Two Boeing cargo jets for Eastern (747-400)

Weekend Standard ^ | June 8, 2005 | Danny Chung

[Righty_McRight]

China Eastern Airlines, the mainland's third largest carrier, said its cargo unit will buy two Boeing 747-400 aircraft for total list price of US$428 million (HK$3.3 billion).

China Cargo will deploy the planes when they are delivered in July 2006 and August 2007 to expand its operating capacity and enhance the number of routes it operates, said China Eastern in a stock exchange statement Tuesday.

The subsidiary is 70 percent owned by China Eastern with the remainder held by mainland shipping giant China Ocean Shipping (Group) Company.

Last year China Eastern recorded a 39 percent increase in revenues from carrying cargo to 4.43 billion yuan (HK$4.17 billion) with traffic measured in revenue freight tonne-kilometers increasing by 45 percent.

On international routes, cargo traffic saw a 49 percent increase with weight of cargo leaping 60 percent to 317 tonnes. However, the increasing competition caused cargo yields to fall four percent to 2.36 yuan per freight tonne-kilometers.

Currently 747-400 freighters are the largest cargo planes available, able to carry at least 110 tonnes depending on season, according to Liza Ng, assistant general manager for cargo at Hong Kong Dragon Airlines. She said these long-haul planes will logically be deployed on international routes.

The actual purchase price agreed with Boeing was not given but typically aircraft manufacturers give 20 to 30 percent discounts. China Eastern said the purchase will be funded by bank loans.

Company secretary Luo Zhuping said the latest transaction could increase China Eastern's debt-to-equity ratio. ``But it is not expected to impact on the group's cashflow position or its business operations,'' Luo declared.

China Eastern's shares fell 0.74 percent Tuesday, closing at HK$1.35, after trading resumed from suspension Monday afternoon.

[Brilliant]

Hmmmm.... I was going to say that I thought Eastern went out of business years ago.

[Yo-Yo]

Get 'em while the line is still running, 'cuz when they're gone, they're gone!

[A.A. Cunningham]

Does Frank Borman know?

[appeal2]

On a cost basis does it make sense to be buying new 747-400's when used ones are available for conversion at a much lower price?

[Paleo Conservative]

On a cost basis does it make sense to be buying new 747-400's when used ones are available for conversion at a much lower price?

The factory built freighters can carry more cargo weight, and they have a nose cargo door available to load oversized cargo. Boeing may be giving serious discounts to keep the 747 line moving to keep it available for the as yet unlaunched 747 Advanced.