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7JetSet7 Code: SHA
Status: Operational
Region: CHINA
Country: CHINA
Employees 3401
Web: shanghai-air.com
Email: ir@shanghai-air.com
Telephone: +86 21 6255 8888
Fax: +86 21 6255 8989

Click below for data links:
SHA-2004-10-A-FINAL 757
SHA-2005-03-A-LAST 757



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.


1992 = +$5.2 MILLION (+$1.9 MILLION) (NET PROFIT).



MAY 1993: $450 MILLION, 5 ORDERS (JULY 1994) 767-300'S (PW4056), 18F, 31C, 214Y, PASSENGERS (PAX).


757-26D (NE004; NE005) DELIVERIES.


JULY 1994: 1ST 767 DELIVERY.


JULY 1995: 757 DELIVERY. PLANS TO ORDER 3 737-300'S, & DELAY 757/767 AIRPLANES.





MARCH 1997: 3 ORDERS (SEPTEMBER 1998) 737-700'S, (ILF) 8 YEAR LEASED.







OCTOBER 1997: WILL BECOME FIRST CHINESE OPERATOR OF 737-NG WITH 737-700, (ILF) LEASED, IN SPRING 1998, 8F, 124Y PAX. NOW HAS 2 737-300'S, 2 757-200'S, AND 2 767-300'S.



767-36D (27685) DELIVERY.

APRIL 1998: 1ST 737-7Q8 (28212), (ILF) LEASED (1ST IN ASIA!).






737-7Q8 (28216) DELIVERY, (ILF) LEASED.




May 1999: 3rd 737-7Q8, (ILF) leased (28233). 737-3Q8 (24300, B-2980) returned to lessor.


FEBRUARY 2000: POSSIBLE TRADE OF 5 757-200'S (P&W) FOR 10 NEW 757-200'S (RB211-535E4). 3 ORDERS (OCTOBER 2000) CRJ-200'S FOR $68 MILLION.






MAY 2000: 737-76D (30167, B-2913), (ILF) LEASED.


JULY 2000: 2.64 BILLION (RPK) (+6%); 105.9 MILLION (FTK) FREIGHT TRAFFIC (+27.4%); 2.15 MILLION PASSENGERS (PAX) (+.7%); 2,300 EMPLOYEES.

737-76D (30168, B-2577) DELIVERY.

DECEMBER 2000: 1 CRJ-200 (7459, B-3020) DELIVERY.




NOVEMBER 2000: 1 CL-600-2B19 (7453, B-3018) DELIVERY.





AUGUST 2001: 767-36D (27684, B-2498) DELIVERY. +2 ORDERS 737-700'S AND 1 ORDER 737-800.(942-28242) DELIVERY, (ILF) LEASED.






1 737-8Q8 DELIVERY.


MARCH 2002: 3RD 737-800 (B-2168), (ILF) LEASED.




June 2002: (MOU) with Lufthansa (DLH) for closer ties (frequent flyer programs, joint system development, harmonization of products & services, as well as network connectivity).

July 2002: Wins approval to go public in China (Chinese investors only) with Initial Public Offering (IPO) of 27.7%

Plans to buy 4 Boeing airplanes and 1 Bombardier RJ. Receives new Hawker 800XP (B-3997) corporate jet to replace previously leased one.

August 2002: To Ho Chi Minh City.

737-8Q8 (30632), & 737-86D (33471, B-2688) deliveries.

September 2002: 737-8Q8 (B-2686) delivery.

September 2002: 737-8Q8 (28251), (ILF) leased.

January 2003: 1 order (2003-04) 767-300ER (PW4060), ex-(TWA), (ILF) 58 month leased.

February 2003: Confirmed it will add 3 737's and 1 767 in 2003.

April 2003: 2,800 employees.

Parent organization/shareholders: Shanghai Government (75%); & publicly held (25%).

August 2003: 1 order (3/04) 737-800 (30666), (ILF) 10 year leased.

September 2003: Despite uncertainty of continuation of product line, $410M, 5 orders (2/04) 757-200's.

2002 = +$17 Million (+$19.9 Million) (net profit): 5.15 Billion (RPK) passenger traffic (+9.7%); +21.5% (ASK) capacity; 64.9% LF load factor (+.2); 4.1 Million passengers (PAX) (+22.1%).

95 (QTA) 6.20; 96 (COI) 5.96; 97 (AAL) EAGLE) 5.94; 98 (LOT) 5.87; 99 (FRO) 5.45; 100 (WJI) 5.49; 101 (MAU) 5.34; 102 (ATLANTIC SE) 5.31; 103 (JPL) 5.16; 104 (SHA) 5.15; 105 (AVI) 5.10; 106 (VLR) 4.96; 107 (SKYWEST) 4.82; 108 (SBL) 4.75; 109 (CNW) 4.67.

1 747-200F, MK Airlines (MKA) wet-leased for Shanghai - Macau cargo service. Will also add cargo service from Shanghai to Bangkok.

737-76D (33470, B-4058), to China United (CUL).

January 2004: 2003 = +CNY90 Million/+$11 Million: 4.23 Million passengers (PAX) (+4.49%).

GECAS (GEF) announced it is leasing two new 737-800 airplanes to Shanghai Airlines, of the Peoples Republic of China. The first airplane was delivered to the airline and the second will be delivered in March 2004. In addition, (GEF) announced it will lease two Bombardier CRJ-200 regional jets to Shanghai Airlines (SHA). The airplanes are currently on lease with another airline customer and will be delivered to Shanghai Airlines (SHA) in June and December of 2004.

Shanghai Airlines (SHA) is one of the largest regional air carriers in China with approximately 120 domestic routes and scheduled flights to Vietnam.

Since 1988, (GEF) has placed more than 130 airplanes on lease in China with 17 different airlines.

737-86N (32739, B-5076), GECAS (GEF) leased.

February 2004: 10-year, $80 Million, Fleet Engine Management Program contract with (P&W) for 767's (PW4056) engines.

March 2004: (ILF) contract with Precision Conversions to convert Shanghai Airlines (SHA)'s 2 757-26D's (24471; 24472) from passenger to freighters, starting in 2004-08, at the Goodrich (BFG) facility, Everett, with both returning to service in 1stQ 2005. The full 15 container converted 757-200F features a basic payload of 68,000 - 70,000 lbs with approximately 6,600 cubic ft of cargo space on its main deck. An additional 1,790 cubic ft of cargo space is available in the lower holds located forward and aft of the wing.

737-86N (32742, B-5077), (GEF) leased, & 737-8Q8 (30666, B-5088), (ILF) leased, deliveries.

April 2004: Signs "cooperative agreement" with Lufthansa (DLH) whereby (DLH) will put its code on Shanghai Airlines (SHA)'s flights, Shanghai to Beijing, Shenzhen, and Qingdao in 2004-05.

737-3S3F (CFM56-3B2) (23811), Ansett Worldwide (AWW) leased for all-cargo service Shanghai - Osaka.

May 2004: Contract for air/ground data link communications to the Asia/Pacific division of (ARINC), including GlobalLinkSM/VHF service for Shanghai Airlines (SHA)'s fleet of 13 737's, 757's, & 767's. It also will support (SHA)'s business operations with its high-speed AviNet network connecting (SHA)'s main HQ, regional passenger operations and trading partners.

757-26D (1044-33959, B-2857) delivery.

June 2004: USA and China have signed a landmark air services agreement that will more than double the number of US 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.

757-26D (33960, B-2858), delivery. CL-600-2B19 (7226, B-3075), GECAS (GEF) leased.

July 2004: Selects Lufthansa (DLH) Systems' schedule management, by switching its scheduling system over to the NetLine/Sched system.

Acquires China United Airlines (CUL), Beijing.

757-26D (33961, B-2880) delivery.

November 2004: 3,085 employees.

January 2005: (CAAC) (CAC), $7.2B, 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).

March 2005: 737-8Q8 (32801, B-5130), (ILF) leased and 757-26D (33966, B-2875) delivery.

May 2005: 737-8Q8 (30686, B-5131), (ILF) leased.

June 2005: Shanghai Airlines (SHA) is a major Chinese carrier with scheduled services on domestic trunk routes and some international routes.

3,401 employees.

(IATA) Code: FM - 774. (ICAO): CSH (Callsign - SHANGHAI AIR).

Parent organization/shareholders: Publicly held (44.69%); Alliance Investment Company (40.66%); & Bank of China (14.65%).

Owns: Sichuan Airlines (SIC) (10%). Controls China United Airlines (CUL).

