China Eastern targets turnaround, SkyTeam membership
Thursday April 23, 2009
China Eastern Airlines, which reported a company-record loss of CNY13.93 billion ($2.04 billion) in 2008, is committed to engineering a turnaround through cost control, targeted expansion and SkyTeam membership despite the threat of insolvency.
Chairman Liu Shaoyong said earlier this year that CEA plans to narrow its loss significantly in 2009, break even in 2010 and turn a profit in 2011. But GM Ma Xulun said yesterday that the company's negative equity property has exceeded CNY10 billion and that in order to achieve its earnings target it was forced to cut operating costs by more than 15% in the first quarter. "But cost control has its limits, so the only way to make a turnaround is to further explore the market," he said.
"Currently there is a strong rebound in the domestic market, as passenger boardings jumped 18.7% on domestic routes in the first quarter while the figure was reduced by 18.8% on international routes. For this reason, we have switched some capacity from international routes to domestic routes accordingly," Ma elaborated.
Meantime, CEA plans to enhance its position in Shanghai. Ma said it holds just 32% of its home market, which is less than its "big three"' rivals command at their bases. China Southern Airlines' market share in Guangzhou exceeds 50% and Air China holds 45% of the Beijing market. But CEA intends to compete in those cities as well. It will start in the capital with the addition of four A330s to its PEK operation, to be followed by more A320s/A321s. It currently has a 12.8% share of that market.
It also intends to join CZ in SkyTeam, Liu revealed earlier. Ma said CEA's lack of alliance membership "takes part of the blame for our operating loss, as we always transport passengers from point-to-point instead of carrying them through a hub-and-spoke system. It not only can boost our revenue to join an international airline alliance but more importantly, it can help us enhance our management level, which can benefit us most".
by Katie Cantle
ATWOnline
Thursday April 23, 2009
China Eastern Airlines, which reported a company-record loss of CNY13.93 billion ($2.04 billion) in 2008, is committed to engineering a turnaround through cost control, targeted expansion and SkyTeam membership despite the threat of insolvency.
Chairman Liu Shaoyong said earlier this year that CEA plans to narrow its loss significantly in 2009, break even in 2010 and turn a profit in 2011. But GM Ma Xulun said yesterday that the company's negative equity property has exceeded CNY10 billion and that in order to achieve its earnings target it was forced to cut operating costs by more than 15% in the first quarter. "But cost control has its limits, so the only way to make a turnaround is to further explore the market," he said.
"Currently there is a strong rebound in the domestic market, as passenger boardings jumped 18.7% on domestic routes in the first quarter while the figure was reduced by 18.8% on international routes. For this reason, we have switched some capacity from international routes to domestic routes accordingly," Ma elaborated.
Meantime, CEA plans to enhance its position in Shanghai. Ma said it holds just 32% of its home market, which is less than its "big three"' rivals command at their bases. China Southern Airlines' market share in Guangzhou exceeds 50% and Air China holds 45% of the Beijing market. But CEA intends to compete in those cities as well. It will start in the capital with the addition of four A330s to its PEK operation, to be followed by more A320s/A321s. It currently has a 12.8% share of that market.
It also intends to join CZ in SkyTeam, Liu revealed earlier. Ma said CEA's lack of alliance membership "takes part of the blame for our operating loss, as we always transport passengers from point-to-point instead of carrying them through a hub-and-spoke system. It not only can boost our revenue to join an international airline alliance but more importantly, it can help us enhance our management level, which can benefit us most".
by Katie Cantle
ATWOnline