China Eastern Airlines announced it is planning to transfer its stake in its wholly-owned subsidiary China Eastern Airlines Logistics Co., Ltd. (EAL) to China Eastern Airlines Industrial Investment Co., Ltd., another wholly-owned subsidiary of the the carrier’s parent company, China Eastern Group.
China Eastern stated that the move was in response to the lackluster development of the global air cargo market as major international airlines had also begun reducing exposure to or withdrawing from operating full air cargo flights in the current depressed market conditions. The carrier also stated that incomes from logistics and cargo accounted for relatively low ratio of its total income and was in decline.
EAL has been in the black for two consecutive years, with profits reaching RMB 49 million in 2014, RMB 213 million in 2015 and RMB 272 million in the first half of this year. However, the EAL-owned China Cargo Airlines had been making substantial losses in the past five years and dragged down the overall performance of China Eastern Airlines.
Experts believed spinning off the logistics arm from the listed company could be a move to strengthen the logistics business by bringing in external investors or raising funds in the capital market. They said that China Eastern’s logistics business showed promising growth potential despite its limited profitability currently. (Transalted by Claire)
