The restructuring of China's crowded airline market is continuing with the purchase by China Eastern Airlines of a 40% stake in Wuhan Airlines. Shanghai-based China Eastern, one of China's "big three" carriers, late in March announced an agreement-in-principle with Wuhan to establish China Eastern Airlines Wuhan with two other parties.
The move is in line with government calls for consolidation among the country's more than 30 airlines. Under the terms of the agreement, China Eastern will hold 40%, Wuhan Airlines itself will hold 40%, while Shanghai Junyao (Group) will hold 18% and Wuhan High-technology Holding Group will hold 2%.
The registered capital of the new company will be around 700 million yuan ($85 million). Wuhan Airlines will make its capital contributions by injecting its assets into the new company, while the three other parties will each contribute cash based on their respective shareholdings.
Wuhan operates eight Boeing 737-300s and -800s from its base in the heart of the Yangtze River basin. It also operates a handful of Chinese-built Xian Aircraft Y-7s.
The CAAC has been calling for consolidation among the country's major airlines for years and earlier this year final government approval was granted for a sweeping restructuring that will include mergers of ten carriers into three groups.
Air China will take over China Southwest Airlines and China National Aviation Corporation; China Eastern will take over China Northwest Airlines and Yunnan Airlines; and China Southern will take over China Northern Airlines and Xinjiang Airlines. China Eastern has already taken over Great Wall Airlines as part of the process.
Wuhan is not directly controlled by the CAAC but many smaller airlines in China have been looking for merger partners, fearing they will not be able to compete in future against the enlarged giants.
As it completed the Wuhan move, China Eastern was finalising a 17.6 billion yuan ($2.1 billion) credit line. The money will help pay for a new order for 20 Airbus A320s signed in mid-April.
Source: Airline Business
