China's FedEx? EAL plans ambitious future

Updated 2017-10-13 10:02:53 China Daily
A technician of China Eastern Air Holding Co checks an aircraft at Shanghai Hongqiao International Airport.

A technician of China Eastern Air Holding Co checks an aircraft at Shanghai Hongqiao International Airport.

As the first company in the aviation sector to launch mixed-ownership reform, Eastern Air Logistics Co, the freight unit under parent company China Eastern Air Holding Co, is now en route to going public, and to reach such a goal, management is exploring a new business mode instead of remaining a traditional aviation or logistics company.

In June, Shanghai-based China Eastern Air Holding Co sold a 55 percent stake in its wholly owned Eastern Air Logistics to external investors and its core employees, in a bid to lower EAL's debt ratio and enhance its market competitiveness with the help of the newly introduced partners.

After the sharehold restructuring, Legend Holdings Corp holds 25 percent, Global Logistic Properties Ltd holds 10 percent, courier company China Deppon Logistics Co Ltd gains 5 percent and Greenland Financial Holdings Group has 5 percent. The remaining 10 percent was sold to EAL's core employees.

Li Jiupeng, general manger of Eastern Air Logistics, said the company will try its best to lay the groundwork for the listed plan, including exploiting markets, ending its reliance on the parent company, making up the operating loss rapidly, raising its continuous profit-making capability, and satisfying all the requirements for being a listed company.

According to Li, EAL made a 428 million yuan (.998 million) profit in 2016, and its total asset value after the ownership reform was about 4.1 billion yuan, which means the company has to double its price-to-earnings ratio to reach the goal of 20 before being listed.

Eastern Air Logistics saw its revenue increase from 5.88 billion yuan in 2014 to 7.14 billion yuan last year, and its net profit surged from 49 million yuan to 428 million yuan in three years.

In addition to the four finalists, companies including e-commerce giants and China's major courier firms all expressed interest in taking part in the mixed ownership reform of China Eastern.

"We talked to nearly 100 enterprises in total, and the finalists were chosen because of their specialities," Li said.

For example, he said, Legend Holdings Corp's successful transformation from a Chinese Academy of Sciences-invested enterprise into a privately owned listed Fortune 500 company, Global Logistic Properties' affluent logistics resources and China Deppon Logistics' expertise in transportation all can be of great help in the transformation of Eastern Air Logistics.

"Our goal is to become the Chinese FedEx, DHL and UPS. It will be a high-end service provider in accordance with the logistics industrial ecosystem," Li said.

After the restructuring, Eastern Air Logistics will expand its air cargo-based business into more profitable sectors including cross-border e-commerce, logistics and warehouses, logistics solutions, high-end delivery and related fields, said Liu Shaoyong, president of China Eastern Air Holding Co.

According to Liu, the rapidly expanding global e-commerce sector presents historical opportunities for the logistics industry, and the business mode with the combination of big data, modern warehouse and collect on delivery is the future trend of logistics worldwide.

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