including routes from Beijing to Shanghai and Guangzhou.

News Item A-4: 737-89P (41482, B-7375), delivery.

February 2016: News Item A-1: "China Eastern 777-300ER Touches Down at Taiwan Taoyuan International Airport for the 1st Time" by Lena Ge, China Aviation Daily, February 06, 2016.

At 8:46 am on February 4, a Boeing 777-300ER airplane performing flight MU7045 touched down at Taiwan Taoyuan International Airport, marking that China Eastern Airlines (CEA) deploys the model on a cross-strait route for the 1st time.

(CEA) has operated its 777-300ER on long-haul services to North America and Europe. In a bid to improve passengers' flight experience during the "Spring Festival" travel rush, (CEA) deployed 777-300ER on the Shanghai - Taipei route.

During the 40-day travel rush, (CEA) plans to operate >1,300 cross-strait flights, including 222 extra flights.

News Item A-2: Passengers on China Eastern Airlines (CEA)'s domestic flights will get in-flight Wi-Fi service as (CEA) will launch the service on February 5.

Around 290 flights weekly will provide Wi-Fi services allowing passengers to apply for the service through (CEA)'s official website and app.

The fees for the service have yet to be released.

On the eve of the lunar New Year, passengers on board will be able to watch the live Spring Festival Gala Evening using the new Wi-Fi service.

As the 1st Chinese airline which commercialized in-flight Wi-Fi service since 2014, (CEA) already has 23 airplanes with in-flight Wi-Fi equipment. By the end of 2016, the fleet with Wi-Fi services will increase to >50.

News Item A-3: China Eastern Airlines (CEA) is expected to boost international capacity by >20% this year.

(CEA) plans to introduce 49 aircraft in 2016 and open more long-haul international routes to Chicago, Madrid, Amsterdam, St Petersburg, Brisbane and Prague starting from Shanghai this year, according to (CEO) Ma Xulun.

Ma said, “It is very rare for (CEA) to open so many international long-haul routes in one year in the carrier’s history.” He also said (CEA) would add flight frequencies on international flights to Japan, Korea and some Southeast Asian countries.

(CEA) operates the Airbus A330-200 to Europe, the A330-300 to neighboring countries, and the Boeing 777-300ER on international routes to the USA.

(CEA)’s General Manager Planning & Development, Guo Lijun said it would choose between the A350-900 and Boeing 787-9 for the main long-haul aircraft type over the next 5 to 10 years.

News Item A-4: Pratt & Whitney (PRW) and joint venture (JV) partner, China Eastern Airlines (CEA) signed an agreement to incorporate (V2500) engine overhaul capability in their facility in Shanghai, China. The (PRW) Shanghai Engine Center will begin overhauling (V2500) engines in 2017.

News Item A-5: "Shanghai Pudong Airport Posts over >20% Passenger Growth in January 2016" by Joy Wong, China Aviation Daily, February 17, 2016.

Shanghai Pudong International Airport registered a growth of +20.50% in passenger numbers in January 2016 compared with the same period a year earlier, reaching 5.21 million, according to data released by Shanghai International Airport Company, Ltd on February 17.

Pudong Airport registered a +14.77% year-on-year growth in domestic passenger numbers and a +29.88% growth in international passengers.

Aircraft movements amounted to 39,350, up +11.71% from a year earlier. Aircraft movements on domestic and international routes rose +10.94% and +15.78% year on year.

Cargo traffic climbed +5.60% to 273,300 tonnes, among which 201,700 tonnes were carried on international flights.

The city of Shanghai's Pudong International Airport has reported its largest ever passenger flow during the recent Spring Festival, February 7 - 13, handling a total of 680,000 passengers over the 7-day period, a +5% increase over 2015 and +28% over 2014.

One single day, February 7, Lunar New Year's Eve, saw >92,000 passengers, the highest number for that day over the past 10 years and a +14% year-on-year increase. The last day of the holiday, February 13, was also a peak day, with a historic number of 122,600 passengers, breaking the previous record of 121,500 in one day.

To deal with the travel rush and make things more convenient and efficient, the airport said it increased the number of service areas, such as the Common-Use Self-Service kiosks, self-service check-in machines and self-service boarding channels. Passengers could also go through immigration in Terminal 1 and Terminal 2 easily and Hong Kong and Macao residents coming to Shanghai with a Chinese e-passport and mainland travel permit could go through clearance by themselves within 12 seconds.

News Item A-6: INCDT: A China Eastern Airlines(CEA) plane bound for Shanghai returned to Chengdu after it was struck by lightning during take-off. Flight MU5414, operated with an Airbus A321-200 (B-6927) suffered the lightning strike about a half hour after departure, when the flight crew (FC) requested an emergency landing back to Chengdu.

The Shanghai base that responded to the incident, said that the flight MU5414 left Chengdu Shuangliu International Airport around 5:16 pm Sunday and returned within a half hour when the airplane was struck by lightning in a rain cloud.

Passengers on board saw a glare but didn't feel anything when the lightning struck. After landing, all passengers were deplaned and arranged to return to the terminal. Fortunately, no damage was found on the aircraft in maintenance inspection.

News Item A-7: Boeing and China Development Bank Financial Leasing Company((CDB) Leasing) celebrated the delivery of the 1st Next-Generation 737 from the lessor's order book to (CEA). It marks the 1st of 30 737NGs (CDB) Leasing has on order.

The Next-Generation 737-800 delivered to (CEA) features (CEA)'s refreshed interior and the signature elements of Boeing (TBC's innovative Sky Interior with modern sculpted sidewalls and window reveals, larger pivoting overhead stowage bins and (LED) lighting that enhances the sense of spaciousness.

Based in Shenzhen, (CDB) Leasing operates as a subsidiary of the China Development Bank. With registered capital of 9.5 billion yuan and a fleet at the end of 2015 of 191 airplanes, (CDB) Leasing is 1 of the largest and most influential financial leasing companies in China with >30 years of experience in the business.

March 2016: China Eastern Airlines (CEA) plans to introduce a strategic investor by reducing its state-owned stakes to allow for more capital injection.

“Its [regulations] used to stipulate state-owned stakes should account for <50% in China’s big 3 carriers [Air China (BEJ), (CEA), and China Southern (GUN)]. But I think this figure can be reduced to about 40% so that we can attract more social capital injection [from a strategic investor],” (CEA) (CEO), Ma Xulun noted.

Beijing now encourages China’s state-own enterprises to make reforms to realize diversified ownership. In January, the China Securities Regulatory Commission approved (CEA) to circulate 2.33 billion A shares at CNY6.44/$.98 per share to no more than 10 investors so it could collect about CNY15 billion for fleet renewal and loan payoff, which would reduce state-owned stakes from 64% to about 50%.

Last year, (CEA) introduced Delta Air Lines (DAL) as a strategic investor by selling its 3.55% stake, worth $450 million, to the latter. Both carriers have a code share on 30 domestic USA routes, 43 domestic Chinese routes, and seven China - USA transpacific routes. They are also expected to conduct closer cooperation on revenue management, scheduling, Information Technology (IT), sales, and frequent-flyer programs.

March 2016: News Item A-1: China Eastern Airlines (CEA) officially commenced a nonstop service linking Shanghai and Chicago, making it the seventh destination in North America, following New York, Los Angeles, Honolulu, San Francisco, Toronto, and Vancouver.

(CEA) flies the new service with its wide body Boeing 777-300ER airplane (one of its newest fleet additions) loaded with bells and whistles, including Wi-Fi in all cabins and dynamic (LED) lighting to ease jet lag and improve passengers' flight experience.

Departing on Tuesdays, Fridays and Sundays, the Chicago-bound flight MU717 is scheduled to take off from Shanghai Pudong international Airport (PVG) at 11:40 am and arrive at O'Hare International Airport (ORD) at 12:40 pm, with the return flight MU718 departing (ORD) at 3:00 pm and landing at (PVG) at 7:10 pm the next day (all local time).

(CEA) had filed an application to the aviation watchdog for launching a daily service from Shanghai Pudong to Chicago in October 2015. Actually, the non-stop service between Chicago and Shanghai will start operating 3x-weekly in March and then be increased to daily.

China Eastern (CEA) will compete against (UAL)'s daily service on the route and (AAL)'s weekend-only service.

News Item A-2: China Eastern Airlines (CEA) is waiting government approval to launch 2 intercontinental round-trip services: Beijing - Hangzhou - Sydney, and Kunming - Qingdao - San Francisco in June 2016.

(CEA) will use Airbus A330-300 aircraft to fly the 2 new services. Both Beijing - Hangzhou - Sydney and Kunming - Qingdao - San Francisco services will be offered 3x-weekly.

News Item A-3: "China Eastern Shandong Takes Delivery of 1st A321" by Lena Ge, China Aviation Daily, March 17, 2016.

China Eastern Airlines (CEA)'s Shandong Branch took delivery of its 1st A321 aircraft. The A321-211 (B-8398) will be deployed on Qingdao - Guangzhou and Qingdao Beijing route from March 19.

With the arrival of new A321, China Eastern Shandong expands its fleet to 28 Airbus aircraft, including 2 A319s, 25 A320s and 1 A321.