Alliances: Air China (BEJ); All Nippon Airways (ANA); & Lufthansa (DLH).

Main Base: Shanghai Hongqiao International airport (SHA); & Shanghai Pudong International airport (PVG).

Domestic, Scheduled Destinations: Baotou; Beijing; Changchun; Changsha; Chengdu; Chongqing; Dalian; Dayong; Fuzhou; Guangzhou; Guilin; Haikou; Hangzhou; Harbin; Hefei; Hohhot; Jinan; Jinghong; Jinzhou; Kunming; Lanzhou; Lijiang City; Mudanjiang; Nanchang; Nanjing; Ningbo; Qingdao; Sanya; Shanghai; Shantou; Shenyang; Shenzhen; Shijiazhuang; Taiyuan; Tianjin; Urumqi; Wanxian; Weihai; Wenzhou; Wuhan; Xi'An; Xiamen; Xiangfan; Xining; Xuzhou; Yanji; Yantai; Yichang; Yinchuan; & Zhengzhou.

International, Scheduled Destinations: Ho Chi Minh City; Macau; Osaka; Phnom Penh; Phuket; & Seoul.

MD-11 (48415, B-3176), ex-Eva Air (EVA), (GEF) leased.

July 2005: 737-3S3F (23811), to be returned to AWAS (AWW) for lease to Aerolineas Argentinas (ARG) in 9/05.

September 2005: Shanghai Airlines (SHA) applied to (CAAC) for authority to operate four MD-11F flights a week on the Shanghai -Anchorage - Los Angeles route.

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.

737-8Q8 (30685, B-5132), (ILF) leased, delivery.

November 2005: 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).

December 2005: 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.

Shanghai Airlines (SHA) is setting up a cargo airline to be called "Shanghai International Freight Airlines." The airline will initially begin operations with 3 leased airplanes: 1 MD-11F and 2 757-200Fs. It plans on starting service from Shanghai to Los Angeles via Anchorage in August.

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 one 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."

Five 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.

Shanghai Airlines (SHA) announced plans to increase its fleet size from 42 to 100 by 2010.

ILFC (ILF) announced the lease of 8 737-800s to Shanghai Airlines (SHA) for 10 years. The new airplanes are due for delivery from Jan 2007 through Aug 2008.

January 2006: Precision Conversions received a Supplemental Type Certificate (STC) from the (FAA) to carry out passenger-to-freighter conversions of (PW2000)-powered 757-200s. In conjunction with the awarding of the (STC), (CAAC) approved the conversion, clearing the way for delivery of the first converted aircraft to Shanghai Airlines (SHA). The work was carried out on behalf of ILFC (ILF), which is leasing the jet to the Chinese carrier. Work will begin shortly on converting a second ILFC (ILF) 757 for Shanghai Airlines (SHA). Precision received an (STC) for conversion of Rolls-Royce-powered 757s last June.

Shanghai Airlines (SHA) said it has entered negotiations to join Star Alliance, according to media reports citing board secretary Xu Junmin. The carrier currently codeshares with alliance members Lufthansa (DLH) and All Nippon Airways (ANA).

For the first half of 2005, (SHA) made a tiny profit of +CNY4.7M, -82%, while revenue was up +13.8% to CNY1.18B.

February 2006: Thales (THL) was selected by Shanghai Airlines (SHA) to supply two 737-800 Level D full-flight simulators and support training equipment in a contract valued in excess of $20 million.

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 five 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 five 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 five years had amounted to only CNY10 billion.

March 2006: United Airlines (UAL) and Shanghai Airlines (SHA) announced a codeshare agreement covering 11 flights from May 15. (UAL) flights included are Shanghai to Chicago O'Hare and San Francisco (SFO), (SFO) to Los Angeles, Newark and New York (JFK), and O'Hare to Newark and New York LaGuardia. Shanghai Airlines (SHA) will operate codeshare flights from Shanghai Pudong to Shenyang, Chengdu, Dalian and Qingdao.

737-86N (34254, B-5148), (GEF) leased.

April 2006: Boeing is expected to sign contracts shortly with Chinese airlines for 80 737s. The deal is the second 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) five, and Shandong Airlines (SHG) six, 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.

737-8Q8 (30698, B-5140), (ILF) leased.

May 2006: Shanghai Airlines (SHA) accepted a formal invitation to join Star Alliance at a ceremony in Shanghai, becoming the second Chinese carrier to commit itself to a global airline partnership.

China Southern Airlines (GUN) signed a Memo of Understanding (MOU) with SkyTeam two years ago, and since then, the three alliances have been angling for the best foothold in one of the world's fastest-growing commercial aviation markets. Air China (BEJ) also appears to be on the verge of joining Star.

Shanghai Airlines (SHA) offers Star a significant presence at its developing hub of Pudong, where a second terminal is under development and scheduled to open in 2008. No official decision has been reported concerning what carriers will operate out of the new facility, but Shanghai Airlines (SHA) made it clear yesterday that the prospect of consolidating its operations in the market was attractive to Star.

"We should make full use of the airport resources, provide quick and convenient transferring and connecting service, which is called Under One Roof, and offer high-quality service to business passengers," Chairman, Zhou Chi said. "We hope that the establishment of a second terminal building in the near future will provide high standard, high quality and high efficiency operating service, thus greatly supporting Star Alliance."

China's first commercial airline following the breakup of (CAAC) (CAC), Shanghai (SHA) offers a large domestic network to the alliance. It operates a mostly-Boeing fleet of 42 airplanes and flew more than 150 routes at the end of 2005. In addition to its Chinese service, it flies to Japan, South Korea, Russia, Vietnam, Cambodia and Thailand and operates freighters to Europe. In 2004, it became the first Chinese carrier to receive an (IOSA) certificate.

"For Star Alliance, this invitation to Shanghai Airlines represents a giant step forward," Star CEO, Jaan Albrecht said. "Having a high-quality Chinese carrier the caliber of Shanghai Airlines (SHA) will add immeasurable value to our network."

China Southern Airlines (GUN) signed a Memo of Understanding (MOU) with SkyTeam two years ago and since then the three alliances have been angling for the best foothold in one of the world's fastest-growing commercial aviation markets. Air China (BEJ) also appears to be on the verge of joining Star.

Shanghai Airlines (SHA) took delivery of a 737-8Q8 (30700, B-5142), leased from ILFC (ILF) and is the leasing company's 600th Boeing airplane.

July 2006: Thai and Shanghai Airlines (SHA) signed a Memo of Understanding (MOU) for increased commercial cooperation. The carriers currently code share on routes between China and Thailand.

737-8Q8 (33007, B-5145), (ILF) leased.

August 2006: Shanghai Airlines chose (GEnx) engines to power nine 787s to be delivered beginning in June 2008. Value of the order is estimated at $220 million.

737-86N (32691, B-5143), (GEF) leased.

September 2006: 767-36DER (35155, B-2500), delivery.

November 2006: Shanghai Airlines (SHA) will inaugurate nonstop service from Shanghai to Hong Kong on November 28th. The airline will operate up to 3 flights a day using 767s.

Shanghai Airlines (SHA) became an Airbus customer for the first time with an order for five A321s. The airplanes are part of China Aviation Supplies Import and Export Group (CSC)'s order for 150 A320 family airplanes, placed last year. Although the airline operates a nearly all-Boeing fleet (it said it flies 13 757-200s, 6 767-300s, 6 737-700s and 16 737-800s), President, Zhou Chi said the A321 "meet[s] our strategic development plan," which includes "entering into the new phase of expanding internationally and comprehensively."

December 2006: Shanghai Airlines (SHA) Cargo International, currently has 2 757-26DFs, 2 MD-11Fs, and plans to acquire a 747-200F. (EVA) Air has agreed to acquire a 25% stake in the cargo airline, with Shanghai Airlines (SHA) owning 55%.

767-36DER (35156, B-2566), delivery.

January 2007: Aviation Partners Boeing (APB) announced that Shanghai Airlines (SHA) and China Eastern Airlines (CEA) have ordered Blended Winglets for airplanes purchased as part of last year's combined order for 150 737-700s/-800s. Shanghai (SHA) is taking 13 airplanes and China Eastern (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. The company said that "discussions continue" with Chinese carriers to launch the first retrofit winglet installation on the 737NG and 757-200.

March 2007: Oneworld is discussing membership with China Eastern Airlines (CEA), alliance Managing Partner, John McCulloch announced in a briefing with reporters cited by Reuters. Oneworld has yet to recruit a member from mainline China, while SkyTeam is preparing to welcome China Southern Airlines (GUN), and Star Alliance will admit Air China (BEJ) and Shanghai Airlines (SHA).

