(Yicai Global) Oct. 13 -- China Eastern Air Holding, the parent company of one of the big three state-run Chinese airlines, is to receive a CNY31 billion (USD4.6 billion) capital injection from four new state-backed investors, greatly easing the firm’s asset-to-liability ratio.

China Life Investment Holding will invest CNY11 billion, Shanghai Jiushi Group CNY10 billion, while China Reform Asset Management and China Tourism Group will inject CNY5 billion apiece, Shanghai-based China Eastern Airlines said in a statement yesterday. Together they will own almost 32 percent of the company. China Eastern Air will remain the controlling shareholder with 30.97 percent after the capital boost.

Chinese carriers slashed capacity earlier this year in response to the coronavirus outbreak, which hit their financial positions hard. The addition of new investors will help reduce the asset-to-liability ratio of China Eastern Air. China Eastern Airlines had the highest debt ratio among the country’s three major carriers.

“The Covid-19 pandemic has had an unprecedented impact on the aviation industry,” China Eastern said.

The ALRs of China Eastern Airlines, China Southern Airlines and Air China were 78.84 percent, 73.98 percent, and 69.64 percent respectively in the first half, according to their semi-annual reports. 

“The capital increase fully reflects investors’ confidence in the development of China’s civil aviation and recognition of China Eastern Airlines’ good development momentum in recent years,” the company said

The proceeds will mainly go to expand the scale of the company’s core aviation business and enhance its coordination with strategic investors in aviation insurance, transport construction and tourism services, the statement said.

Units of China Eastern Air have already carried out several so-called mixed ownership reforms. China Eastern Air completed a stock swap last year that made it Juneyao Airlines’ second-largest shareholder. Juneyao and its parent own 10.07 percent of China Eastern Air. US-based Delta Air Lines took a stake in the company in 2015 and in leading Chinese e-travel agency Trip.Com Group in 2016. 

Editor: Ben Armour