News Item A-4: China Eastern Airlines (CEA) will open a Guangzhou subsidiary in May to enhance its position in the Pearl River Delta Region.

April 2016: News Item A-1: China Eastern Airlines (CEA) reported a net profit of +CNY4.54 billion/+$64 million in 2015, up +33% compared to net income of +CNY3.42 billion in 2014.

Full-year operating revenue rose +4.6% to CNY93.84 billion, while expenses dropped -3% to CNY77.15 billion.

(CEA) credited continuous market demand growth, especially outbound travel, and lower fuel prices as the main reasons for the improved performance. However, it said the slowdown of cargo market growth and exchange rate fluctuations had negatively affected its financial performance.

Passenger boardings increased +12% to 93.78 million with an average load factor of 80.5% LF, up +0.95 point over 2014. Passenger capacity grew +13% to 181.79 billion (ASK)s against a +14.6% increase in passenger revenue to 146.34 billion (RPK)s. Cargo traffic volume grew +2.6% to 1.4 million tonnes.

(CEA) introduced 80 new airplanes and retired 42 old airplanes last year. As of December 31, 2015, it operated 551 airplanes, comprising 526 passenger airplanes, 9 freighters and 16 business jets. Daily airplane utilization increased +2.4% to 10.03 hours.

Looking ahead, (CEA) predicted passenger demand will continue to grow, while the cargo market stays depressed. (CEA) plans to take advantage of the Shanghai Disneyland opening and lower fuel prices to improve its financial performance in 2016. (CEA) expects to optimize its fleet by introducing 72 new airplanes and phasing out 26 old airplanes this year.

News Item A-2: China Eastern Airlines (CEA) predicted its (1Q) net profit will increase +60% to +70%, according to a filing released by the Shanghai Stock Exchange. (CEA) credited continuous market demand growth and lower fuel prices for the expected (1Q) performance.

(CEA) reported a net income of +CNY1.56 billion in the 1st quarter of 2015. (ASK)s grew +15.9% against a +16.1% increase in (RPK)s.

Industry analysts predict there will be more room for (CEA) to improve its financial performance, as robust market demand growth in the Yangtze River Delta Region continues and Shanghai Disneyland opens in June.

(CEA) posted a 2015 net profit of +CNY4.54 billion/+$64 million, up +33% compared to a net income of +CNY3.42 billion in 2014.

News Item A-3: China Eastern Airlines (CEA) has signed a one year extension of its fleet management deal with (GE) Avionics that will cover data collection and data mining from its 270-strong fleet of Airbus and Boeing airplanes.

The (GE) system will help maintain optimum operational efficiency and fuel savings for (CEA) by analyzing operational data to identify potential cost savings. (CEA) said the agreement would also help improve its environmental performance.

“(CEA) is highly focused on environmental protection and is committed to improving aircraft efficiency and reducing emissions,” (CEA) Chairman Liu Shaoyong said.

The agreement covers cooperation on data analysis of (CEA)'s fleet of Airbus A320 and A330 aircraft, as well as its 737 and 777 models.

The 2 companies would continue their existing “innovative cooperation model” and extend research on flight operation data to generate value for (CEA)’s efficiency, (CEA) said.

(GE) said it had made “impressive progress” over the past two years through analyzing data from flight analytics, engine management analytics and fuel efficiency reports. It said it will also extend its existing training programs to improve (CEA)’s engine management capability and provide six sigma training programs for (CEA)'s engineers (MT).

(CEA) is expected to announce a significant fleet expansion in coming weeks, adding either Airbus A350-900 or the Boeing 787-9s to its fleet. The (CEA) deal comes on the heels of an announcement by (GE) that it is to invest $81 million in a new Asia-based advanced technologies research and development facility in Singapore.

News Item A-4: Boeing (TBC) and China Eastern Airlines (CEA) on April 28th finalized an order for 15 787-9 Dreamliners. The order, valued at nearly US$4 billion at current list prices, strengthens (CEA)'s expanding long-haul fleet.

May 2016: News Item A-1: INCDTS: 3 Chinese airlines have been punished over errors that could have resulted in plane crashes, China's civil aviation regulator (CAAC) announced.

In addition, the Civil Aviation Administration of China (CAAC) said it was sending senior pilots (FC), engineers (MT) and supervisors to inspect operations and carry out training with staff from China Eastern Airlines (CEA), Okay Airways (OKA), and Xiamen Air (XIA).

The (CAAC) said it was taking the action due to a what it described as a "landslide of safety conditions."

Beijing-based private carrier Okay Airways (OKA) was involved in an incident in which the tail of a passenger aircraft scraped the runway as it came into land at Nanning airport in south China's Guangxi Zhuang Autonomous Region.

In a similar incident, the tail of a Xiamen Air (XIA)'s Boeing 737-800 passenger airplane also touched the ground, which could have led to a serious accident.

On May 1, an Airbus 319 passenger aircraft belonging to China Eastern Airlines (CEA) suffered damage to its tail and tires during an aborted landing during bad weather at an airport in Kangding in southwest China's Sichuan Province. After missing the approach, the aircraft flew back to Chengdu.

Experts say most of the incidents were the result of pilot (FC) error, often the result of fatigue or lack of training. They also said the rapid expansion on flights and fierce competition has led to a shortage of pilots (FC), with some airlines cutting back on training and introducing more overtime.

Official data shows there have been 7 air accidents due to negligence in the 1st quarter of this year alone.

Meanwhile, 2 foreign airlines operating in China have been criticized by the (CAAC). Emirates (EAD) and Orient Thai Airlines (OTH) were ordered to take immediate remedial action after 2 incidents, in January and April.

The (CAAC) said it would also evaluate the performance of other foreign airlines that operate on the Chinese mainland.

News Item A-2: "China Eastern Launches Ningbo - Amsterdam Cargo Service" by Lena Ge, "China Aviation Daily" May 13, 2016.

China Eastern Airlines (CEA) has launched a cargo service between Ningbo and Amsterdam, marking the 1st inter-continental all-cargo route at Ningbo Lishe International Airport.

The inaugural flight took off from Ningbo at 1:00 pm on May 5. The 2x-weekly service is available every Tuesday and Thursday, operated by 777-200Fs by (CEA)'s cargo unit, China Cargo Airlines (CKK).

This is Ningbo Airport's first intercontinental freighter service, and its 5th international cargo route.

News Item A-3: "China Eastern Celebrates Milestone Delivery of Its 300th Airbus Aircraft" By Lena Ge, China Aviation Daily, May 13, 2016.

China Eastern Airlines (CEA)'s Airbus (EDS) fleet reached the 300th milestone with an A320-200, handed over during a ceremony in Toulouse, France on May 12.

The A320-200 (B-8359) aircraft, is installed with (CFM56-5B) engines and equipped with 158 seats including 8C and 150Y in economy class.

(CEA), the SkyTeam (STM) Alliance carrier is a long-time operator for Airbus (EDS) jetliners, starting in 1985 with the A310. Today, it operates some 248 A320s and 51 A330s, owning the largest Airbus (EDS) fleet in China.

June 2016: News Item A-1: Chinese carriers reported a collective net profit of +CNY32.03 billion/+$4.86 billion in 2015, up +75.1% over the net income of CNY18.29 billion in 2014 in the face of “the slowdown of global economic growth” and “mounting domestic economic downward pressure,” according to Civil Aviation Administration of China (CAAC).

Industry analysts credited “lower fuel price” and “continuous robust growth of market demand, especially market demand on international routes” as the main reasons for domestic airlines’ much improved performance.

Chinese carriers transported a total of 436.18 million passengers, up +10.6% over 2014. Average passenger load factor increased by +0.7 points to 82.1% LF. Cargo traffic volume jumped +5.9% to 6.293 million tonnes.

Domestic airlines took delivery of +280 new aircraft in 2015, expanding the total fleet to 2,650 aircraft as of December 31, 2015.

China’s 4 major carriers all reported big profit increases in 2015. Air China (BEJ) has reported a 2015 net profit of +CNY6.77 billion/+$955 million, up +77% compared to net income of +CNY3.82 billion in 2014, while (CEA) reported a net profit of +CNY4.54 billion/$64 million in 2015, up +33% compared to net income of +CNY3.42 billion in 2014. China Southern Airlines (GUN) reported a net profit of +CNY3.85 billion/+$593 million in 2015, >2x- from a net income of +CNY1.77 billion in 2014. Hainan Airlines (HNA) reported a 2015 net profit of +CNY3 billion/+$462 million in 2015, up +16% from a net income of +CNY2.59 billion in 2014.

News Item A-2: China Eastern Airlines (CEA) will introduce premium economy (PY) seating on board its new fleet of long-haul aircraft.

(CEA) is revamping its twin-aisle fleet, with 15 new 787-9s and 20 A350-900s due to be introduced between 2018 and 2021.

And (CEA) has now revealed that it will equip both these new aircraft types with 4 cabin classes, including premium economy (PY).

The 787-9s will be configured with a total of 285 seats: 4F in 1st class, 26C flat beds in business (C) class, 32PY seats in premium economy and 227Y in economy. The A350 will seat 288 passengers in total, with 4 suites in 1st (F) class, 36C flat-beds in business (C) class, 32PY seats in premium economy and 216Y in economy class.

At present, (CEA)'s long-haul 777s feature three cabins while its A330s have just two classes.

