The Research Of China Eastern Airlines' Proposal For Introducing Strategic Investor

Since China's reform and opening-up, operating environment for domestic and international air transport sector has brought not only unprecedented pressures and challenges but also development opportunities to China Eastern Airlines Corporation Limited (hereinafter referred to as "Eastern Airlines", "CEA" and"the Company"). As one of the there major players in domestic air transport sector and listed international airlines in domestic and overseas capital market, CEA currently encounters a number of issues regarding re-assessment of economic condition from a strategic level, re-position according to existing strategic resources and changes of internal/external environment, establishment of development strategies and maintenance and upgrade of competitiveness via introduction of strategic investors to face with the intensified domestic and global competition. The introduction of global strategic investors via follow-on means that CEA is able to acquire both capital strength and advanced managerial ideas.The article provides a detailed analysis on some features of the civil aviation sector. Deregulation of the aviation sector revealed both strong development potential and intensified competition between private aviation and high-speed rail. CEA's current position is objectively evaluated by full-range analysis on its development path, capital operation, financial condition, strategic goal and so forth, which points out that CEA currently is suffering from high debt ratio, extensive management, lack of global operating experience and other issues. The introduction of strategic investors was brought forward based on the considerations of improvement of its capital structure and corporate governance, and upgrade of its operation/management and brand value. The opportunities and challenges for the introduction of strategic investors were also revealed in the article. The standards of qualified strategic investor were explained clearly as well and a series of comparisons were conducted accordingly. The feasible solutions were summed up based on applicable regulations regarding introducing foreign capital and analysis on key considerations of transaction structure regarding introducing strategic investors (including market selection, pricing consideration, issue size, involvement of subscription by China Eastern Air Holding Company (hereinafter referred to as "Eastern Airlines Group" and"the Group"), market window and selection method). In conclusion, 4 alternatives are introduced based on assumptions and detailed analysis on pros and cons in various aspects with comparison of feasibility of the 4 alternatives in terms of the scale of financing, negotiation latitude, etc..The study results of the article are significant to CEA's strategic development, which set forth a clear direction for its strategic research, provide specific recommendations and proposals for introducing strategic investors with a strong practical significance and play a contributive role to other airlines for their strategic development in domestic civil aviation sector.