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New major airline to appear in China

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New major airline to appear in China

China Eastern Airlines and several of its partners are planning to establish a new airline in the Hainan region. This is driven by a potential increase in air traffic to China’s southernmost island province amid Beijing’s plan to turn it into a free trade hub..

China Eastern will hold a 51% controlling stake in the new carrier, tentatively named Sanya International Airlines. One of China Eastern’s largest shareholders, Juneyao Airlines, will receive a 15% stake, while the Shanghai arm of Trip.com (China’s largest online travel agency, listed on the Nasdaq) will hold 14% of the new company..

Two others state-owned companies, Sanya Development Holdings and Hainan Communications Investment Holdings, will each own 10% of the new joint venture.

China Eastern, which lost 3.93 million yuan in the first quarter due to coronavirus, said the new joint venture will have a registered capital of between 3 billion and 6 billion yuan.

The agreement is still pending regulatory approval and is awaiting approval by the boards of directors of the project participants.

«To take advantage of Hainan’s emerging free trade port, international travel and consumer hub, we worked with multiple market players to create Sanya International Air2», – China Eastern said in a statement.

Like many global airlines, China Eastern was hit hard by the coronavirus in the first quarter as measures to prevent its spread resulted in air traffic restrictions and economic activity slowdown..

While the new joint venture will not address the founder’s financial problems overnight, it can be beneficial for long-term revenue growth..

New major airline to appear in China

«Thanks to the new project, the company‘s strategic position in southern China will be further strengthened and this should help improve our overall competitiveness.», – the airline said.

China Eastern is currently focusing on flights to Beijing, Shanghai, Kunming and Xian, according to the 2019 annual report.. 

Aviation remains the main vehicle for travelers to reach the 35,000 square kilometer island. PRC President Xi Jinping announced in April 2018 that the popular holiday destination, sometimes referred to as China’s Hawaii, would be transformed into the country‘s largest free trade zone.

In early June, Beijing laid out its plan do Hainan «free trade port», by reducing the income tax rate for individual individuals and legal entities to 15%, as well as easing visa requirements for travelers and business tourists.

According to the plan, in 15 years, the island province of 9.5 million people will enjoy freedoms in the field of trade, investment and capital movement..