July 2016: China Eastern Airlines (CEA) has filed an application with the Civil Aviation Administration of China (CAAC) to launch two international services from Chengdu to Manila and Cebu in July, 2016.

Pending government approval, (CEA) will fly its Airbus A320 aircraft on both Chengdu - Manila and Chengdu - Cebu routes.

(CEA) will operate the Manila service 3x-weekly, with 4x-weekly on the Cebu route.

August 2016: 737-89P (41495, B-7876), 777-39PER (43280, B-7365), A320-214 (7253, B-8557), ex-(F-WWIF), and A321-211 (7254, B-8572, 7265, B-8573), ex-(D-AYAH & D-AYAL) deliveries.

October 2016: News Item A-1: China Eastern Airlines (CEA) on October 16 established a southern branch in Guangzhou, capital of South China's Guangdong Province, a move to further tap the region's market in the world's 2nd-largest aviation industry.

China Eastern (CEA) operates 22 aircraft on 59 domestic and three international routes with 120 daily flights from Guangzhou, Shenzhen, Shantou, Zhanjiang, Zhuhai and Foshan. Last year, (CEA) transported 6.2 million passengers in Guangzhou and 3.5 million passengers in Shenzhen, taking up >11% of the Guangzhou market and nearly 9% of the Shenzhen market, respectively.

All 3 State-owned airlines, which used to compete within their bases, are now competing in 3 hub cities: Beijing, Shanghai, and Guangzhou.

Earlier, Air China (BEJ), based in Beijing, marched into South China's market with the help of Shenzhen Airlines (SHZ). (CEA) and Guangzhou-based China Southern Airlines (GUN) both set up branches in Beijing, and (BEJ) and (GUN) both have branches in Shanghai.

Insiders said the moves by the 3 giants to tap into each other carriers' territories showed that they are becoming market-oriented instead of administration-oriented. Earlier, the former head of the Civil Aviation Administration of China (CAAC) expressed the hope that the 3 airlines could build their own hubs within their respective territories.

However, how to win more flight slots in 1st-tier cities is a challenge ahead of the carriers.

(GUN) said in June that the operation of its Airbus A380 jumbo yielded profit in 2015 after years of losses. The most suitable flights for the jumbo are long-haul routes such as those starting from Beijing, but (GUN) has found it is hard to win flight slots in Beijing.

(GUN) enjoys a dominant market share (36% share) in Guangdong, followed by China Eastern (CEA) with a share of 11%, the 21st Century Business Herald reported on October 16.

(CEA) now serves 6 cities in Guangdong Province with 120 flights daily, and it also flies to 3 cities overseas. Its Guangdong branch hopes to put nearly 60 airplanes into service in total by 2020, and it plans to open continental flights from Guangzhou to Australia and North America.

News Item A-2: The Civil Aviation Administration of China (CAAC) has authorized 100 international routes in the 3rd quarter ended September 30, 2016, according to an announcement posted October 10 on its official website.

From July to September, the aviation watchdog approved 15 Chinese airlines to launch 65 international routes, with +48 more services by 28 foreign carriers.

China Eastern Airlines (CEA) led with approvals for 8 international services to Abu Dhabi, Cebu, Manila, Okinawa, Prague, Shizuoka, Sydney, and Vancouver.

October 2016: News Item A-1: China Eastern Airlines (CEA) said its net profits rose +25.69% from a year earlier in the 1st 3 quarter of 2016, as fuel costs fell and passenger numbers increased. Net profit for the 1st 9 months was 6.69 billion yuan, (CEA) said in a stock exchange statement.

Total revenue for the 9 months ended September 30 rose +4.79% to 75.4 billion. Basic earnings per share stood at 0.49 yuan per share.

Besides, (CEA)'s 3rd-quarter net profit soared came in at about 1.97 billion yuan, soaring 95.5% from a year earlier, according to its financial report. (CEA) attributes the profit growth to low oil prices, sustained growth of the air travel demand, as well as (CEA)'s enhanced brand and operating efficiency.

In the 1st 9 months of 2016, (CEA) handled a total of 76.3 million passengers and 10.1 billion tonnes, up +8.2% and down -1.5% over the same period last year, respectively.

(CEA) took delivery of 6 new aircraft and phased out 2 old ones in the period from July to September. As of September 30, (CEA) operated a total of 572 aircraft.

News Item A-2: China Eastern Airlines (CEA) will install Rockwell Collins’ (PAVES) in-flight entertainment (IFE) system on 30 Boeing 737NGs and 60 737 MAXs, Rockwell Collins announced October 25. Rockwell Collins said it was the “largest Chinese airline win in the history of [the company].”

The Cedar Rapids, Iowa-based Information Technology (IT) systems company said it will also install various avionics systems on other airplanes in (CEA)'s fleet, including 70 Airbus A320neos, 15 A330 family aircraft, 60 737 MAXs and 50 737NGs.

According to Rockwell Collins, the (PAVES) (IFE) system allows for hybrid (IFE) configurations supporting an airline’s requirements for unique configurations, such as in-seat (IFE) in first (F) class and overhead (IFE) in economy (Y).

Shanghai-based China Eastern Airlines (CEA) has logged major order transactions with Boeing (TBC) in the past 2 years, including a June 2014 order for 80 Boeing 737 series airplanes scheduled for delivery between 2016 and 2020, and a July 2015 order for 50 737-800s, scheduled for delivery between 2017 and 2019.

The 2014 order was for an undisclosed mix of 737 MAXs and 737-800s, although it is believed the majority will be 737 MAXs.

November 2016: News Item A-1: Chinese carriers have accelerated their international expansion pace as outbound travel continues to grow.

In October, Beijing-based Air China (BEJ) experienced a +18.6% year-over-year (YOY) growth in (RPK)s on international routes. Shanghai-based China Eastern (CEA) reported a +30.4% (YOY) growth; Guangzhou-based China Southern (GUN) posted a 23.9% (YOY) growth; and Haikou-based Hainan Airlines (HNA) saw a 47.4% (YOY) growth.

Air China (BEJ) transported 11.2 million passengers on international routes in October, up +23.2% (YOY); China Eastern (CEA), 12.1 million, up +17.2% (YOY); China Southern (GUN), 11.6 million, up +19.1% (YOY); and Hainan Airlines (HNA), 18.7 million, up +57% (YOY).

In September, domestic airlines transported 4.2 million passengers on international routes, up +19.9% (YOY), which outpaced a +13% growth on domestic routes.

Hainan (HNA) opened 2x-weekly Xi'an - Sydney and Changsha - Sydney routes in September and 2x-weekly Haikou - Da Nang services in October.

China Eastern (CEA) opened 13 international routes in the (1H) and +2 European routes to St Petersburg and Madrid, in addition to boosting flight frequencies on routes to Europe and the USA.

Industry analysts point out domestic airlines still need to face severe challenges including overcapacity; shortage of slots and aviation professionals, such as pilots (FC) and Maintenance Repair & Overhaul (MRO) (MT) staff; and should focus more on profits than market shares, when they speed up their international expansion pace.

December 2016: News Item A-1: China Eastern Airlines (CEA) expected it will break 100 million annual passengers for the 1st time in its history in 2016, ending the year with record operating revenue and its 8th consecutive year of profitability.

(CEA) will achieve a total turnover of 19.7 billion tonnes km in 2016, up +10.5% year on year. It also forecasted a +8.2% increase in passenger volume to 101.4 million, with cargo traffic declining -0.4% to 1.39 million tonnes.

During the year, (CEA) will accomplish a total of 1.96 million hours of safe operations, with 838,400 aircraft movements. Notably, China Eastern (CEA) has deployed +4.17% more capacity on international routes, adding 9 overseas gateways and increasing frequencies of 25 international routes. Specifically, (CEA) also added +62.3%, +25.5% and +39.5% more capacity on international routes to North America, Europe and Australia.

At present, (CEA) operates >580 aircraft, flying to 1,062 destinations among 177 countries and regions via the extensive shared network of the SkyTeam (STM) Alliance.

News Item A-2: Shanghai Airport Authority, which operates Pudong International Airport and Hongqiao International Airport, set a new record by handling 100 million passengers in a single year. Shanghai becomes China's 1st city to top the 100 million air passenger milestone and world's 5th following Atlanta, London, New York and Tokyo.

In the past year, Shanghai Airports have maintained a steady growth in passenger throughput, aircraft movement and cargo traffic. According to relevant statistics, a total of 99 million passengers traveled through Pudong International Airport and Hongqiao International Airport in 2015, making the city the busiest among Chinese airports. The 2 airports handled a combined 3.7 million tonnes of cargo and mail and 700,000 aircraft movements in the past 12 months, hitting new records in their history.

Besides, (PVG) has started the construction of the world's largest satellite airport terminal that can handle 38 million passengers annually when it is completed in 2019.

News Item A-3: "China's Longest East - West High-Speed Railway Starts Operation" by "Xinhua" December 27, 2016.

China on December 28 put into operation one of the world's longest high-speed railways, linking the country's prosperous eastern coast to the less-developed southwest.

The Shanghai - Kunming line (2,252 km in length) traverses the 5 provinces of Zhejiang, Jiangxi, Hunan, Guizhou and Yunnan and cuts travel time from Shanghai to Kunming from 34 to 11 hours, according to the China Railway Corporation.