Goodrich (BFG) reached a deal with Shanghai Airlines (SHA) to supply wheels and electrically actuated brakes for its 9 787s, which it will put into service starting next year.

April 2007: Chinese airlines remain interested in aligning with global alliances despite the difficulties associated with joining up or integrating. With Air China (BEJ) and Shanghai Airlines (SHA) committed to Star Alliance and China Southern Airlines (GUN) set to join SkyTeam, speculation has turned toward Oneworld and Hainan Airlines (HNA), which recently opened a new Beijing - Osaka service in cooperation with Japan Airlines (JAL). Hainan (HNA) parent (HNA) Group told "China Business" that it established a working group in January to start preparing the carrier to join an alliance. But Hainan Airlines (HNA) may be in an inferior negotiating position, according to industry analysts, because it is based at Haikou in the deep south, while alliances are targeting carriers in Beijing (Air China (BEJ)), Shanghai (Shanghai Airlines (SHA)) and Guangzhou (China Southern (GUN)). Oneworld Managing Partner John McCulloch told reporters last month that his group also was negotiating with China Eastern Airlines (CEA), which is based in Shanghai. Even if an alliance regards a Chinese carrier as a good fit, the hurdles that an airline must negotiate before meeting alliance standards can be significant. For example, Shanghai Airlines (SHA) has had to work on improving or restructuring its Information Technology (IT), safety management, loyalty program, sales and marketing, legal affairs and human resources departments to conform to Star requirements. The company has admitted that it has taken a long time to meet those requirements and that the price for its Star membership is "really high." Chinese airlines also may suffer when allying with foreign carriers, as they have incurred heavy losses on international routes and have been forced to open their own markets to more experienced foreign competitors, while being unable to tap into the potential offered by foreign markets. But Shanghai Airlines (SHA) Chairman, Zhou Chi said it was worth the effort. "One single airline can't establish a foothold in every part of the world due to limitations set by national air traffic rights," he explained. "But by joining airline alliances, we can expand our international route network and better utilize our existing capacity to improve efficiency without increasing investment and fleet expansion."

2 737-8Q8s (30715, B-5185; 30718, B-5320), (ILF) leased.

May 2007: Shanghai Airlines (SHA)'s 2006 annual profit plummeted -82.2% to +CNY8.2 million/+$1.1 million from earnings of +CNY46 million in 2005, as revenues rose +24.5% to CNY9.93 billion, and costs climbed +27% to CNY8.49 billion.

In the 2007 first quarter, (SHA) remained stuck in its downturn with a -CNY95.8 million loss. Operating revenue increased +27.41% to CNY2.55 billion against a +29.5% lift in costs to CNY2.3 billion. The carrier cited "high oil prices" and "intensified market competition" as the reasons for the earnings decline in 2006, but credited "fuel savings" and "cost control" as key elements in achieving a profit for the year. It said last year's launches of its cargo subsidiary, (SHA) Tours and Boeing Shanghai Aviation Services were testament to its "long-term development." Passenger boardings rose +10.2% to 7.5 million, load factor improved +0.7 point to 69.2% LF, and cargo traffic jumped +29.1% to 260,690 tonnes.

This year, the airline is counting on soaring growth of China's air transport market as the Beijing Olympics and Shanghai Expo approach. It noted that "the strategy of building Shanghai as a big international air hub implemented by (CAAC) (CAC) and the Shanghai municipal government" also will play an important role in boosting revenue. "But challenges still remain," it admitted, referring to "the fierce scramble for slots at Shanghai airports at peak hours," a "human resources shortage" and surging oil prices.

737-86N (35212, B-5330), (GEF) leased. 737-86D (35767, B-5315), delivery.

August 2007: While USA majors lobby and issue competing press releases touting their proposals to serve China under the expanded aviation agreement signed by the two countries, four small Chinese carriers have applied to the (CAAC) (CAC) for the right to operate transpacific services in a market traditionally dominated by the country's big three and their USA counterparts. Despite the fact that Chinese airlines have faced significant competitive disadvantages on routes to the USA, four carriers - - Shanghai Airlines (SHA) Cargo, Hainan Airlines (HNA), Jade Cargo International (JDC) and Great Wall Airlines (GWZ) - - plan to operate transpacific services, and each has received approval from the (CAAC) (CAC), according to a statement from the regulator.

Shanghai Airlines (SHA) is scheduled to fly from Pudong (PVG) to Los Angeles via Anchorage (ANC) beginning in September, and to Dallas/Fort Worth (DFW) via (ANC) from next April. Jade (JDC) intends to operate a Shenzhen - (PVG) - Portland, Oregon - (DFW) - Portland - (PVG) routing, and a Shenzhen- (ANC) - Chicago O'Hare (ORD) flight beginning this month.

In March, Great Wall (GWZ) expects to fly freighters to Los Angeles (LAX) and (ORD) via (PVG) - Seoul - (ANC) and beginning June 8, Hainan (HNA) will operate passenger flights between Beijing and Seattle. Hainan (HNA) never before has applied to serve the USA. It also has applied to serve Mexico City from Beijing (PEK) from March 30, and last month, it started flights to St Petersburg. The local analyst community has suggested that the carrier is expanding internationally to pave the way for the launch of Grand China Air.

The industry in China is hoping that the seven new cargo routes to the USA will help domestic airlines improve on the 30% market share they currently hold in the international freight market. The difficulties in competing for passenger traffic were highlighted by the lack of interest from Air China (BEJ), China Southern Airlines (GUN), and China Eastern Airlines (CEA) in increasing their transpacific operations. (BEJ) Public Relations Director, Wang Yongsheng confirmed that "in the short term, we won't apply for any new routes to the USA," as (BEJ) already serves (LAX), San Francisco and New York (JFK).

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."

Alteon Training said it will open a training center at Shanghai Pudong by year end, that eventually will house China's first 787 full flight simulator (FFS) and a 757/767 (FFS) for center partner Shanghai Airlines (SHA) and "other regional operators." The 787 simulator will be ready in the first half of next year.

MD-11F (48543, B-2178), ex-(N7821B) for Shanghai International Cargo Airlines.

September 2007: In the 2007 first half, Shanghai Airlines (SHA) posted a net loss of -CNY134.5 million/-$17.9 million. Gu Jiadan, Vice Managing Director, projected it will have a better performance in the second half and realize a full-year profit.

(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.

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.

Commenting on its first-half performance, (SHA) said development costs associated with subsidiaries Shanghai Airlines (SHA) Cargo International Co (launched in July 2006) and China United Airlines (CUL) (started in 2004) had a significant impact on the result. Higher fuel prices and startup costs of new routes also were cited. Routes opened in the first half include Shanghai - Wuhan - Kunming, Shanghai - Xi'an - Jiayuguan, and Guangzhou - Zhangjiajie .

Operating expenses increased +27.2% to CNY5.8 billion. Passenger boardings jumped +14.3% to 4.1 million, while load factor rose +1.2 points to 71.2% LF. Cargo traffic climbed +96% to 4.29 million (FTK)s.

(SHA) expects to improve service levels further and push forward cost savings in the second half. It is expected to become a member of Star Alliance (SAL) in December, and is speeding up preparations to join the partnership.

Shanghai Airlines (SHA) denied widespread speculation that Air China (BEJ) or China Eastern Airlines (CEA) will merge with it, to expand their market share in Shanghai, with one official insisting that (SHA) plans to "go its own way and become an international carrier."
Currently, (SHA) has a 17% market share in Shanghai, while (CEA) and (BEJ) have 35% and 12%, respectively. "So far, we are not interested in merging with any other airlines, including Air China (BEJ) and China Eastern Airlines (CEA)," (SHA) Vice Managing Director, Gu Jiadan said. "Our core strategy is to go our own way, and become an international carrier with Shanghai as our hub." According to the long-haul route distribution program released by (CAAC) (CAC), (SHA) will open five new international routes to Vienna, Hamburg, Zurich, Seattle and Los Angeles from Shanghai in the next two years. The company also has no plans to enter into partnership with a strategic investor, but it wouldn't exclude this possibility in the future, Gu added. (ANA) President & CEO, Mineo Yamamoto said in July that the Japanese carrier is considering a cross-shareholding arrangement with (SHA). Though no merger is contemplated at present, cooperation with (BEJ) is on the horizon. (SHA) is scheduled to join the Star Alliance (SAL) by year end. "We will conduct broader cooperation with Air China (BEJ), when both of us join Star (SAL)," a (SHA) insider noted. The company will begin to codeshare with (BEJ) on Shanghai - Tokyo flights from September 29.

