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SASAC denies capital injection into 3 largest airlines
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China's state assets watchdog indirectly denied an earlier report that it would inject capital into the parent companies of China's three largest airlines - Air China, China Eastern and China Southern.

The Securities Daily reported on July 29 that the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council had convened meetings with the three groups about cash injections, which exhilarated the airline industry. It was rumored that China National Aviation Co. and China Southern Air Holding Co., the parents of Air China and China Southern Airlines, may each get 1.5 billion yuan. China Eastern Air Holding Co., parent of China Eastern Airlines, may get 100 million yuan. But later, representatives from Air China, China Eastern Airlines (CEA) and China Southern Airlines (CSA ) announced that they did not receive any formal notice about such a plan.

Both CEA and CSA received a 3 billion yuan capital injection to respond to the economic downturn last year. CEA has received a further 6 billion yuan since.

Air China received no such help.

Huang Bin of Air China's board of directors noted that the capital liquidity of Air China has been satisfactory so far, and the injection plan is all dependent on the situation and the government's policy. An insider from SASAC also told The Securities Daily that "there was a rumor spreading saying that another round of injection is possible, but we have not get the information yet."

By the end of March, 2009, the total assets of CSA was 84.58 billion, with 74.758 billion yuan of debts and the debt ratio high as 88.38 percent; for Air China, the total assets were 99.79 billion yuan, with debts of 78.62 billion yuan, leaving a 78.78 percent debt ratio. CEA is in a worse position, with debt exceeding its total assets.

Liu Shaoyong, board chairman of CEA, said at its mid-term meeting that CEA profit has achieved a slight increase in 2009; 256 measures have been taken to contain economic losses, and 113 million yuan of controllable costs have been saved. According to Liu, CEA is likely to reduce losses substantially as its cargo and passenger traffic ascend in the third quarter.

Having absorbed and merged with ST Shanghai Airlines (600591), ST China Eastern Airlines (600115) plans to non-publicly issue A shares and H shares to raise about 7.02 billion yuan. With that capital, CEA would lower its debt ratio to 96.5 percent.

(China.org.cn translated by Fan Junmei July 30, 2009)

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