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China Eastern to launch new airline in Hainan with partners including unit, as plans to make the island a free trade hub promise greater air traffic

South China Morning Post logo South China Morning Post 14/6/2020 Georgina Lee
a large passenger jet sitting on top of a runway: Juneyao Airlines will have a 15 per cent stake in the new carrier, which will be majority-owned by China Eastern. Photo: AFP Juneyao Airlines will have a 15 per cent stake in the new carrier, which will be majority-owned by China Eastern. Photo: AFP

China Eastern Airlines and several partners plan to launch a new airline in Hainan, as they eye growing air traffic to China's southernmost island province amid Beijing's plan to turn it into a free trade hub.

China Eastern will own a majority 51 per cent share in the new carrier, which has been given the preliminary name of Sanya International Airlines. One of China Eastern's major shareholders, Juneyao Airlines, will have a 15 per cent stake, while 14 per cent of the new company will be held by a Shanghai unit of Nasdaq-listed, China's largest online travel agency.

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Two other state-owned entities, Sanya Development Holdings and Hainan Communications Investment Holdings, will each own 10 per cent of the new joint venture, according to an announcement on the Hong Kong Stock Exchange on Sunday.

China Eastern, which lost 3.93 million yuan in the first quarter because of the coronavirus, said the new joint venture will have registered capital of 3 billion yuan (US$420 million) to 6 billion yuan.

The shareholders will pay in cash and other assets, which could include aircrafts. The framework agreement is still pending regulators' approval, and the green light from the boards of each investor.

"To grasp the opportunities from Hainan developing into a free trade port with Chinese characteristics, and from its development into an international tourism and consumption hub the company has worked with multiple parties to establish Sanya International Air," China Eastern said in the Chinese language announcement.

Hainan-based companies are bouncing amid stronger Covid-19 policy support

Just like many global airlines, China Eastern was hit hard by the coronavirus in the first quarter, as measures to prevent its spread grounded air traffic and crippled economic activity.

While the new joint venture might not immediately cure the airline's financial woes, it could be beneficial to its longer term growth.

"Through this collaboration, the company's strategic position in Southern China will further be augmented, and this should help elevate our overall competitiveness," it said.

According to its 2019 annual report, China Eastern currently focuses its services on Beijing, Shanghai, Kunming and Xian. Shanghai-based Juneyao Airlines is a 10 per cent shareholder in China Eastern.

Air remains the primary means for travellers to reach the 35,000 square kilometre island. President Xi Jinping announced in April 2018 that the popular holiday destination, sometimes referred to as China's Hawaii, would be made into the nation's largest free-trade zone.

China unveils plan to make Hainan a free trade hub like Hong Kong

Earlier this month, Beijing outlined its plan to make Hainan a "free trade port" by lowering the income tax rate for selected individuals and companies to 15 per cent, and relaxing visa requirements for tourists and business travellers.

The project to make Hainan, which covers an area 30 bigger than Hong Kong, into a regional trade, shopping and shipping centre has been "planned, arranged and promoted by General Secretary Xi Jinping personally", according to an earlier government statement.

The island province of 9.5 million people will also enjoy freedoms in terms of trade, investment, capital flows and the movement of people and data by 2035, as it moves toward becoming a hub of "strong international influence" by the middle of the century.

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