The maximum speed is 330 km per hour, said Wang Jinda, a train driver.

The line is also the longest east - west high-speed railway in China. A longer rail line stretching north to south is the 2,298 km Beijing - Guangzhou line, put into operation in 2012.

China has built >20,000 km of high-speed rail lines. According to the government's plan, the mileage will increase to 45,000 km by 2030. The launch of the Shanghai - Kunming line means the country's high-speed rail grid has taken shape, connecting almost all provinces on the Chinese mainland.

A320-214 (7374, B-8973), ex-(B-000J) delivery.

February 2017: News Item A-1 China Eastern Airlines (CEA) has filed an application with the Civil Aviation Administration of China (CAAC) to launch a new international service from Nanjing to Sapporo, Japan in March 2017.

Pending government approval, (CEA) will operate its Airbus A320 aircraft on the Nanjing - Sapporo service, with 2x-weekly, according to an announcement released Tuesday on the website of the (CAAC).

News Item A-2: China Eastern Airlines (CEA) officially offers WiFi on a flight between Wuhan, Central China, and Sydney on February 20.

This is the 1st flight from Wuhan to offer its passengers Internet access, said Mei Xiaoling with the airline's Wuhan subsidiary, adding that mobile phones must still be switched off during the flight.

Passengers should reserve in advance, as the service is limited to 100 passengers on each flight, according to (CEA).

(CEA) launched its Wuhan - Sydney route in January. An Airbus A330 departs Wuhan at 11:40 pm on Mondays, Wednesdays and Fridays (Beijing time), and leaves Sydney on Tuesdays, Thursdays and Saturdays at 10:15 pm (local time).

News Item A-3: Chinese airlines are rapidly increasing flights to the Philippines following the relaxing of visa requirements between the 2 countries in October 2016. Since then, 675,700 Chinese tourists visited the Philippines in 2016, up +37.1% over 2015. Local industry analysts predicted this figure will continue to grow quickly this year. Over the past 3 months, >10 Chinese carriers (including China Eastern (CEA), Sichuan Airlines (SIC), Juneyao Airlines (JYA), Spring Airlines (CQH), Xiamen Airlines (XIA) and Capital Airlines (DER)) have applied to open nearly 40 international routes to Kalibo and Cebu in the Philippines. Tianjin Airlines (GCR) has applied to open 5 international routes to the Philippines from Tianjin, Ningbo, Xi’an, Wuhan, Nanjing and Chongqing.

7 Chinese carriers currently operate routes to the Philippines with 24,000 weekly flights. Local analysts point out many domestic airlines need to find new SE Asian markets (such as the Philippines) to make up for decreased demand in the Thailand market after the government tightened tourism restrictions following the death of Thailand’s king last year. However, analysts also expressed concern about the Philippine’s infrastructure and aviation safety that may impact the fast-growing Sino-Philippine market.

News Item A-4: Shanghai's 2 airports reported a record high of >2 million passengers during the week-long Chinese New Year holiday from January 27 to February 2, according to the Shanghai Airport Authority (SAA). The 2 Shanghai airports handled +10.21% more passengers over a year earlier in the "Golden Week."

Pudong International Airport received >1.3 million passengers and Hongqiao International Airport had about 700,000 passengers, customs officials said. Aircraft movements increased +5.39% from the same period last year to 13,790. The daily peak occurred on the 6th day of the Lunar Calendar (February 2) with 320,000 passengers and 2,025 aircraft movements.

Nearly 700,000 travellers departed from or entered the country via Shanghai Pudong International Airport over the holiday, hitting a new high record. The busiest day was January 26, when >120,000 passengers arrived and departed Shanghai from the airport, almost matching the daily record set during last year's "Chunyun" (the annual Spring Festival travel rush period).

A321-211 (7551, B-8976), ex-(D-AVXP) delivery.

March 2017: News Item A-1: China Eastern Airlines (CEA) plans to open a service between Houston and Shanghai this year, while also adding 2 European services. The Houston operation will be the 2nd direct link between the Texan city and China. Air China (BEJ) runs a Beijing - Houston service that, industry sources say, is performing well. (CEA) will begin flying between Shanghai Pudong International Airport and Houston’s George Bush International Airport in June or July.

News Item A-2: "China Eastern (CEO) Calls for Air Space Management Legislation" by (ATW) Katie Cantle, March 9, 2017.

China Eastern Airlines (CEA) (CEO) Ma Xulun will call on Beijing to formulate legislation for China’s air space management to meet the country’s fast-growing market demands when he attends the annual National People’s Congress and Chinese People’s Political Consultative Conference this week.

According to Ma’s proposal submitted to the National People’s Congress, China has lacked basic air space management legislation for a long time and the current model (which is mainly dominated by the military and characterized by solid usage and static management) has seriously restricted the development of China’s air transport industry. In addition, he said China’s air transport growth potential has reached “the ceiling” of air service supportability.

Ma also said the government organizations responsible for air space management in China face big challenges when dealing with issues such as general aviation aircraft and unmanned aerial vehicles, because they are currently under-regulated.

Ma said Beijing should establish an air space management committee to:

* Formulate air space management policies;

* Set up coordination and communications systems between civil air space and military air space management;

* Provide air traffic control service to conduct unified supervision and management of China’s air space to guarantee a safe, orderly and good use of air space resources; and

* Meet the needs of different air space users.

It is widely known the air space issue is closely related to Chinese carriers’ on-time performance (OTP). Last week, Civil Aviation Administration of China (CAAC) (CAC) Minister Feng Zhenglin said the regulator has done some work to improve (OTP) by +8.4 points to reach 76.4% in 2016. He said “weather conditions” have become the main factor that impacts domestic airlines’ (OTP), but he is not still satisfied and believes “there is still room for further improvement.”

April 2017: News Item A-1: China Eastern Airlines (CEA) reported a 2016 net profit of +CNY4.5 billion/+$635 million in 2016, down a slight -0.73% over a net income of +CNY4.54 billion in 2015.

Operating revenue for the year was up +5% to CNY98.6 billion, while operating expenses grew +7.1% to CNY82.6 billion.

(CEA) cited exchange rate fluctuations and international terrorism as negative factors on its figures; however, it also noted positives factors including lower fuel prices and robust outbound traffic growth. Passenger capacity was up +13.5% to 206.2 billion (ASK)s against an increase of +14.5% in passenger revenue to 167.5 billion (RPK)s. Passenger boardings were up +8.5% to 101.7 million with an average load factor of 81.2% LF, up +0.73 point over 2015. Cargo traffic volume dipped -0.3% to 1.4 million tonnes.

In 2016, China Eastern (CEA) introduced 72 airplanes and phased out 26, which expanded its fleet to 596 total airplanes.

Looking ahead, (CEA) expects passenger growth will continue, but cautions challenges remain, including fluctuations in oil prices and exchange rates, as well as the geopolitical situation and increased competition. In the next 3 years, (CEA) plans to take delivery of 73 airplanes and retire 18 in 2017, introduce 67 and phase out 15 in 2018, as well as take delivery of 72 airplanes in 2019.

News Item A-2: China Eastern Airlines (CEA) will become China's 1st state-owned carrier to diversify ownership of its logistics subsidiary, in an effort to enhance market competitiveness.

According to a filing released by the Shanghai United Assets and Equity Exchange, China Eastern subsidiary China Eastern Equity Investment Limited Company (which holds a 100% stake of China Eastern Logistics Company) is expected to reduce its stake in the logistics subsidiary to 45%. This means it will sell a 55% stake, in which 45% is expected to be sold to privately owned strategic investors. This comprises 25% for 3rd party logistics providers, 10% for logistics and real estate companies, 5% for express delivery companies and 5% for financial investors. The remaining 10% will be sold to key staff.

After the deal is complete, China Eastern Logistics Company would gain 278.8 million yuan/US$40.5 million in registered capital.

Beijing has selected China Eastern (CEA) as one of the 1st state-owned enterprises to implement diversifying ownership reforms. Industry analysts pointed out the transaction is quite rare and can become a role model for other China's state-owned enterprises to follow.

Earlier this year, (CEA) (CEO) Ma Xulun said many privately owned companies had showed an interest in diversifying ownership reforms of China Eastern Logistics Company, which is expected to launch an initial public offering (IPO) in the future.

China Eastern Logistics Company aims to become a high-end logistics solutions provider and aviation logistics ground service provider. It has reported a net income of 380 million yuan and 210 million yuan in 2014 and 2015, respectively, despite the domestic cargo market depression. In November 2016, (CEA) transferred 100% of its stake in the logistics subsidiary (launched in 2012) to subsidiary China Eastern Equity Investment Limited Company for 2.43 billion yuan.

Beijing-based Air China (BEJ) also plans to follow suit with its logistics subsidiary.

News Item A-3: China's economic planner on April 13th approved China Eastern Airlines (CEA)'s 13.2-billion-yuan/US$1.92 billion plan for a base at an expansive new airport in Beijing that could eventually be the world's largest, when completed.

The National Development & Reform Commission said on its website that the base will cover 1.17 million square metres, and 30% of the investment, or 3.96 billion yuan, will be funded by (CEA). The remaining 9.24 billion yuan will be financed using domestic bank loans.

