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Airline to lease back jets to boost cash

CHINA Eastern Airlines will sell two Airbus jets for a total of 590 million yuan (US$86 million) and lease them back to boost its cash flow.

The loss-making carrier has signed contracts with Bank of Communications Financing Leasing Co for the sale and lease of the two Airbus A340 jets, it said in a statement to the Shanghai Stock Exchange yesterday.

The Shanghai-based carrier will lease back the two jets for 17 million yuan each quarterly and use them over the next five years, the statement said.

"The deal can help revitalize China Eastern's fixed assets and develop new financing channels, as well as boost its cash flow," the statement said.

China Eastern, which lost about 14 billion yuan last year, is seeking new revenue sources to boost its finances.

Some media reports last week quoted Luo Zhuping, board secretary of the country's third-biggest airline, as saying that it has canceled leasing contracts for seven Boeing 737 jets and may scrap a previous order for nine Boeing's new 787 aircraft if the demand in international travel markets continued to be weak.

China's aviation regulator has unveiled several stimulus measures in a move to boost struggling domestic carriers, including urging them to cancel or postpone plane deliveries due this year and park unnecessary planes, retire old ones and return aircraft leased from overseas.

China Eastern, which secured a 7-billion-yuan injection from the central government, has introduced cost-cutting measures to save 3 billion yuan this year. It returned to profit in the first quarter of this year after three straight quarters of losses.


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