Breaking through China Eastern’s spin

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“China Eastern to establish airline in Yunnan province”, says one of the headlines in China’s state-controlled news media.

At first glance, it may seem like a new airline but in fact it is not. China Eastern already has a carrier in Yunnan province’s capital Kunming.

In fact, what is happening is China Eastern is reducing its equity in China Eastern Yunnan branch by selling a stake to the Yunnan provincial government. Rather than an effort to expand, this in fact part of China Eastern’s effort to sell non-core assets and extricate itself from businesses that may push the cash-strapped carrier to the brink.

China Eastern has been losing hundreds of millions of dollars and has had to rely on government bail-outs to survive.

Last Friday I spoke to the Centre for Asia Pacific Aviation’s executive chairman Peter Harbison who predicts the central Government is going to put China Eastern under increasing pressure to fundamentally restructure its business.

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