China plans to complete the 1st phase by 2019, and will be able to serve 45 million passengers a year with 4 runways on the 1st opening. 2 more phases would push the capacity to an annual count of 100 million passengers. That would put the airport as the world's largest in surface area, roughly in line with Hartsfield-Jackson Atlanta International Airport, the world's busiest by number of annual passengers.

Upon completion, rival state carrier, China Southern Airlines (GUN), will also relocate to the new airport from the existing Beijing Capital International Airport, the airport project managers told reporters last year. They said (CEA) and (GUN) will handle 40% of the new airport's footfalls.

May 2017: China Eastern Airlines (CEA) posted a (1Q) net profit of +CNY2.8 billion/+$406 million, up +8.3% over net income of CNY2.6 billion in the year-ago quarter. Operating revenue for the (1Q) rose +4.3% year-over-year (YOY) to CNY24.5 billion against a +16.2% increase in operating expenses to CNY21.5 billion. China Eastern (CEA) cited record-high passenger boardings and a boost of direct ticket sales as reasons for the profit increase.

(CEA) transported 26.6 million passengers in the 1st quarter, up +9.3% over the year-ago quarter. (CEA)’s low-cost subsidiary China United Airlines (CUL)’s direct sales revenue was up +25.4%, which accounted for 75.4% of the (LCC)’s total sales revenue.

May 2017: 777-39PER (43285, B-7881), A320-214 (7685, B-8565), ex-(F-WWBP), (BOC) Aviation leased; A330-343E (1788, B-8968), ex-(F-WWYR) deliveries.

July 2017: China Eastern Airlines (CEA) plans to allocate 150 - 200 aircraft to Beijing’s new airport in Daxing, which is expected to open in 2019. The airport has not yet been named.

(CEA) said the aircraft would be a mix of narrow bodies and wide bodies, which would operate on domestic Hong Kong, Macau and Taiwan routes and international routes to America, Europe, Australia, Japan, Korea and SE Asia. (CEA) currently has no direct intercontinental long-haul service from Beijing.

China Eastern (CEA) will invest CNY13.2 billion/$1.9 billion in its infrastructure at the new airport in an effort to enhance its position in the Beijing market. (CEA) previously said it plans to designate Beijing’s new airport as its core strategic hub for the most profitable Beijing - Shanghai route. This should increase the number of long-haul routes from Beijing and strengthen cooperations with other SkyTeam (STM) Alliance members.

(CEA) has also signed a framework cooperation agreement with the local Daxing government to cooperate in areas including (MRO), logistics, air catering and aviation media.

China Southern (GUN) has had a cooperation agreement with the Beijing government as early as 2011 to allocate 200 Airbus A330s and A380s to the new airport over the next 10 years.

China Eastern (CEA) and China Southern (GUN) are expected to build their own infrastructures at Beijing’s new airport based on their respective passenger boardings. This would account for 40% of the airport’s annual passenger volume (which is projected to be 45 million in 2020, 72 million in 2025 and 100 million in the longer term).

Air China (BEJ) and other Star (SAL) Alliance member carriers (including Hainan Airlines (HNA)) are expected to remain at Beijing Capital Airport, which has a slot shortage.

September 2017: China Eastern Airlines (CEA), announced September 7 it will begin a daily flight from Shanghai to the Australian city of Brisbane in the state of Queensland.

The new service is expected to see 120,000 additional visitors over the next 4 years coming to Australia, and Premier of Queensland Annastacia Palaszczuk said it will allow even more Chinese tourists to have "access to our best destinations." "China is Queensland's most valuable and fastest growing international market," Palaszczuk told state parliament on Thursday.

"We know that securing additional international flights to Queensland is the best way to grow tourism."

Queensland Tourism Minister Kate Jones was excited about the new flights, and said in a statement obtained by "Xinhua" that this was part of an Australia-wide collaboration between stakeholders to further welcome guests from China. "It will offer Chinese travellers easier access to many of our iconic destinations known for their world-class beauty, natural environments, unique experiences and world-class events," Jones said.

With nearly 120 million outbound Chinese travellers in 2016, Tian Liuwen, Executive VP of China Eastern Airlines (CEA), said that these new flights will be able to further serve these tourists, with more seeking to come to Australia than ever before.

"We also believe that (CEA) will open up new opportunities for economic and cultural exchange not only between Shanghai and Queensland, but also between China and Australia," Tian said.

October 2017: News Item A-1: "Europe Eyes Potential of Flying Visits" by Fu Jing, China Daily, October 10, 2017.

Despite the threat of terrorist incidents, Chinese tourists continue to flock into European countries, and Chinese airlines have been responding to the demand by launching new direct flights to European destinations.

On September 30, Air China (BEJ), China's national carrier, introduced direct flights between Beijing and Athens, Greece. Hainan Airlines (HNA) will launch non-stop flights between Shanghai and Brussels on October 25 and China Eastern Airlines (CEA) will commence flights between Xi'an and Prague on October 29.

The flights between Shanghai and Brussels will be (HNA)'s 2nd route to the Belgian capital, as it also flies between Beijing and Brussels.

Prague is already linked by direct flights with Beijing, Shanghai and Chengdu, capital of Sichuan province, and by the middle of next year, the Czech capital, according to the schedule, will be connected by direct flights with 6 Chinese cities. That will make it stand out among Central and Eastern European countries, and many Western European countries as well.

The Czech Republic aims to become a regional aviation center, and it is keen to grasp the opportunities presented by expanding its aviation and tourism cooperation with China.

In terms of number of direct flights linking Chinese cities, Prague could even compete with London, Paris and Frankfurt, the established airport hubs in Western Europe.

On the demand side, the number of Chinese tourists traveling to Europe, according to official statistics, increased by 65% year-on-year during the 1st half of this year. It is an upward trend that is set to continue, because it is not just the residents of the large Chinese cities that are traveling overseas but even those of county-level towns.

Also the governments of both sides, especially the top leaders, have shown their determination to deepen such cooperation and boost tourism, economic and trade exchanges.

The Czech Republic is well prepared to tap the potential of the growing number of Chinese travelers. But other European countries will be able to do so as well since the number of Chinese tourists to Europe is huge and still growing.

According to official data, there are 600 flights between China and Europe every week. A number that will only increase over the coming decade, as China is set to become a medium-and high-income country in a few years in line with (UN) standards.

And it is not just Chinese tourists that Europe is hoping to attract. Poland, for example, has recently proposed a 10-year plan to build a hub airport between its capital Warsaw and the city of Lodz, and Chinese investors are being courted to participate in the project.

At the same time, the aviation industry itself will benefit from the predicted growth in the number of Chinese travelers. According to an official forecast, China will need to increase its fleet from the current 2,950 aircraft to >7,000 in 20 years. No other country will have such a demand for aircraft and the European aircraft manufacturer Airbus (EDS) will be 1 of those tasked with meeting the demand.

In seeking beneficial opportunities from the growing number of Chinese tourists traveling overseas, the Czech Republic is setting a good example for other European countries.

News Item A-2: China Eastern Airlines (CEA) commenced daily services from Shanghai Pudong (PVG) to Cebu (CEB) on October 18. Flights on the 2,325 km sector will be operated by (CEA)’s A320s until October 25. There then follows a break in (CEA) service until January 18 2018, when daily frequencies resume. There is currently no direct competition on this route, although Juneyao Airlines (JYA) will start serving the airport pair 3x-weekly from October 31. China Eastern already serves Manila and Clark in the Philippines from Pudong.

December 2017: 737 MAX 8 (6542-61623, B-1383), ex-(F-WZGE) delivery.

January 2018: News Item A-1: China’s big 3 carriers: China Southern (GUN), China Eastern (CEA) and Air China (BEJ) each reported passenger boardings of >100 million in 2017 as market demand continued to grow.

Last year, (GUN) transported 126 million passengers, up +10.2% over 2016. Domestic passengers were up +10.3% to 109 million and international passengers jumped +11.1% to 15.4 million. (GUN) carried 2.3 million passengers on regional routes (Hong Kong, Macau and Taiwan). Average passenger load factor was up +1.7 points to 82.2% LF.

China Eastern (CEA) transported 111 million passengers last year, up +9% over 2016. Domestic passengers were up +10% year-over-year (YOY) to 92.6 million. International passengers increased 2.4% to 14.7 million. (CEA) carried 3.5 million passengers on regional routes (Hong Kong, Macau and Taiwan). Average passenger load factor decreased 0.17 point to 81.1% LF.

Air China (BEJ) transported 101.6 million passengers last year, up +5.1% over 2016. Domestic passengers were up +6% to 83.5 million on domestic routes and 13.5 million on international routes, up +2%. Air China carried 4.6 million passengers on regional routes (Hong Kong, Macau and Taiwan). (BEJ)’s average passenger load factor increased 0.4 point to 81.1% LF.

Hainan Airlines (HNA) also experienced large growth last year. (HNA) transported a total of 71.7 million passengers in 2017, up +52.5% over 2016. (HNA) carried 67.4 million domestic passengers, up +51.7%; international passengers jumped +75.3% to 4 million. (HNA) carried 289,700 passengers on regional routes (Hong Kong, Macau and Taiwan). Average passenger load factor dropped -1.8 points to 86.1% LF.