737-8Q8 (30728, B-5353), (ILF) leased.

October 2007: Boeing Shanghai Aviation Service Co (BSASC), a Joint Venture (JV) launched last year by Boeing (TBC), Shanghai Airlines (SHA), and Shanghai Airport Group, expects its hangar at Pudong to be operational in 2009, company CEO, Timothy Premselaar said. The hangar will be constructed in two phases. At the conclusion of the first in April 2009, it will hold two 747s or two 777s, and by 2010, its capacity is expected to double. (BSASC) said the hangar will be engaged mainly in airplane reconfiguration. (CAAC) (CAC) Chief Aviation Expert, Yu Zhenfa has said that approximately three-quarters of the freighters in China have been reconfigured from passenger airplanes.

December 2007: Under the motto "Sharing Unbounded Space," Air China (BEJ) and Shanghai Airlines (SHA) formally joined the Star Alliance (SAL) at a ceremony held in the vast new Terminal 3 at Beijing Capital International Airport. With eight Star (SAL) member airplanes lined up in front of the imposing building and the Chief Executives (CEO)s of all 19 member carriers, as well future members Turkish Airlines (THY) and EgyptAir (EGP) present, Star (SAL), its new members, and Chinese civil aviation authorities spared no effort to make the event memorable. "This is an historical moment. The world's fastest growing and largest airline alliance, the Star Alliance (SAL), has arrived in the world's fastest growing and largest country, China. By becoming a member of the Star Alliance (SAL), China's premier airline, Air China (BEJ), is set to undergo many years of strategic cooperation with a large group of the world's leading airlines," (BEJ) Chairman, Li Jiaxiang said proudly.

Air China (BEJ) is the country's flag carrier and operates a fleet of 212 airplanes on a network spanning 26 countries from its hubs in Beijing and Chengdu. It was listed on the Hong Kong Stock Exchange and London Stock Exchange in December 2004. Its smaller, Shanghai-based counterpart (SHA), operates 59 airplanes on more than 140 domestic, international and regional routes. (SHA) plans to expand its fleet by up to 100 airplanes by 2010. In 2004, (SHA) became the first Chinese airline to achieve International Operational Safety Audit (IOSA) certification. "By joining the Star Alliance (SAL), we believe Shanghai Airlines (SHA) has a brighter future ahead of it," Chairman, Zhou Chi said, adding the carrier will "serve as a bridge between China and the world via its Shanghai hub."

With the addition of the pair, Star (SAL) now has 19 member carriers operating 17,000 daily flights to 897 destinations in 160 countries. On domestic routes alone, Air China (BEJ) and Shanghai Airlines (SHA) have added more than >40 new destinations to the partnership. "China is one the fastest growing aviation markets in the world and with Air China (BEJ) and Shanghai Airlines (SHA) now formally Star Alliance (SAL) member airlines, we offer an unrivalled network of flight connections to, from, and within this market for international travelers," Star (SAL) CEO, Jaan Albrecht said. In order to provide better interconnectivity between international flights and domestic destinations in China, (BEJ), (SHA) and other members, serving China are working on cementing a dual-hub strategy at Beijing and Shanghai Pudong.

As Shanghai-based China Eastern Airlines (CEA)'s stake sale to Singapore Airlines (SIA) draws near completion, Shanghai Airlines (SHA) is planning to introduce a strategic investor of its own in order to boost its competitiveness. "We definitely will introduce a strategic investor in the future. We also need to develop further," (SHA) Public Relations Director, Wang Wanlong said.

(SHA) reported a net loss of -CNY57.2 million/-$7.7 million for the first nine months of 2007, a result impacted significantly by costs associated with the development of its Shanghai Airlines Cargo (launched in July 2006), and China United Airlines (CUL) (2004) subsidiaries. "Due to its current deficit, (SHA) intends to introduce a strategic investor to stimulate its growth. As the carrier is not very big in size and has fairly good asset quality, it will not be difficult for it to find a suitable strategic investor," Haitong Securities aviation analyst Ma Yin said.

(ANA) President & CEO, Mineo Yamamoto said last June, that the Japanese carrier is considering a cross-shareholding arrangement with (SHA), which has sought investment but not a merger. Yamamoto said an arrangement would be similar to the agreement (ANA) reached with Asiana Airlines (AAR) earlier this year, under which each carrier took a $12 million stake in the other. This month, (SHA) formally joined the Star Alliance (SAL), which counts (ANA) as a member.

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

January 2008: Shanghai Airlines (SHA) expects to post a loss in 2007 after reporting an +CNY8.2 million/+$1.1 million profit in 2006, according to a company statement cited by "Reuters." The airline said high fuel prices, slow development of new international routes and the establishment of a cargo subsidiary, were the principal causes. It posted a narrowed -CNY134.5 million loss in the first six months of 2007.

Shanghai Airlines (SHA) formed a logistics enterprises alliance to meet increasing competition in the cargo market. The group comprises (SHA) and five other logistics companies: China United Airlines (CUL), (SHA) Cargo International, (SHA) International Cargo Services, Shanghai Crane Transportation and Dahang International Transportation. Shanghai Airlines (SHA) has a controlling stake. (SHA) Board Secretary, Xu Junmin said the alliance is designed to achieve synergies, that would be impossible if each firm was operating separately. The group owns approximately 60 airplanes, that fly on 170 domestic and 20 international routes.

As Shanghai occupies a 70% share of the Chinese cargo market, airlines from home and abroad are increasing their efforts to grab their portion. (DHL) launched its North Asia hub project at Shanghai Pudong in November, and (UPS) established its Asia transfer center at the same airport. Cathay Pacific Airways (CAT) continues to discuss a cargo joint venture with Air China (BEJ), while (HNA) Group plans to establish its Grand China (GCH) Logistics Holding Co in Shanghai.

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%.

March 2008: Beijing Capital International Airport's new $3 billion-plus Terminal 3 opened as Shandong Airlines (SHG) (flight SC1151 arrived from Jinan at 8:39 am. UK architect, Norman Foster claimed it is the largest covered structure ever built - - 3.25 km long and 1.3 million sq m of floor space. Construction began in March 2004. The airport said the three-concourse facility welcomed Shandong (SHG), Sichuan Airlines (SIC), Qantas (QAN), Qatar Airways (QTA), British Airways (BAB), and El Al (ELA). A second move is scheduled for March 26 when Air China (BEJ), Shanghai Airlines (SHA), (SAS), Austrian Airlines (AUL), Lufthansa (DLH), Asiana Airlines (AAR), Air Canada (ACN), United Airlines (UAL), (ANA), Thai Airways (TII), Singapore Airlines (SIA), Finnair (FIN), Cathay Pacific Airways (CAT), Japan Airlines (JAL), Dragonair (DRG), Turkish Airlines (THY), Emirates (EAD), Air Macau (MCU), S7 Airlines (SBR), and EgyptAir (EGP) will transfer to the new building. "Reuters" reported that airport capacity will be boosted to 76 million per year from the 52 million it served in 2007. The baggage system can handle 19,800 pieces per hour, it said.

More than >40 Shanghai Airlines (SHA) pilots (FC) staged a sickout citing unfair treatment.

737-8Q8 (35271, B-5370), (ILF) leased, ex-(N1786B).

April 2008: Shanghai Airlines (SHA) was unable to reap the benefits related to rising demand and yuan appreciation enjoyed by its rivals in 2007, as it reported a -CNY497.6 million/-$70.9 million net loss that widened considerably from a -CNY6.5 million deficit the year before, although it enjoyed a slight reversal of fortune in the first quarter of 2008.

Full-year operating revenue climbed +22.9% to CNY12.31 billion against a +27.6% increase in expenses to CNY12.84 billion. The company attributed the net result to rising fuel prices and startup costs on new routes. Competition and the -CNY160 million loss at its Shanghai Airlines Cargo International (SACI) subsidiary, launched in July 2006 also were cited. (SHA) added 10 domestic and three international routes last year and introduced eight 737s and one MD-11, expanding its fleet to 58 airplanes. Passenger boardings jumped +21.4% to 9.5 million and load factor improved +3.6 points to 72.8% LF. Cargo traffic grew +21.7% to 327,400 tonnes.

