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January 19, 2010

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Air China gets cash injection

THE shares of two domestic airlines surged yesterday following announcements of a cash injection for Air China and profit expectations for China Eastern Airlines.

Air China, the country's flagship international carrier, said its parent will receive a 1.5 billion yuan (US$220 million) cash injection from the central government, its statement to the Shanghai Stock Exchange said over the weekend.

Its shares jumped 4.62 percent to close at 11.09 yuan.

The cash will be injected into the Beijing-based carrier to fund its purchase of a stake in its cargo venture, the statement said. The company didn't elaborate on when and how it will receive the cash.

Air China is expanding its stake in International Cargo Transport Ltd of China to 100 percent from 76 percent as it expects the country's cargo business to grow.

It will pay 718 million yuan to Capital Airports Holding Co for the 24 percent stake that it doesn't own.

The cargo venture was set up in 2003 by Air China, CITIC Pacific Ltd and Capital Airports Holding Co, with a registered capital of 2.2 billion yuan. Air China held 51 percent at that time.

In 2008, Air China increased its stake to 76 percent when it purchased CITIC Pacific's 25 percent stake for 857 million yuan.

China Eastern and China Southern Airlines have already received cash aid from the central government to fight the global downturn. China Eastern received about 9 billion yuan while China Southern was given about 3 billion yuan.

Meanwhile, China Eastern, the country's third-largest carrier, said it expects to turn a profit in 2009 thanks to fuel hedging gains and recovering demand.

Investors reacted favorably to the news, pushing the airline's shares up 5 percent to 6.65 yuan.


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