China Eastern faces more losses, regulatory scrutiny after plane crash

China Eastern Airlines faces deepening losses and closer regulatory scrutiny following the crash of a Boeing 737-800 jet on Monday with 132 people on board. Rescuers Tuesday scoured heavily forested slopes for survivors and data recorders from flight MU5735, which crashed a day earlier in the mountains of the southern region of Guangxi. The plane crash, China’s first in 12 years, comes as its airline sector is struggling to find its footing amid the coronavirus pandemic, with air passenger traffic far below 2019 levels due to repeated outbreaks and a steep fall in international travel due to China’s strict quarantine rules. China Eastern has been among the biggest casualties: The state carrier forecast in January a 2021 loss of 11-13.5b yuan ($1.7-$2.1b), after a 11.8b yuan loss in 2020. Its losses are set to deepen after the group, including two subsidiaries, grounded its fleet of 737-800s following Monday’s crash. The group has 225 of the aircraft, data from British aviation consultancy IBA shows. “My guess is that in the short term this is going to cause some issues for China Eastern as their maintenance records are reviewed, and there will likely be a short term pullback from Chinese consumers,” said Ben Cavender, managing director at China Market Research Group in Shanghai. Cheng Wang, associate equity analyst at Morningstar, said one of the big risks for China Eastern was if the investigation implies maintenance or other process shortfalls. “We think most of the impact will be in the near term. The indemnity alone will not have a material impact on our fair value estimates. The potential regulatory actions including fines, additional security requirements, or even grounding of aircraft could make a bigger difference.”<br/>