In the 2008 first quarter, (SHA) reported net income of +CNY36.8 million compared to a loss of -CNY78.1 million in the year-ago period thanks to accelerated yuan appreciation that generated income of +CNY180 million. Operating revenue rose +32.6% to CNY3.39 billion against a +25% increase in expenses to CNY3.36 billion.

Looking ahead, (SHA) is optimistic that (SACI)'s performance will improve and it is targeting a +20.3% year-over-year increase in passengers to 11.4 million. In the meantime, however, it warned that "the surge in fuel prices to a record level" and a "severe shortage of aviation professionals, such as pilots (FC) and Maintenance Repair & Overhaul (MRO) workers (MT)," remain big challenges.

737-8Q8 (35273, B-5368), (ILF) leased.

May 2008: Following the formation of an alliance with five other logistics companies in January, Shanghai Airlines (SHA) took a further step toward strengthening its position in a city that commands 70% of the Chinese freight market through the injection of CNY260 million/$37.2 million into its (SHA) Cargo International subsidiary.

Launched in 2006, (SHA) Cargo had registered capital of CNY124.1 million, of which (SHA) invested CNY68.2 million to hold a 55% stake while Sino Prime Ltd. and Juniper Estate held 25% and 20%, respectively. (EVA) Air soon thereafter sealed a deal with Sino Prime to purchase its stake for $3.9 million. (SHA) forged the logistics partnership four months ago and has a controlling stake.

Board Secretary Xu Junmin said the CNY260 million is for fleet expansion, as its cargo subsidiary plans to introduce two MD-11Fs this year and add one more in 2009. (SHA) Cargo International's fleet currently consists of two 757F freighters, one 747F, and four MD-11Fs.

Owing to "increasingly fierce competition caused by boosted cargo capacities in Shanghai," according to Xu, (SHA) Cargo International posted a net loss of -CNY160 million last year. He predicted the carrier will narrow its loss by a large margin in 2008.

June 2008: Shanghai Airlines (SHA) expects a turnaround this year "as long as the rising oil price doesn't get out of control," VP, Chen Zhuofu said. "Our cargo subsidiary will narrow its loss by a big margin this year, which definitely will relieve our operating pressure," Chen explained. Shanghai Airlines Cargo International, launched in July 2006, was cited as one of main drivers of (SHA)'s -CNY497.6 million/-$71.7 million loss in 2007. The company injected an additional +CNY260 million into its cargo branch last month. Other challenges facing the airline, include improving airplane utilization, ongoing pilot (FC) shortages and discontent, and the fact that "as a Chinese carrier we are not entitled to order airplanes as we wish, because our order must be approved by Beijing (CAC)/(CSC) first," Chen said. He also revealed that (SHA) plans to follow the domestic trend of acquiring a strategic investor. "So far, we haven't decided whether to introduce a foreign carrier as our investor or just introduce a financial investor," he noted.

China's airlines are moving to upgrade their fleets and cut international flights to mitigate the impact of skyrocketing fuel costs. Shanghai Airlines (SHA) VP, Chen Zhuofu said that (SHA) plans to introduce two A321s next year to replace 757s. He said it will be difficult for Chinese carriers to post a collective profit this year if fuel prices continue to rise. In addition to these measures, Chinese carriers have raised fuel surcharges on international routes, including a +33% increase by China Southern Airlines (GUN).

July 2008: 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.

July 2008: At the Farnborough Air Show, International Aero Engines (IAE) said that Shanghai Airlines (SHA) selected the (V2500-A5) to power 10 A321s in a deal worth $170 million with deliveries starting in July 2009.

1 737-800, (ILF) 10 year leased.

August 2008: Shanghai Airlines (SHA) earned a +CNY23.4 million/+$3.4 million first-half profit, based on domestic accounting standards, reversed from a -CNY134.5 million loss in the year-ago semester, thanks to a CNY44.5 million government subsidy. It did not say what the subsidy was for, "Bloomberg News" reported. Instead, it credited "the enhancement of marketing efforts and rationalization of the route network, as well as improving airplane daily utilization" as key to the result. Operating revenue rose +26% year-over-year to CNY7.03 billion against a +22.8% lift in expenses to CNY7.12 billion. Passenger boardings climbed +14.1% to 4.9 million, and load factor rose +1.1 points to 71.4% LF. Cargo traffic jumped +8.9% to 1.7 million tonnes. (SHA) introduced three 737-800s during the six-month period, expanding its fleet to 63 airplanes, and opened eight new routes.

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.

737-8Q8 (35281, B-5369), (ILF) leased and 737-86D (35770, B-5395), delivery.

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."

(SHA)'s second quarter (Q2) financial results = net loss of -$10 million, and an operating loss of -$17 million.

October 2008: Shanghai Airlines (SHA) launched service from Shanghai Hongqiao to Seoul Gimpo aboard a 757 and Tokyo Haneda aboard a 767-300ER.

Boeing (TBC) Shanghai Aviation Services, a joint venture among Boeing (TBC), Shanghai Airport Authorities and Shanghai Airlines (SHA), won USA (FAA) repair station certification to provide Maintenance Reapir & Overhaul (MRO) to Chinese airlines, as well as regional and international carriers. "Achieving (FAA) certification is another step in offering our airline customers the services that will help them expand safely and efficiently, while keeping pace with the tremendous growth in commercial aviation that we see in China over the next 20 years," Boeing Commercial Airplanes (TBC) China Operations VP, John Bruns said.

Under USA FAR Part 145, Boeing Shanghai will conduct heavy maintenance on 737s and expects to expand offerings to twin-aisle airplanes beginning with the 767-300 and eventually to handle passenger-to-freighter conversions. The facility also conducts nondestructive testing and other maintenance services. The approval is significant considering there are more than >235 737NGs flying in East Asia and more than >260 on order.

November 2008: 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.


December 2008: 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.

737-86D (35771, B-5396), delivery.

January 2009: Air China (BEJ) and Shanghai Airlines (SHA) joined China Southern Airlines (GUN) and China Eastern Airlines (CEA) in announcing that they expect to report losses for 2008. Both (BEJ) and (SHA) cited "the decline in market demand" that was exacerbated by the impact of May's Sichuan earthquakes, stricter security measures surrounding the Beijing Olympics, the global financial crisis and "much higher fuel expenses" until the recent fall in oil prices. The resulting fuel hedge losses then became a culprit.

(BEJ) noted that it suffered a -CNY6.8 billion/-$993.3 million loss resulting from a write down in the value of its fuel hedges on December 31. (BEJ) reported cash losses of -$5.9 million and -$52.8 million on its fuel hedge contract in November and December, respectively.

(SHA) said it posted a -CNY8.5 million cash loss on its fuel hedge contract as of December 31, while the full-year write down totaled CNY170 million.

This month Citibank predicted that (BEJ) would report a net loss of -CNY7.7 billion. (BEJ) posted a -CNY3.88 billion loss in 2007, while (SHA) suffered a- CNY435.1 million loss in the same time frame.

February 2009: Shanghai Airlines (SHA) is expected to receive a CNY1 billion/$146 million capital injection through the issuance of a non-public stock offering to Jinjiang International Holding, its third-largest stakeholder. The move is designed to reduce (SHA)'s debt ratio and relieve some pressure as its financial situation worsens. (SHA) said its debt ratio will fall -5.9 points to 85.5% as a result. Last month it warned that its 2008 loss may be double the -CNY435 million reported in 2007.

"Judging from current operating conditions, (SHA) expects to continue facing relatively heavy operating pressures and financial difficulties into the first quarter of 2009," (SHA) said in a statement released by the Shanghai Stock Exchange. The carrier said it suffered a -CNY8.5 million cash loss on its fuel hedge contract as of December 31, 2008, while the full-year write down totaled CNY170 million.

(SHA) will circulate some 222.2 million shares for Jinjiang at CNY4.5 per share, increasing Jinjiang's stake from 7.9% to 23.6% and making it the second-largest shareholder behind the municipal government's Shanghai Lianhe Investment Company with 29.6%.

(SHA) Chairman, Zhou Chi said in December that the airline was seeking capital from the Shanghai government. Jinjiang's controlling shareholder is the Shanghai municipal government. (SHA) Board Secretary, Xu Junmin said the stock plan requires approval at a March 13 shareholders conference.

Chinese carriers expect to post a collective 2008 loss owing to the difficult operating environment. The government already has injected CNY7 billion and CNY3 billion into China Eastern Airlines (CEA) and China Southern Airlines (GUN), respectively. Industry analysts believe that the aid granted to (SHA) also is designed to smooth its merger with (CEA). (SHA) warned last month that its 2008 loss may double the CNY435 million reported in 2007.

