Shanghai-based China Eastern Airlines is set to launch a new Hainan based airline in partnership with Juneyao Airlines and two other state entities. This news comes fresh on the heels of Beijing’s announcement that they want to turn China’s southernmost island province into a free trade zone.
The SkyTeam Alliance member will own 51% of the new airline, which has been given the preparatory name Sanya International Airlines. One of China Eastern Airlines’ most significant shareholders, Juneyao Airlines, will hold a 15% ownership with 14% going to China’s largest travel agency, the Shanghai unit of Trip.com. Two other state-owned companies, Hainan Communications Investment Holdings, and Sanya Development Holdings, each will have a 10% stake in the new airline.
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Hainan is China’s Hawaii
This new airline launch comes at a time when air travel is down drastically as airlines struggle to cope with the fallout of the coronavirus pandemic. Despite having lost millions of yuan in the first quarter of 2020, China Eastern says that the new joint venture will have 3 billion yuan ($420 million) of capital injected.
In a Chinese language announcement made on its website The South China Morning Post newspaper quotes China Eastern with saying,
“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.”
While China Eastern hopes to recover as travel restrictions ease, this new joint venture will not cure the airlines short term woes but could very well be a smart long term investment.
“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.
China wants Hainan to be a free trade zone
China’s President Xi Jinping announced in April of 2018 that he wanted to turn the popular tourist destination into a free trade zone. He also proposed lowering the tax rate to 15% and relaxing visa requirements for visitors.
Often referred to as China’s Hawaii due to its warm tropical climate, Hainan is 30 times bigger than Hong Kong and has a population of 9.5 million people. Sanya, the island’s capital city after which the airline will be named, has several bays, including Yalong Bay, a place of natural beauty full of upmarket luxury hotels. Popular activities in Hainan include a budding surfing scene and diving on coral reefs near Wuzhizhou Island.
Hainan is a popular tourist destination
For the first three months of this year, over 340,000 tourists from 59 countries visited Hainan up 13.9% year on year. Turning Hainan into a free trade hub offers the prospect of even more visitors coming to the island. At the moment, people visit for the sandy beaches, crystal clear water, and lush mountain forests. Imagine now that you can visit Hainan for some upscale, high-end tax-free shopping, and you have yet another reason to vacation on China’s favorite tropical island.
As for China Eastern, it is hard to imagine that once a vaccine is created for the coronavirus, Sanya International Airlines will not be successful. What do you think? Please let us know your thoughts in the comments.