All eyes on China

Dino D'Amore
By Dino D'Amore April 29, 2016 19:38

All eyes on China

Today China Eastern Airlines has announced an order for 20 A350-900s and finalised an order for 15 787-9s, while China Aircraft Leasing Company, or CALC, has launched its first US bond issuance.

CALC has launched and priced its first US dollar bond in an aggregate principal amount of US$300 million due 2019. The unrated and unsecured bonds will bear an interest of 5.9% per annum, payable semi-annually in arrear, commencing on November 6, 2016. The bonds are irrevocably and unconditionally guaranteed by the company.

It is CALC’s largest debt raising exercise to date. The estimated net proceeds of the proposed bonds issuance will amount to approximately US$296.5 million. CALC intends to use the net proceeds for pre-delivery payment (PDP) financing and new aircraft acquisitions, financing the aircraft disassembly centre, business expansion in aircraft and related business as well as general corporate purposes.

“CALC has always been actively exploring different alternatives to increase its working capital and improve liquidity, says Chen Shuang, CEO and Chairman of CALC. “Following the placement of convertible bonds in Hong Kong and the medium-term notes issuance in China last year, we have tapped the international bond market for the first time, establishing another significant option to obtain long-term financing from international investors. These new financing arrangements, together with the Group’s aircraft lease receivables realisations, and the support from various investors and financiers, CALC’s diversified financing channels underpin our globalisation strategy. We are seeing increasing demand for aviation-related investment globally and are set to develop innovative ways to raise fund and seek for long-term and sustainable growth in China and international markets. ”

China Everbright Bank and DBS Bank act as the joint global coordinators, joint bookrunners and joint lead managers of the bonds issuance, and BOCOM International Securities and CEB International Capital Corporation acted as joint lead managers.
China Eastern Airlines’ purchase agreement with Airbus for 20 A350-900 aircraft, has pushed orders for the aircraft type above 800.

“The introduction of the latest generation A350 XWB aircraft demonstrates that the partnership between China Eastern Airlines and Airbus has embarked on a new phase,” said Liu Shaoyong, Chairman of China Eastern Airlines. “The introduction of A350 XWB will play a very important role in promoting our operational capability, profitability and service brand on our international long haul routes and opening a new chapter in the international development of China Eastern Airlines.”
China Eastern currently operates nearly 300 Airbus aircraft, comprising A320 Family and A330 Family aircraft types.
With this latest order, Airbus has recorded 803 firm orders for the A350 XWB from 43 customers worldwide. So far 20 A350 XWBs have been delivered to five customers worldwide.

“We are proud to welcome China Eastern Airlines, a long time and loyal Airbus partner, to become the latest airline to select the A350 XWB,” said John Leahy, Airbus Chief Operating Officer – Customers. “The outstanding A350’s long haul performance, fuel efficiency and passenger comfort with its extra wide cabin and wider-seats, will allow China Eastern Airlines to achieve its ambitions to develop and efficiently expand its international route network.”

China Eastern Airlines order for 15 787-9 Dreamliners is valued at nearly $4 billion at current list prices.

“We are very happy to introduce the new 787 Dreamliners into our long-haul fleet,” said Shaoyong. “The addition of these next-generation, fuel-efficient airplanes will play a key role in supporting China Eastern’s strategy for international expansion, and enable us to realize profits in point-to-point routes across the Pacific Ocean, and between China and Europe.”
China Eastern plans to operate the new 787-9s on routes between China, North America and Europe, bolstering its competitiveness in the international long-haul market.

With growing air traffic demand, the carrier plans to increase frequencies on existing routes from Shanghai to Los Angeles, New York, San Francisco and Toronto, as well as their newly launched destination, Chicago. The routes are currently operated by the airline’s flagship 777-300ER airplane.

Headquartered in Shanghai, China Eastern Airlines is one of the three major airlines in mainland China. Flying a fleet of over 560 long-haul and short-haul airplanes with an average age of less than seven years, China Eastern serves nearly 100 million travelers annually and ranks the 7th largest carriers in the world in terms of passenger transportation volume.

Dino D'Amore
By Dino D'Amore April 29, 2016 19:38