March 2009: Shanghai Airlines (SHA) reported a 2008 net loss of -CNY1.25 billion/-$182.8 million, nearly tripling a net deficit of -CNY435.12 million in 2007, on a +8.6% lift in revenue to CNY13.37 billion. (SHA) blamed the loss on "the sharp drop of domestic demand caused by the Sichuan earthquake last May and the economic downturn in the second half of last year." It also pointed to "the higher fuel price." Shanghai Airlines (SHA) Cargo posted a net loss of -CNY263 million for 2008, which had a "negative impact" on (SHA)'s overall financial performance, (SHA) said. Operating expenses jumped +14.1% year-over-year to CNY14.65 billion.

(SHA)'s 2008 revenue on international routes climbed +29.3% to CNY3.14 billion as it opened "two key international and regional routes" (Shanghai - Mumbai and Shanghai - Taiwan). It also launched a Shanghai - Chongqing - Bangkok route as well as direct Shanghai - Bangkok flights.

It transported 10.12 million passengers in 2008, up +7%, and operated 13.75 billion (RPK)s traffic, a +8% increase. Capacity rose +11.3% to 19.48 billion (ASK)s, dropping load factor -3 points to 70.6% LF. Cargo volume decreased 2.5%.

Looking ahead, (SHA) warned that "2009 will be a tough year [as] the negative impact exerted by the global financial crisis on the airline industry will continue for some time."

(SHA) will add Hanoi to its network later this month. Flights will operate three times a week using 737-800s. (SHA) also serves Vietnam’s largest metro area Ho Chi Minh City.

(SHA) is expecting a "difficult" 2009, although a turnaround is possible if it can maintain its passenger load factor of 72% LF and the airline industry shows signs of recovery in April or May, Chairman, Zhou Chi said. (SHA) announced in January that it expects to report loss for 2008. In response, it announced a -20% cut in senior management salaries and said it would not lay off any employees. Zhou said (SHA) will shift more resources to passenger transport, as "cargo transport, especially international cargo transport, is too challenging" in the current environment. The carrier is set to receive a +CNY1 billion/+$146 million capital injection from the government that company shareholders approved.
But Zhou noted the money can help (SHA) to solve only its short-term needs and that either a strategic investor a merger will be required for long-term survival. "We will seek to introduce a proper strategic investor, but it' not easy to find one in the current economic downturn. We won't rule out the possibility," he said.

He hopes to get more government money down the road, but he rejected widespread speculation that the CNY1 billion injection is designed to pave the way for a merger with Shanghai-based, China Eastern Airlines (CEA). "We have never formulated our development strategy based on the merger with (CEA)," he claimed. "So far we have never discussed this issue with (CEA) at company level and also have not been informed of this possibility by the Shanghai government or Beijing."

(SHA) Chairman, Zhou Chi told a shareholders meeting that the 787 does not "fully meet the quality that Boeing (TBC) touted earlier" and said the carrier is considering cancelling and/or postponing some or all of its nine 787 Dreamliner orders, according to "Bloomberg News."

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.

April 2009: Shanghai Airlines had a 1st quarter net profit of +$4 million (-$19 million), ex-special items.

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.

June 2009: The government-prompted merger of China Eastern Airlines (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.

ST Aerospace will provide maintenance-by-the-hour (MBH) component support to Shanghai Airlines (SHA) beginning in July; the eight-year, $21 million contract will cover repair management and pool access to its fleet of 10 A321s.

737-86D (35773, B-5461), delivery.

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.

1st A321-231 (3969, B-6591), delivery - - SEE PHOTO - "SHA-A321-231-2009-07."

August 2009: Shanghai Airlines (SHA) said it expects to report a first-half net loss, which will follow its -CNY1.36 billion/-$198.8 million deficit in 2008. It cited the global decline in air travel, especially "the sharp drop in cargo traffic" at its Shanghai Airlines Cargo International subsidiary, in a filing with the Shanghai Stock Exchange. (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. It earned +CNY40.1 million in the first quarter.

Shanghai Airlines (SHA) said it expects to report a first-half net loss, which will follow its -CNY1.36 billion/-$198.8 million deficit in 2008. It cited the global decline in air travel, especially "the sharp drop in cargo traffic" at its Shanghai Airlines Cargo International subsidiary, in a filing with the Shanghai Stock Exchange. (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. It 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."

September 2009: Shanghai Airlines (SHA) decision to install on-demand, in-seat in-flight entertainment (IFE) on narrow body airplanes represents a very significant innovative step in China, according to Charles Ogilvie, Panasonic's Executive Director for China.

Passengers on board ten (SHA)'s A321 airplanes have been experiencing the Panasonic eFX in-flight entertainment (IFE) system following its introduction to the fleet in July, Panasonic said. Panasonic eFX is a fully-digital (IFE) system with an open architecture to provide for maximum performance. (SHA) can add advanced functionality to the system as its long-term strategy evolves. "After great analysis and discussion, we decided the Panasonic system was the right one for us," said Xiaoyun Shao, Senior VP at (SHA). "We look forward to continued cooperation with Panasonic and future success. With eFX, (SHA) will be able to provide high quality entertainment and make passengers feel more satisfied."

737-76D (35777, B-5260), and A321-231 (4045, B-6592), 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).

Boeing (TBC), the Shanghai Airport Authority, and Shanghai Airlines (SHA) opened a new two-bay, airplane maintenance hangar at Shanghai Pudong to be used by their Boeing Shanghai Aviation Services Maintenance Repair & Overhaul (MRO) joint venture (JV).

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.

737-76D (35778, B-5261), and 737-86D (34772, B-5460) deliveries.

November 2009: Shanghai Airlines (SHA) suffered a -CNY42.7 million/-$6.2 million loss in the third quarter, narrowed -90.2% from a -CNY437.5 million deficit in the year-ago period. Operating revenue jumped +14.9% to CNY3.62 billion, while expenses rose +6% to CNY3.81 billion. (SHA) cited a decline in passenger boardings caused by the global financial crisis, stricter security measures taken prior to China's October 1 national holiday and falling fares as the culprits.

It also cited a -CNY50 million loss at its Shanghai Airlines (SHA) Cargo International subsidiary. (SHA) holds a 55% stake of (SHA) Cargo and injected CNY110 million into the carrier in August.

(SHA)'s nine-month loss of -CNY133.9 million compared to a -CNY432.3 million deficit in the first nine months of 2008. Revenue fell -10.9% to CNY9.06 billion.

(SHA) starts Shanghai Hongqiao to Seoul Gimpo.

1 737-86D (CFM56-7B) (35775, B-5471), delivered and wet-leased to China United (CUL).

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.

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.

A321-231 (4198, B-6642), delivery.

April 2010: China Eastern Airlines (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.

737-76D (35779, B-5269), delivery.

July 2010: Shanghai Airlines (SHA) reached an agreement with the Star Alliance (SAL) to “terminate” its membership by the end of October.

It noted that the move results from (SHA)’s recent merger with China Eastern Airlines (CEA). (CEA) joined the SkyTeam (STM) alliance in April, and although (SHA) never officially confirmed it also would join SkyTeam (STM), it was widely anticipated it would leave (SAL). (SHA) joined the Lufthansa (DLH)-led alliance in December 2007 along with Air China (BEJ).

“The departure of (SHA) will lead to a slight reduction of the Star (STM) alliance network in China but the decision was not unexpected and member carriers have been exploring several options to fill the gap,” an industry insider said, conceding that one of the possible options is to bring some of Air China (BEJ)’s “recent airline acquisitions” into the alliance as full members.

Air China (BEJ) in March became the majority shareholder of Shenzhen Airlines (SHZ), when it increased its stake from 25% to 51%. Shenzhen (SHZ) is the country's fifth-largest carrier and is providing Air China (BEJ) with a strong foothold in the Pearl River Delta region.

August 2010: 737-86D (35776, B-5523), ex-(N1796B) and 737-86N (36803, B-5545), (GEF) leased.

September 2010: Boeing (TBC)’s Shanghai-based maintenance, repair and overhaul (MRO) joint venture (JV) has signed a memorandum of understanding (MOU) with Boeing Commercial Airplanes to become a supplier of Fleet Management and "GoldCare" (MRO) services. The agreement, which still needs to be finalized, covers line and base maintenance, component management, engineering and planning, as well as other services, says Boeing Shanghai Aviation Services Company Ltd.

