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China Eastern gets $820m loan from group

(Agencies)
Updated: 2009-01-16 10:50

SHANGHAI -- China Eastern Airlines said on Friday that it had obtained a short-term loan of 5.6 billion yuan (US$820 million) from its parent group to boost its working capital.

In this Aug. 28, 2007 file photo, workers leave the China Eastern building at Hongqiao Airport in Shanghai, China. China Eastern Airlines said on Friday that it had obtained a short-term loan of 5.6 billion yuan ($820 million) from its parent group to boost its working capital. [Agencies]

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The six-month loan, with an interest rate below the central bank's benchmark lending rate for commercial banks, will ease a short-term funding squeeze and cut financial costs at the major Chinese carrier, it said in a statement.

China Eastern may ask to extend the loan 15 days before it matures, the airline added.

Earlier this week, China Eastern estimated it would post a large loss for 2008 because of slumping traffic and losses on fuel price hedging contracts.

Last month it announced it would receive a 7 billion yuan capital injection from the government in exchange for a placement of shares to its state-owned parent group, and it has been taking a range of steps to strengthen its finances, such as trying to sell a stake in its regional unit Happy Air Co.

Company sources said on Thursday that it would aim for zero capacity growth this year and might cancel, delay or sell all new planes to be delivered in 2009.

Partly because of such steps, China Eastern's Shanghai-listed A shares jumped their 10 percent daily limit on Thursday.