Key Concepts for China Eastern Annual Reports

Important Areas

Safety

China Eastern had an increased focus on Safety highlighted by the establishment of the Nantong airport training base to reinforce training on flying skills and the introduction of the “Assessment and Remuneration Packages of Star-rating Flight Crew Members.”

Service Quality

There has been a focus on optimising its fleet structure and have placed an order for the acquisition of 70 new aircraft to increase the quality of service through the upgrading of their VIP lounges, waiting areas and check-in areas in key areas. They also upgraded their website and mobile application to increase customer service quality and introduced nine overseas websites including an Australian website (http://au.ceair.com/muovc/main/en_AU/index.html).  

Route Optimisation

The company has put a large emphasis on optimising its routes by analysing flight capacities and reducing the flights where there is no longer adequate demand. The company has also highlighted its plans to increase flights to the USA in order to tap into the American market. In 2012 it also entered into a codeshare agreement with a number of airlines including Jetstar in Australia.

Fuel Consumption

A focus on route optimisation and precise fuelling according to routes were implemented to reduce fuel costs, arguably the largest cost to the business and a critical area to the company. 

Future Strategies

China Eastern, with the premise of maintaining safe operations, intends to achieve its goal of strengthening its management of passenger and freight carriers and strictly controlling cost to achieve improved operational efficiency.

Passenger Traffic business

• Allocate flight capacity and routes precisely and properly and to maintain accurate control of cabin space and refine pricing management.
• Increase direct sales by expanding sales and marketing platforms.
• Further enhance its cooperation with both members and non-members of SkyTeam Alliance.

Freight Logistics

• Restructure the route network based on demand.
• Reduce operating costs by controlling flight capacity.
• Enhance its ability to provide logistics solutions. 

Other..

• Implement comprehensive budget management measures and strengthen the overall control in implementing this budget.
• Improve electronic business platforms and mobile service platforms. 

Key Challenges & Some Company Suggested Remedies

Interest rate fluctuations

Fluctuations in the US dollar and Renminbi interest rates have significantly affected the Group’s finance costs. China Eastern has highlighted the need to investigate different financial channels to reduce their financial costs.

Exchange rate fluctuations

The fluctuation in the Renminbi exchange rate is affected by domestic and international economic and political conditions and general currency supply and demand dynamics.

Risk associated with the fluctuation of fuel prices

The company has effectively reduced fuel costs by approximately RMB130 million in 2012 by way of precise refueling based on its flight plans as well as optimising routes. This is only a temporary remedy though, at a certain point it will not be possible to reduce the costs associated with fuel in this way.

Pledges on assets and contingent liabilities

The value of the Group’s assets used to secure certain bank loans was RMB22,544 million, representing an increase of 23.08% from RMB18,317 million as at 31 December 2011.

Decrease in demand for freight

Reducing the flight capacity for freight transportation.

Political and economic developments

Remedies depend on the situation. To deal with the political developments between China and Japan China Eastern have reduced the flight capacity to Japan.