Boeing Shanghai is a four-year-old joint venture of (TBC), Shanghai Airport Authorities and Shanghai Airlines (SHA), that focuses on 737s and 767s, but the announcement that the facility will provide GoldCare (MRO) services seems to indicate that the facility plans to add the 787 to its capabilities list. GoldCare is the aftermarket support program (TBC) developed specifically for the 787. As previously reported, (TBC) plans to expand GoldCare to other airplane types, but currently the program still is limited to the 787. Chinese carriers have 57 787s on order, and several carriers in the Asia-Pacific region are in line to be early operators of the airplane, including launch customer, All Nippon Airways (ANA). (TBC) is building a global network of GoldCare providers to support the 787. “It is important to get additional (MRO) facilities lined up prior to the delivery of airplanes,” says a (TBC) spokesman. “As the world economy and aviation sector recover, Boeing Shanghai, through this new agreement, will be well-positioned to support the expanding (TBC) fleet through the airplane life cycle with comprehensive fleet management services,” says Bernard Hensey, (CEO) of Boeing Shanghai.

The (MRO) has authority from the (FAA), (EASA) and Thailand for all levels of 737NG and 767 base maintenance. It has customers in Europe, the USA and China.

September 2010: 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.

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.


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%.

January 2011: 737-86N (38011, B-5576; 39393, B-5550), delivered to China Eastern (CEA) for Shanghai Airlines (SHA) operations, (GEF) leased.

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 - - "SHA-2011-06-SKYTEAM ALLIANCE."

February 2012: 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.

January 2013: 737-86D (39302, B-5730), delivery.

March 2015: 737-86D (39314, B-1741), delivery.

June 2013: 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.

July 2013: Established in 1985 by the Shanghai municipal government and local enterprises, Shanghai Airlines (SHA) initially focused on domestic flying, before expanding into international markets in 2007. A decade later, (SHA) was officially welcomed as the Star (SAL) Alliance’s 19th member, consolidating the group’s presence in the Shanghai market. In early 2010, Shanghai Airlines (SHA) merged with another Shanghai-based airline, becoming China Eastern Airlines (CEA)’s fully-owned subsidiary. While (SHA) has since retained its own branding, it moved to its parent’s alliance, the SkyTeam (STM) alliance in 2011.

Examination of annual seat capacity data shows that Shanghai Airlines (SHA) increased its offering by +45.7% in the last nine years, from 12.5 million seats in 2005 to 18.2 million in 2013 (data as of July 24). (SHA) offers predominantly domestic services, whereas only around 10% of all 2013 seats are allocated to international markets.

While Shanghai Airlines (SHA) increased its seat offering in every year since 2005 until 2011, most of this growth occurred over two years. In 2009 and 2010, the airline added +21.1% and +24.4% extra capacity, mostly on domestic routes, although 2010 was also the year of peak international capacity for the airline with 2.25 million seats offered (2013 international capacity as reported to date is lower by a fifth).

In 2011, (SHA) recorded only +2.2% more seats than in the previous year and the positive result was driven by the growth in the domestic segment (+3% year-on-year compared to -6.7% for international). Last year, capacity reductions were applied across the business, resulting in an overall decrease of -8%. The downward capacity trend has continued in 2013, as reported in late July, albeit at -3.7%, representing a slight improvement over 2012.

Unsurprisingly, Shanghai Airlines (SHA)’s activity is centered on the two airports serving the south-eastern Chinese city, where it operates a dual hub operation. In August 2013, Shanghai Airport commands around a third of all seats offered by (SHA), a decrease from a 58% share in the previous year’s operation. At the same time, +11% more weekly seats are allocated to Shanghai Pudong this August than a year before, giving it a total share of 18%. Shanghai Airlines (SHA)’s operation at Shanghai Airport was significantly reduced in terms of seat capacity compared to August 2012 (-23.3%), but the number of weekly flights fell by only -1.1%, indicating a shift towards smaller airplanes.

A different pattern can be observed at Shanghai Pudong, where Shanghai Airlines (SHA) has added both seats and frequencies (+21.4% and +30.7%, respectively) in August 2013 as compared to the same period of 2012.

Other significant airports include Guangzhou, from which (SHA) flies to four domestic destinations as well as to its hubs, Tianjin (one non-hub destination) and Hangzhou, which has six non-hub destinations by Shanghai Airlines (SHA), but no connection to either of the Shanghai airports.

Guangzhou, a key economic hub of south-eastern China, is Shanghai Airlines (SHA)’s largest destination from Shanghai, and offered by (SHA) from both Shanghai Airport (42 weekly frequencies) and Pudong Airport (7). Guangzhou accounts for 5.5% of (SHA)’s weekly frequencies and 6.2% of seats offered from both Shanghai airports. Tianjin, another important industrial center located in northern China, comes second and is the only other destination to take up more than >5% of the airline’s capacity (>5.1% of weekly frequencies and >5.4% of seats).

Bangkok, served by Shanghai Airlines (SHA) with 22 weekly frequencies from Shanghai Pudong Airport, is (SHA)’s largest international destination. The Thai capital is #8 on the top destinations list, but takes up less than 3% of the carrier’s capacity from the two airports. The Thai resort of Phuket is the second-ranking non-Chinese destination. However, the twice-daily schedule offered by Shanghai Airlines (SHA) to Phuket places it in mid-20s in terms of (SHA)’s largest routes. SEE ATTACHED - - "SHA-2013-07 - TOP DESTINATIONS."

737-86D (37907, B-5832), delivery.

August 2013: 737-86D (37908, B-5833) and 737-89P (39304, B-5789), deliveries.

November 2013: See video - - "CEA-Visit Shanghai by Piers Morgan" - -

December 2013: 737-86D (39306, B-1900), ex-(N5573K), delivery.

February 2014: 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.

June 2014: 737-86D (39309, B-1967), delivery.

July 2014: A330-243 (1440, B-5931), ex-(F-WWKG) delivery.

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.

(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.

737-86D (39311, B-1968) delivery.

November 2014: Shanghai Hongqiao International Airport (SHA) reported a +3.4% year-on-year growth in passenger numbers for October compared with the same period a year earlier.

In October, the number of passengers traveling through the airport amounted to 3.4 million, up +4.8% from a year earlier. Cargo traffic rose +5.5% year on year to 40,740 tonnes.

Airplane takeoffs and landings totaled 21,912, up +1% from a year earlier, the airport said.

Shanghai Airlines (SHA)'s 757-26D (B-2876), had been phased out of the (SHA) fleet. It was the last 757 produced by Boeing (TBC).

December 2014: Shanghai Hongqiao International Airport (SHA) registered a growth of +4.6% in passenger numbers in November compared with the same period a year earlier, the airport said.

The number of passengers traveling through the airport amounted to 3.2 million, up +4.6% from a year earlier. Cargo volume rose +1.2% year on year to 42,011 tonnes.

Airplane takeoffs and landings totaled 21,280, up +2.8% from a year earlier, the airport said.

January 2015: 737-86D (39312, B-1740), ex-(N1786B) delivery.

February 2015: 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.

March 2015: Shanghai Airlines (SHA) has retired the last Boeing 757-200 passenger airplane from its fleet, making an end of its nearly 10 years' service in the Shanghai-based carrier.

The 757-26D (33966, B-2875), made its final revenue flight for the carrier on March 21. The 757 flew from Harbin to Shanghai Pudong on its final passenger flight for the carrier, operated as flight FM9172.

The airplane was the second to last 757 airplane produced by Boeing, which took its maiden flight on October 5, 2004 and joined the fleet of Shanghai Airlines (SHA) on March 31, 2005.

(SHA)'s 757-200 (33967, B-2876), had been phased out in November 2014, which was the last 757 produced by Boeing (TBC).

Since the first 757-200 (27152, B-2833) was delivered to Shanghai Airlines in 1993, the 757-200 fleet has served (SHA) for nearly 22 years. Now, (SHA) has retired all of its 10 Boeing 757-200 passenger airplanes.

May 2015: News Item A-1: See video "Visit Shanghai (very quickly)"

737-86D (39316, B-1742), delivery.

July 2015: News Item A-1: "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 three 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, two private carriers (Juneyao Airlines (JYA) and Spring Airlines (CQH)) announced their launch of nonstop services from Shanghai Pudong to Tokyo Haneda this August.

737-89P (41506, B-1512), delivery.

August 2015: Shanghai Airlines (SHA) became one of three carriers to launch flights last week between Shanghai Pudong (PVG) and Tokyo Haneda (HND). On August 5th (SHA) started 3x-weekly flights using its 737-800s on the 1,735 km sector, competing with Juneyao Airlines (JYA) (thrice-weekly) and Spring Airlines (CQH) (four times weekly).

