Carrier boosts fleet to cut costs, better service

SHANGHAI Airlines Co plans to buy five Airbus A321 aircraft to expand its fleet, improve service and cut costs while it will also sell four Boeing 757 planes and then lease them back.

The purchase is valued at US$370 million at catalog prices, the Shanghai-based carrier said in a notice to the Shanghai Stock Exchange yesterday. The A321 planes will be delivered between 2011 and 2012. The airline will also sell the B757s to Aircastle Ltd and lease them back in a US$66-million deal.

"The fleet expansion will help reduce operation costs and boost Shanghai Airlines' competitiveness in the domestic market," the carrier said.

The Airbus deal raised its total order of the aircraft type to 10. It ordered five Airbus A321 jets last year which are set to be delivered between 2009 and 2010.

Shanghai Airlines added five Boeing 737-800 planes in the first half, raising its overall fleet to 55.

The Shanghai carrier made a loss of 134.5 million yuan (US$17.83 million) in the first half, against a 137-million-yuan loss in the same period last year, it said yesterday. It flew 4.07 million passengers in the six months through June, a jump of 14.27 percent.

China Eastern Airlines Corp, the bigger of the two city-based carriers, returned to the black in the first half with a net profit of 58.21 million yuan after losing money in 2006.

China Eastern will sign an agreement to sell a stake to Singapore Airlines Ltd on Sunday. SIA and its parent Temasek Holdings Pte may purchase a combined stake of about 24 percent in China Eastern for about US$930 million, according to previous media reports.