Chinese carriers transported a total of 7.1 million tonnes of cargo in 2017, up +5.7% (YOY). The airlines carried 4.8 million tonnes on domestic routes, up +2% (YOY) and 2.2 million tonnes, up +15% (YOY), on international routes.

News Item A-2: China Eastern Airlines (CEA) and Hainan Airlines (HNA) on January 17 became the 1st Chinese carriers to let passengers use mobile phones in flight mode. This follows the relaxation of a longstanding rule prohibiting mobile phones to be turned on at all in aircraft by the Civil Aviation Administration of China (CAAC). Now they can, in flight mode, if the airline allows it. Hainan Airlines (HNA) has further taken advantage of the change to begin providing an in-flight wireless internet service.

March 2018: News Item A-1: China Eastern Airlines (CEA) reported a net profit of +CNY6.4 billion/+$983 million in 2017, up +41% over net income of CNY4.5 billion in 2016 as market demand continues to grow and exchange rates improve. In addition, last year (CEA) received CNY4.9 billion in government subsidies. Operating revenue for 2017 rose 3.2% to CNY101.7 billion. Revenue grew +9.1% to CNY90.8 billion, while cargo traffic revenue fell -39.1% to CNY3.6 billion.

News Item A-2: China Southern Airlines (GUN) has set up a branch company in the SW Chinese province Yunnan, a stronghold of rival China Eastern Airlines (CEA).

8 new (GUN) domestic routes from Yunnan will be opened in March and a service to Islamabad, Pakistan, from provincial capital Kunming will begin in June. These moves by (GUN) support a government policy to use Yunnan as a hub through which to connect with the economies of neighboring countries in S and SE Asia.

The branch company was established in Kunming March 6. Branch companies are treated by authorities preferentially in the allocation of service rights and runway slots. Yunnan is also growing strongly as a domestic market for air transportation, because of its tourism attractions.

(GUN) has not said what aircraft it will assign to the branch.

In 2005, China Eastern (CEA) acquired Yunnan Airlines (YUN), giving it a stronger presence in the region. It now operates under the name China Eastern Yunnan Airlines (YUN).

May 2018: "China Eastern, China Southern to Benefit from New (CAAC) Policies" by Katie Cantle, ATWOnline, May 18, 2018.

China Eastern Airlines (CEA) and China Southern Airlines (GUN), which have been designated as main operators at Beijing’s new airport (are expected to benefit from the Civil Aviation Administration of China’s (CAAC) (CAC) new policies on international operations and Beijing’s “1 city, 2 airports” rules, which are scheduled to take effect on October 1. Beijing’s new airport is scheduled to open in 2019.

The new policies governing international services allow main airport operators to apply for more routes to America, Europe (excluding Russia), Oceania and Africa. The (CAAC) is gradually abandoning an old practice that “1 intercontinental route can only be operated by 1 domestic carrier” to encourage competition to maximize public interest.

In addition, the Beijing Capital Airport and the yet-to-be opened Beijing’s new airport will be considered 1 destination, which means an international route originating from either airport will be regarded as the same route based on Beijing’s “1 city 2 airports” international air traffic rights allocation policy.

If domestic carriers want to apply as a new operator, the (CAAC) noted it would make a comprehensive evaluation based on 4 indexes: consumer interests, hub development, resource utilization efficiency and operation quality.

Local industry analysts point out SkyTeam (STM) Alliance members China Eastern (CEA) and China Southern (GUN) will take advantage of the new international policies despite the fact there is little room for adding more new services in the Sino - USA market in the short term because of a saturation of air traffic rights.

(GUN) previously said it would plan to fly between Beijing and London Heathrow (LHR) once Beijing’s new airport is open next year. So far, Air China (BEJ) is the only Chinese carrier that operates a Beijing to London route with 2x-daily flights; British Airways (BAB) operates this service with 1x-daily flight.

(CEA) Chairman Liu Shaoyong in March said Beijing’s new airport should be given priority when distributing international slots to open routes to developed countries.

In addition, the (CAAC) said SkyTeam (STM) Alliance member carriers that are designated to move to the new airport, will transfer their current international routes operated from Beijing Capital Airport within 4 years after the new airport opens. Currently (GUN) operates only 1 direct intercontinental service between Beijing and Amsterdam; (CEA) has no direct intercontinental service from Beijing.

Chinese carriers have seen a rapid growth of international demand in recent months, although yield is declining on some international routes, especially on USA and Australia services, which are experiencing overcapacity.

According to the (CAAC), Chinese airlines carried 50.7 million passengers in April, up +15.3% from the year-ago period when international passenger boardings jumped +25.1% and maintained >20% growth rate for 2 consecutive months.

Domestic carriers also transported 605,000 tonnes of goods last month; cargo traffic volume on international routes rose +11.6% year-over-year.

737-800 (61699, B-1255), ex-(N1787B) delivery.

July 2018: 737-800 (61700, B-1256), 3 A320-0251neo (8079, B-1292; 8301, B-302G; 8309, B-301Z) and A330-343E (1868, B-300Q), 1 A330-343E 1868, B-1048) deliveries.

November 2018: News Item A-1: The Hainan Airlines (HNA) Group is reportedly seeking to divest its aviation businesses by selling Lucky Air (LKY). Talks are underway to sell a 60% stake in the low cost carrier (LCC) to China Eastern Airlines (CEA), and 40% to Yunnan (SASAC), the province’s state-owned asset regulator. (HNA) has already sold numerous overseas assets to ease mounting debts, but the move to sell (LKY) would be the 1st from its aviation portfolio.

News Item A-2: China Eastern Airlines (CEA) has taken delivery of its 1st A350-941 (248, B-304D), ex-(F-WWIW) in Toulouse, becoming the latest operator of this twin-engine wide body aircraft. (CEA) now operates an Airbus fleet of 356 aircraft, including 306 A320 Family aircraft and 50 A330 Family aircraft (figures at the end of October 2018). (CEA) is the largest Airbus operator in Asia and 2nd largest in the world.

(CEA)'s A350-941 aircraft features a modern and comfortable 4-class cabin layout of 288 seats: 4F first, 36C business, 32PY premium economy and 216Y economy. (CEA) will initially operate the new aircraft on its domestic routes, followed by flights to international destinations.

Bringing new levels of efficiency and comfort to the long-range market, the A350 XWB Family is particularly well suited to the needs of Asia-Pacific airlines. To date, A350 XWB firm orders from carriers in the region represent >3rd of total sales for the type.

The A350 XWB is an all new family of mid-size wide body long haul airliners. It is presently the world's long-range leader in the 300 to 400 seat category. The A350-900 and the A350-1000, and derivatives, are the present longest range airliners in operation, with a range capability of up to 9,700 nm. The A350 XWB features the latest aerodynamic design, carbon fiber fuselage and wings, plus new fuel-efficient Rolls-Royce (RRC) engines. Together, these latest technologies translate into a 25% reduction in fuel burn and emissions. At the end of October 2018, Airbus has recorded a total of 890 firm orders for the A350 XWB from 47 customers world wide.

News Item A-3: See video on First class/Premier Service:

January 2019: News Item A-1: China Eastern Airlines (CEA) launched flights from Guangzhou (CAN) to Cebu (CEB) on January 20. (CEA) will operate the 1,843 km airport pair 2x-weekly (Tuesdays and Saturdays). (CEA) faces no direct competition on its new route, which it will operate with 737-800s.

(CEA) also serves Cebu from Shanghai Pudong. It will operate that airport pair daily during the week commencing January 23 and again faces no direct competition.

News Item A-2: "China Eastern Managing Director, Ma Xulun Named as China Southern Chairman" by Bradley Perrett (perrett@aviationweek.com), January 28, 2019.

China Eastern Airlines (CEA) Managing Director Ma Xulun will leave that post to become Chairman & President of China Southern Airlines (GUN), the Chinese government has announced through the (CAAC). Ma will also serve as Deputy Secretary of (GUN)’s Communist Party committee, the State-owned Assets Supervision & Administration Commission said. The commission holds the government’s majority stakes in the airlines.

(CEA)’s new President & Deputy Secretary will be Wang Zhiqing, a Deputy Chief of the Civil Aviation Administration of China (CAAC), an industry source said. He will report to (CEA) Chairman & Party Committee Secretary Liu Shaoyong.

In November 2018, Ma’s predecessor at China Southern, Tan Wangeng, became Vice President of the state-owned Commercial Aircraft Corporation of China (COMAC) and Deputy Secretary of its Communist Party committee. Ma previously served in management positions at Air China (BEJ) and the (CAAC). He has also been deputy secretary of the party committee at China Eastern (CEA).

The outgoing Chairman of China Southern (GUN), former (CAAC) Deputy Chief Wang Changshun, is Secretary of (GUN)’s party committee, a position that ranks equally with the chairmanship.


