China Eastern has partnered with a number of partners, including China’s largest online travel agency Trip.com to launch a new airline.
The new airline is concentrating on the island destination Hainan with eight million inhabitants and a free trade center.
Some have questioned the timing of the launch, which comes when the aviation industry is struggling to survive.
Government-sponsored China Eastern will own a 51% majority stake in the new airline, Sanya International Airlines.
Other supporters include Juneyao Airlines, based in Shanghai, and a Trip.com unit, as announced on Sunday at the Hong Kong Stock Exchange.
No timeframe was given for the launch of the new airline, which will need regulatory approval.
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The partners hope to benefit from the growing importance of Hainan in China. The island is about 30 times the size of Hong Kong and is a popular holiday destination for Chinese tourists.
Chinese President Xi Jinping also wants to make the island the largest free trade area in the country.
Beijing has outlined plans to lower Hainan’s personal income tax rate to 15% for select individuals and businesses, and to relax visa requirements for tourists and business travelers.
The launch plans come during the biggest crisis the airline industry has faced as planes are grounded and strict quarantines put in place to curb the spread of the Covid-19.
Greg Waldron, Asia managing editor at FlightGlobal magazine, said: “The airline’s official launch will likely depend on the continued recovery of Chinese domestic traffic and the Covid-19 situation in both China and regionally.
“It takes time to build an airline, however, so a great deal of work needs to take place in terms of equipment and personnel before the airline takes to the air.”
A number of high-profile airlines have been struggling to survive during the crisis including Virgin Australia, Thai Airways and Colombia’s Avianca. Other airlines have been forced to layoff thousands of workers and downsize operations.
The airline industry could suffer losses of more than $84bn (£66bn) this year, the International Air Transport Association, warned last week.
But Shaun Rein, founder of the China Market Research Group, said it was actually a good time to start a new airline focused on Hainan.
“Even before Covid, 2020 was the year of domestic Chinese tourism as China wants to focus more on seeing their own country, especially hot spots like Hainan, Yunnan and emerging ones like Gansu.”
He added that the US-China trade war has seen “emerging patriotism with Chinese citizens wanting to show their children how great their country is and to teach them more about its heritage”.
Meanwhile, ongoing pro-democracy protests in Hong Kong have discouraged many Chinese travellers from visiting the former British colony.
“Hainan itself as a destination is hot right now, especially as the government supports duty-free shopping there. Hainan also has no quarantine or other travel restrictions.”
(Source – BBC)