China Eastern Quickens Capacity Growth to 10% on Overseas Travel - Businessweek

China Eastern Airlines Corp., the nation’s second-largest carrier by passengers, will accelerate capacity growth in the second half to 10 percent as it adds new planes and boosts international services.

Expansion will focus on overseas routes after a 19 percent increase in nationwide outbound passenger numbers in the first half, Zeng Yongchao, an executive vice president, said in an interview yesterday in Hong Kong. The Shanghai-based airline expanded passenger capacity 4.6 percent through June.

“We did pretty well in the traditional peak July and August,” Zeng said. He didn’t elaborate. China’s nationwide domestic market expanded 9 percent in July, compared with a 7.8 percent increase in June, according to International Air Transportation Association.

The carrier will receive 21 new planes in the second half of the year, Zeng said, which will including Airbus SAS A320s and A330s as well as Boeing Co. 737s. The expansion contrasts with Singapore Airlines Ltd. and Cathay Pacific Airways Ltd., which have both pared growth plans because of the global economic slowdown.

The company will add another 47 planes next year and it is confident of absorbing the capacity because of rising overseas travel and rising demand in western part of China, Zeng said.

The planes arriving in the second half of this year will help boost capital expenditure to 12.6 billion yuan ($2 billion) from about 8 billion yuan in the first half, according to a company presentation.

China Eastern fell 1.3 percent to HK$2.33 in Hong Kong trading yesterday. It’s tumbled 16 percent this year, compared with a 21 percent decline for Air China Ltd. and a 17 percent drop for China Southern Airlines Co.

China Eastern also plans to reduce the number of freighter type at its cargo unit to pare losses, said Company Secretary James Wang. The freight operations’ losses widened to 400 million yuan in the first half from 250 million yuan a year earlier. Net income fell 65 percent to 806.9 million because of higher fuel costs and currency losses.

The airline hasn’t seen any obvious rebound in air-cargo demand, Wang said.

To contact the reporter on this story: Jasmine Wang in Hong Kong at Jwang513@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net