Click below for photos:
CEA-737-700 B-5270 2018-02.jpg
CEA-737-800 - 2012-10
CEA-777 B-2002 - 2017-01.jpg
CEA-777-300ER - 1ST 2014-09
CEA-777-300ER - 2014-09 NEW LIVERY
CEA-777-300ER - 2015-08.jpg
CEA-777-300ER - 2016-02.jpg
CEA-777-39PER B-7347 2018-05.jpg
CEA-A319 - 2014-08
CEA-A320 - 2016-05.jpg
CEA-A320 - 2017-02.jpg
CEA-A320 B-6261
CEA-A321 - CEA Shandong Branch-2016-03.jpg
CEA-A321 - NW BRANCH - 2014-10
CEA-A321 - NW BRANCH - 2014-10-A
CEA-A330 Landing at Taipei.jpg
CEA-A330-200 SKYTEAM COLORS 2011-12
CEA-A340-600 1
CEA-A350-900 2018-11.jpg

March 2019:

3 737-2T4 (JT8D-17A) (1093-23272, /85 B-2506; 1097-23273, /85 B-2507; 1099-23274, /85 B-2508), (GWA) OPERATIONS. 128Y.

0 737-37K (CFM56-3) (2547-27283, /94, B-2935), (ZHO) 1 YEAR LEASED 1999-06, RETURNED TO (ZHO)/(GUN).

0 737-3L9 (CFM56-3B2) (1800-24570, /90, B-2653), EX-(MRS)/(CRM), (SIL) 2 YEAR LEASED 2000-04. TAIYUAN OPERATIONS. RETURNED 2002-05, LEASED TO (ASW). 148Y.

3 737-36N (CFM56-3B1) (2888-28560, /97, B-2977; 2896-28561, /97, B-2978; 2908-28562, /97, B-2979), (GEF) LEASED, (CHG) OPERATIONS. 148Y.

1 737-36R (CFM56-3C1) (2970-29087, /97 B-2988), EX-(WUH) 2002-12. 148Y.

3 737-39P (CFM56-3C1) (3053-29410, /98, B-2571; 3071-29411, /98, B-2572; 3080-29412, /98, B-2573), (CHG) OPERATIONS. 148Y.

7 ORDERS 737-700/-800 (CFM56-7B):

27 ORDERS (2011-07) 737NG (CFM56-7B):

45 ORDERS 737-700NG/737-800NG:

6 737-700 (CFM56-7B), (ILF) 8 YEAR LEASED.

1 737-76Q (CFM56-7B24) (1143-30282, B-2680), (BOU) LEASED 2002-06, (CHG) OPERATIONS.

33 737-79P (CFM56-7B24) (1247-28253, /02 B-2683; 1284-28255, /03 B-5031; (ILF) LSD; 29357, B-5093, 2005-02; 29358, B-5094, 2005-02; 1694-29361, B-5095, 2005-04; 1713-29362, B-5096, 2005-4; 1823-29364, B-5097, 2005-12; 1841-29365, B-5054, 2006-01; 1288-30035, /03 B-5032; 1267-30651, /03 B-5030; 30657, /03 B-5033; 30681, 2005-03; 1718-33002, B-5074 2005-06; 33008, B-5074; 1728-33009, B-5084, 2005-06; 1198-33037, /02 B-2681; 1219-33038, /02 B-2682; 1227-33039, /02 B-2684; 1244-33040, /02; 1902-33041, B-5208, 2006-03; 1947-33042, B-5209, 2006-05; 1976-33043, B-5210, 2006-06; 1987-33044, B-5223, 2006-07; 1999-33045, B-5225, 2006-07; 2034-33046, B-5231, 2006-08; 2357-36269, B-5242, 2007-08; 2398-36270, B-5243, 2007-10; 2697-36271, B-5245, 2008-08; 2902-36757, B-5255, 2009-05; 2949-36758, B-5256, 2009-06; 2968-36759, B-5257, 2009-07; 3046-36762, B-5259, 2009-10; 3067-36764, B-5262, 2009-10; 3086-36766, B-5263, 2009-11; 3239-36767, B-5265, 2010-04 - - SEE PHOTO - - "CEA-737-79P-2010-04;" 3269-36768, B-5267, 2010-05; 36772, B-4271), (ILF) LEASED.

4 737-79P (CFM56-7B) (39719, B-5276, 2011-08 - - SEE PHOTO - - "CEA-2011-08-1ST HOT AND HIGH 737-79Y;" 39720, B-5282, 2011-11; 39737, B-5821, 2014-08; 39741, B-5828, 2015-03).

2 737-800 (CFM56-7B) (61699, B-1255; 61700, B-1256), EX-(N1787B) 2018-05.

1 +2 ORDERS 737-800 (CFM56-7B) (ALE) LEASED.

1 737-800 (CFM56-7B), (CDB) LEASING LEASED 2016-02.

3 737-86N (CFM56-7B) (3204-39388, B-5501, 2010-03 39389, B-5516, 2010-06; 39400, B-5683, 2012-07), (GEF) LEASED.

1 737-86N (CFM56-7B) (3483-39393, 2011-01), FOR (SHA) OPERATIONS.

2 737-86R (CFM56-7B24) (786-30494, /01 B-2660; 876-30495, /01 B-2665), (TCI) LEASED, RETURNED & LEASED TO (ETH) 2009-04.

6 737-89P (CFM56-7B26) (1645-30681, /05 B-5100; 1673-30682, /05 B-5101; 1702-30691, /05 B-5085; 1681-32800, /05 B-5086; 1725-32802, /05 B-5087; 2753-36272, /09 B-5199; 3036-36763, /09 B-5473), WITH WINGLETS. (ILF) 8 YEAR LEASED. 20F, 138Y.

12 737-89P (CFM56-7B26) (3062-36765, /09 B-5475; 3121-29652, /09 B-5493; 3311-36769, /10 B-5515; 39726, /13 B-5779; 39730, /13 B-1907; 39744, B-6017, 2015-07; 41470, B-1772, 2015-01; 41475, B-1792, 2015-07; 41478, B-1981, 2014-08; 41482, B-7375, 2016-01; 41495, B-7876, 2016-08; 41509, B-1790, 2015-05), WITH WINGLETS. 8F, 156Y.

3 737-89P (CFM56-7B) (39746, B-6145; 41477, B-1513; 41488, B-6146), 2015-09.

2 737-89P (CFM56-7B26) (29653, B-5517, 2010-06; 3083-29661, B-5492, 2009-11), (CGP) LEASED. WITH WINGLETS. 8F, 156Y.

1 737-89P (CFM56-7B) (40949, B-5589), EX-(F-WWBC), AVOLON LEASED 2012-07.


1 737 MAX 8 (6542-61623, B-1383), EX-(F-WZGE) 2017-12.

0 747-2D7BF (417-21783, N522MC), (TLS) WET LEASED 2001-03. RETURNED.

3 767-300ER.

13 +7 ORDERS 777-39PER (B-2001, 2014-09; 43274, B-2022, 2015-07; B-2023, 2015-08; 1387-43278 B-7347 - SEE PHOTO; 43280, B-7365, 2016-08; 43285, B-7885, 2017-05), 6F, 52C (1-2-1), 258Y (3-4-3).

1 777-39P (43272, B-2020, 2015-03).



1 MD-82 (JT8D-217A) (1537-49511, /89 B-2127; 1568-49513, /90 B-2129; 1609-49515, /90 B-2131) 49518 SOLD 1999-04, 49515 (GEF) LEASED. SHIJIAZHUANG BRANCH OPERATIONS. 49511; 49513; RETURNED & STORED AT MARANA 2007-02. 12F, 135Y.

9 MD-90-30 (V2525-D5) (2240-53587, /90 B-2265; 2259-53589, /99 B-2669). HEFEI BRANCH OPERATIONS. 12F, 145Y.

1 DC-10-30F (CF6-50E2) (47925, N6057C), (GMN) WET-LEASED TO (CKK).

5 +2 ORDERS MD-11 (PW4460) (48461; 496-48496, B-2172; 48497; 48498; 48520), CONVERTED TO FREIGHTER, (ALI) MAINTENANCE. 48461; 48496; 48498; 48520; WET-LEASED TO (CKK) 2005-02.

3 MD-11F (PW4460) (475-48461, /91 B-2170), WET-LEASED TO (CKK).


13 A300B4-605R (CF6-80C2A5) (525, B-2307; 725, B-2324, 2014-06; 741, B-2317, 2014-06; 746, B-2325, 2014-08), TO CONVERT TO FREIGHTER. 7 TO BE SOLD BACK TO AIRBUS (EDS). 24F, 250Y.

0 A310-300 (CF6-80C2), 2 PASSED TO (CNW). 3 RETURNED. 419 LEASED TO AIR BAGAN (BGN) 2006-11.

23 ORDERS A319/A320 (V2500):

10 A319-100 (CFM56-5B6/P), 8F, 114Y.

14 A319-112 (CFM56-5B6/P) (1285, /00 B-2331; 1303, /00 N303SF), (GEH) LSD 2000-08; (1377, /00 B-2333; 1386, /00 B-2334). (1541, /01 B-2215; 1551, /01 B-2216, 2001-07; 1601, /01 B-2217; 1603, /01 B-2222, 2001-11; 1778, /02 B-2227; 1786, /02 B-2226; 2002-07). 8F, 114Y.

10 A319-115 (2693, B-6217, 2006-02; 2757, B-6218, 2006-05; 2825, B-6231, 2006-07; 3168, B-6167, 2007-06; 3186, B-6172, 2007-07; 6116, B-6459, 2014-08' 6307, B-6470, 2015-01; 6368, B-6469, 2015-03; 6469, B-6476, 2015-05; 6593, B-8017, 2015-07).