October 2015: News Item A-1: 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 two 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.

January 2016: 737-89Ps (38828, B-5705; 41785, B-5722) deliveries and
(41784, B-5703), AerCap (DEA) leased.

March 2016: Shanghai Airlines (SHA), a wholly-owned subsidiary of China Eastern Airlines (CEA), has completed the retrofit of its five Boeing 767-300 airplanes, unveiling an upgraded cabin interior.

(SHA) unveiled its new cabin products on the aging 767-300 airplanes, aiming to create a more comfortable travel experience for customers.

The refitted 767 airplanes are equipped with 214 seats in a two-class configuration (Business (C) and Economy (Y) Class, unlike the previous three-class configuration). The Business (C) Class features 30 lie-flat leather seats in a 2-2-2 layout, allowing customers to have a much wider space.

The new cabin features an ergonomically designed headrest, a pitch of 57 inches and a fully flat sleeping position at 180 degrees, along with two 37 inch (LCD) TVs and four 17 inch entertainment screens, offering better entertainment options for customers.

The color choices made for the 767-300 airplane's interior are great improvements, with brown and cream-brown as its main color scheme, identical with China Eastern Airlines (CEA)'s 777-300ER.

Along with retrofitted airplanes and upgraded cabin products, Shanghai Airlines (SHA) is taking a series of measures to improve its in-flight services as well.

December 2016: News Item A-1: "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.

February 2017: 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).


Click below for photos:
SHA-737-300F - 2013-10
SHA-767-300 - 2016-03.jpg
SHA-767-300 C Sleeper Seat.jpg

May 2017:

0 737-31L (CFM56-3), (XIJ) WET-LSD. RTND.

0 737-3S3F (CFM56-3B2) (1445-23811, /87 B-2605), (AWW) LSD 2004-03. RTND, LST (ARG) 2005-09. FREIGHTER.

1 737-7AD (CFM56-7B22) (72-28437, /98 B-2663), EX-(ESW), (PSS) LSD 2001-03. 8F, 126Y.

4 737-7Q8 (CFM56-7B22) (35-28212, /98 B-2631; 122-28216, /98 B-2632; 272-28223, /99 B-2997), (ILF) 8 YR LSD. 8F, 126Y.

6 737-76D (CFM56-7B22) (550-30167, /00 B-2913), (ILF) LSD (600-30168, /00 B-2577; 1343-33472, /03 B-2689; 3037-35777, B-5260, 2009-09; 3064-35778, B-5261, 2009-10; 3235-35779, B-5269, 2010-04). 1334-33470, B-4058; TO (CUL) 2003-10. 35777 TO (CUL) 2009-09. 8F, 126Y.

19 737-8Q8 (CFM56-7B26) (942-28242, /01 B-2153; 1200-28251, /02 B-2686; 1047-30631, /01 B-2167; 1086-30632, /02 B-2168; 1460-30666, B-5088, 2004-03; 32801, B-5130, 2005-03; 1704-30686, B-5131, 2005-05; 1789-30685, B-5132, 2005-10; 1911-30698, B-5140, 2006-04; 1942-30700, B-5142, 2006-05; 1986-33007, B-4145, 2006-07; 2230-30715, B-5185, 2007-04; 2251-30718, B-5320, 2007-04; 2386-30728, B-5353, 2007-09; 2551-35271, B-5370, 2008-03; 2567-35273, B-5368, 2008-04; 2709-35530, B-5369, 2008-08), (ILF) 10 YR LSD. 8F, 156Y.

1 737-8Q8 (CFM56-7B26) (ILF) 10 YR LSD 2008-07. 8F, 156Y.

16 737-86D (CFM56-7B26) (1192-33471, /02 B-2688; 2316-35767, B-5315, 2007-07; 2362-35768, B-5316, 2007-08; 2698-35770, B-5395, 2008-08; 2740-35771, B-5396, 2008-12; 2939-35773, B-5461, 2009-06; 3047-34772, B-5460, 2009-10; 35774, B-5470, 2009-09;* 3360-35776, B-5523, 2010-08; 37907, B-5832, 2013-07; 37908, B-5833, 2013-08; 39302, B-5730, 2013-01; 39306, B-1900, 2013-12; 39309, B-1967, 2014-06; 39311, B-1968, 2014-08; 39312, B-1740, 2015-01; 39314, B-1741, 2015-03; 39316, B-1742, 2015-05), WINGLETS. *IN CHINA UNITED (CUL) COLORS. 8F, 156Y.

1 737-86D (CFM56-7B26) (3098-35775, B-5471), WET-LST (CUL) 2009-11, WINGLETS. 8F, 156Y.

7 737-86N (CFM56-7B26) (2033-32691, B-5143 2006-08; 1434-32739, B-5076, 2004-01; 1464-32742, B-5077, 2004-03; 1897-34254, B-5148, 2006-03; 2277-35212, B-5330, 2007-05; 3376-36803, B-5545, 2010-08; 3531-38011, B-5576, 2011-01), (GEF) LSD. 8F, 156Y.

1 737-86N (CFM56-7B26) (3483-39393, B-5550), (CEA) WET-LSD 2011-01. 8F, 156Y.

4 737-89P (CFM56-7B) (38828, B-5705, 2016-01; 39304, B-5789, 2013-08; 41506, B-1512, 2015-07; 41785, B-5722, 2016-01). 8F, 156Y.

1 737-89P (CFM56-7B) (41784, B-7177), AerCap (DEA) LSD 2016-01. 8F, 156Y.

0 747-200F (MKA) WET-LSD 2003-09. RTND.

2 757-26DF (PW2037) (231-24471, /89 B-2608; 235-24472, /89 B-2609), (ILF) LSD 1989-08. 24471; 24472; CONV TO F. FREIGHTER.

0 757-26D (PW2037) (301-24473, /90 B-2610), RETIRED. 8F, 55C, 138Y.

0 757-26D (PW2037) (560-27152, /93 B-2833; 576-27183, /93 B-2834; 626-27342, /94 B-2842; 684-27681, /95 B-2843; 1044-33959, B-2857, 2004-05; 1045-33960, B-2858, 2004-06; 1046-33961, B-2880, 2004-07), NOT (ETOPS) EQ'PD. ALL RETIRED.

0 757-26D (PW2037) (33966, B-2875, 2005-03; 33967, B-2876). 33967; RETIRED 2014-11. 33966; (SHA)'S FINAL PASSENGER 757 RETIRED 2015-03. 8F, 55C, 138Y

2 767-3D6ER (946-35155, B-2500, 2006-09; 950-35156, B-2501, 2006-12).

1 767-3Q8ER (PW4060) (695-28207, /98 B-5018), (ILF) LSD 2003-02, 15F, 31C, 214Y.

4 767-36D (PW4056) (546-27309, /94 B-2563; 686-27685, /98 B-2567; 770-27941, /99 B-2570 - SEE PHOTO; 849-27684, /01 B-2498), NOT (ETOPS) EQ'PD. 15F, 31C, 214Y.

9 ORDERS (6/08) 787-8 (GEnx), 3 CLASS, 223 PAX.

1 MD-11 (576-48415, B-3176), EX-(EVA), (GEF) LSD 2005-06.

2 MD-11F (572-48543, B-2178, 8/07), EX-(N7821B), OPS FOR (SHA) CARGO INTNL. FREIGHTER.

4 +6 ORDERS A321-231 (V2533-A5) (3969, B-6591, 2009-07 - - SEE PHOTO - "SHA-A321-231-2009-07;" 4045, B-6592, 2009-09; 4198, B-6642, 2010-02; 4638, B-6753, 2011-02). 12C, 166Y.

1 A330-243 (1440, B-1967), EX-(F-WWKG) 2014-07.

5 BOMBARDIER CRJ-200LR (CL-600-2B19) (CF34-3B1) (7226, B-3075, 2004-06; 7247, B-7698, 2004-09; 7453, /00 B-3018); 7459, /00 B-3020; 7556, /01 B-3011), 50Y.

2 BOMBARDIER CRJ-200LR (CF34-3B1) (7226; 7247), EX-(MSK), (GEH) LSD 2004-01. 50Y.

1 RAYTHEON HAWKER 800XP (TFE731-5BR-1H) (258575, /02 B-3997), HAWKER LSD. 8Y.


Click below for photos:











DING XING GUO, VP FLIGHT OPERATIONS (dingxg@shanghai-air.com).





























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