China Eastern Airlines is considering selling off at least a fifth of its shares to a strategic investor to raise funds and help improve management expertise. (4/12/2006)

According to The Standard, China Eastern's chairman Li Fenghua shared that discussions are on with three or four potential investors but expects to choose just one. We would like the strategic investor to hold a stake in our listed company and participate in our operations. I hope to have something to announce this year,?he reportedly said.

As per the report, the airline didn't disclose the names of potential investors although market watchers had earlier speculated that Japan Airlines and Cathay Pacific Airways were possible buyers. Fenghua said the group had been in negotiations for six months on the sale of the stake to an unidentified foreign carrier.

China Eastern Airlines Co., one of the mainland's three major state-owned carriers, said it swung to a net loss of 467.3 million yuan (US$58.3 million) in 2005, as rising fuel costs ate into profits. Net profit for 2004 was 320.7 million yuan, the carrier said. The Shanghai-based airline's revenue last year was 27.45 billion yuan (US$3.42 billion), up from 21.39 billion yuan in 2004. Analysts said the airlines?profitability was hurt because of a 30 percent rise in jet fuel costs in 2005.

With a heavy capex (capital expenditure) burden ahead of it, an already overstretched balance sheet and fuel prices staying high, China Eastern's financial position is looking increasingly precarious,?Merrill Lynch said in a research note, according to media. We think some form of refinancing looks increasingly necessary.?