1 A319-132 (6298, B-6427), EX-(B-520L) 2015-01.

60 A320-200.

2 A320-200, CHINA AIRCRAFT LEASING GROUP (CHD) LEASED 2015-11 & 2015-12.

2 A320-214 (CFM56-5B4/P) (665, /97 B-2356; 754, /97 B-2357), TRANSFERRED FROM (CNW).

26 A320-214 (CFM56-5B4/P) (772, /98 B-2360; 1005, B-2203; 1028, /99 B-2207; 1030, /99 B-2369; 1070; 1072, N720AP; 1093; 1312; 1316; 1330; 1532; 1542; 1639, B-2221, 2001-12; 1906, B-2228, 2003-01; 1911, B-2229, 2003-01; 2155, B-6016; 2004-06), (GEH) LEASED, 8F, 150Y.

39 A320-214 (CFM56-5B4/P) (1964, /03 B-2330; 1981, /03 B-6001; 2022, /03 B-6002; 2034, /03 B-2333; 2049, /03 B-6008; 2056, /03 B-6007; 2068, /03 B-6006; 2182, B-6029, 2004-04; 2219, B-6009, 2004-06; 2221, B-6010, 2004-06; 2235, B-6011, 2004-07; 2239, B-6012, 2004-07; 2244, B-6013, 2004-07; 2274, B-6017, 2004-09; 2437, B-2410, 2005-05; 2451, B-2411, 2005-06; 2455; 2478, B-2412, 2005-06; 2493, B-2413, 2005-07; 2498, B-2415, 2005-07; 2562, B-6259, 2005-10; 2591, B-6260, 2005-10; 2606, B-6261, 2005-12; 2627, B-6262, 2005-12; 3170, B-6333, 2007-07; 3481, B-6346, 2008-05; 3611, B-6371, 2008-08; 3716, B-6399, 2008-12; 4627/TJ53, B-6760; 4659, B-6756, 2011-04; 4748, B-6803, 2011-10; 4769, B-6829. 2011-11; 4776, B-6830, 2011-11; 4799, B-6831, 2011-11; 4844, B-6870, 2012-01; 4877, B-6805, 2011-10; 5691, B-9941, 2013-07; 6127, B-1862, 2014-08; 6213, B-1860, 2014-08; 6582, B-8227, 2015-07; 6661, B-8229, 2015-09; 7253, B-8557, 2016-08; 7374, B-8973, 2017-01); 2182; REPAINTED IN "MAGNIFICENT QINGHAI" COLORS. 8F, 150Y.

1 A320-214 (CFM56-5B4/P) (5710, B-9942), EX-(D-AVVK), (ICBC) LEASING LEASED 2013-07. 8F, 150Y.

3 A320-214 (CFM56-5B4/P) (2171; 2199, B-6030; 2212, B-6015, 2004), (ILF) 10 YEAR LEASED. 8F, 150Y.

1 A320-214 (CFM56-5B4/P) (5668, B-9951), EX-(F-WWBT), 2013-07. (SMBC) AVIATION CAPITAL LEASED 2013-07. 8F, 150Y.

1 A320-214 (CFM56-5B4/P) (7685, B-8565), EX-(F-WWBP), 2017-05. (BOC) AVIATION CAPITAL LEASED 2017-05. 8F, 150Y.

22 A320-232 (3775, B-6586, 2009-09; 3793, B-6558 2009-02; 3797, B-6587, 2009-09; 3852; 3870, B-6600, 2009-10; 3904, B-6559, 2009-05; 3929, B-6616, 2009-11; 3937, B-6560, 2009-06; 3965, B-6585, 2009-07; 4037, B-6601, 2009-10; 4043, B-6636, 2010-02; 4144, B-6617, 2009-12; 4186, B-6671, 2010-05; 4220, B-6672, 2020-06; 4252, B-6639, 2010-04, 4309, B-6696, 2010-09; 4340, B-6673, 2010-06; 4342, B-6713, 2010-09; 5461, B-9900, 2013-01; 6062, B-1859, 2014-08; 6137, B-1863, 2014-08; 6578, B-1678, 2015-05; 6668, B-8018, 2015-09).

5 +65 ORDERS A320-251neo (61699, B-1255, 2018-05; 61700, B-1256, 2018-06).

50 A321-200.


16 A321-211 (CFM56-5B) (2309, B-2289, 2004-10; 2315, B-2290, 2004-10; 2543, B-2291, 2005-08; 2549, B-2292, 2005-08; 2882, B-2419, 2006-09; 2895, B-2420, 2006-10; 3247, B-6330, 2007-09; 3249, B-6331, 2007-09; 3262, B-6332, 2007-10; 3471, B-6345, 2008-04; 3612, B-6367, 2008-08; 3969, B-6591, 2012-07; 4374, B-6668, 2012-07; 7254, B-8572, 2016-08; 7265, B-8573, 2016-08; 7551, B-8976, 2017-02), 20C, 157Y.

3 A321-231 (V2533-A5) (5705, B-9947, 2013-06; 6499, B-1640, 2015-03; 6762, B-8232, 2015-09), EX-(D-AZAI, D-AVZU & D-AYAS). 20C, 175Y.

1 A321-231 (6774, B-8230), EX-(D-AYAY) 2015-09.

14 ORDERS A330 (TRENT 700):

34 A330-243 (TRENT 772C-60) (728, B-6121, 2006-02; 732, B-6122, 2006-02; 735, B-6123, 2006-03; 777, B-6126, 2006-09; 781; 821, B-6082, 2007-03; 916, B-6099, 2008-04; 1262, B-6537, 2011-11; 1267*, B-6538, 2011-12 - - SEE PHOTO - - "CEA-A330-200 SKYTEAM COLORS 2011-12;" 1280, B-6543, 2012-01; 1421, B-5926, 2013-06; 1429, B-5930, 2013-07; 1468, B-5937, 2013-12; 1479, B-5938, 2013-12; 1537, B-5949*, 2014-06; 1617, B-5973, 2015-05; 1655, B-8226, 2015-09; 1664, B-8231, 2015-09), *IN SKYTEAM ALLIANCE (STM) CORPORATE GREY & BLUE COLORS. 24C, 240Y.

23 +106 ORDERS A330-343E (TRENT 700) (713, B-6119, 2006-01; 720, B-6120, 2006-01; 773, B-6125, 2006-07; 777, B-6126, 2012-07; 782, B-6128, 2006-09; 791, B-6129, 2006-10; 830, B-6083, 2007-04; 836, B-6085, 2007-06; 851, B-6095, 2007-07; 866, B-6097, 2007-09; 942, B-6507, 2008-08; 1375, B-5920, 2013-01; 1551, B-5893, 2014-08; 1595, B-5969, 2015-01; 2015-09; 1788, B-8968, 2016-05 1868, B-300Q, 2018-07). 777; REPAINTED IN "www.people.cn" COLORS. 2 CLASS, 300 PAX.

3 A340-200.

5 A340-313 (CFM56-5C4) (129, /96 B-2389, WET-LST (GIA) UNTIL THE END OF 2000-04) (378, EC-HQF "MARIA DE ZAYAS Y SOTOMAYOR"), 12F, 28C, 247Y.

1/3 ORDERS A340-500/-642 (TRENT 556), (ILF) LEASED, 488 PAX.

5 A340-642 (TRENT 556) (468, /03 B-6050; 488, /03 B-6051; 514; 577, B-6053, 2004-06; 586, B-6055, 2004-07), 8F, 42C, 272Y.

1 A350-941 ((RRC) ENGINES) (248, B-304D), EX-(F-WWIW) 2018-11. 288 PAX: 4F, 36C, 32PY, 216Y.


0 F 100 (TAY 650) (11383; 11389; ALL SOLD TO (TPR).

3 B AE 146-100 (LYC ALF502R-5).

4 SHORTS 360 (PT6A-65R).

8 EMBRAER ERJ-145 (00839, B-3049, 2005-09; 00848, B-3050, 2005-09; 00882, B-3053, 2006-04; 00898, B-3051, 2006-05; 00905, B-3052, 2006-06; 00921; 00928; 00932; 00949, B-3059, 2007-03; 00958, B-3058, 2007-03). SOLD TO AIRBUS (EDS).

3 AN-24 (LYC AL-24A).


18 Y-5 (HS5).

0 Y7.

4 Y7-100C (WJ 5A-1) (02704, /84 B-3453), 52Y.


4 YAK 42D, LEASED 2000-03.


Click below for photos:
CEA-5-KATHY ZHANG - 2014-12


Wang Zhiqing has also served as a Deputy Chief of the Civil Aviation Aministration OF China (CAAC). He reports to (CEA) Chairman & Party Committee Secretary, Liu Shaoyong.

Ma Xulun will leave thIS above position with China Eastern Airlines (CEA) to become Chairman & President of China Southern Airlines (GUN), the Chinese government announced through the (CAAC). Ma will also serve as Deputy Secretary of (GUN)’s Communist Party committee, the State-owned Assets Supervision & Administration Commission said. The commission holds the government’s majority stakes in the airlines.





















































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