China Eastern Airlines is to take a 40% stake in Wuhan Airlines as it seeks to expand its domestic market reach amid sweeping consolidation in the country.
The Shanghai-based carrier, one of China's "big three", will acquire the stake by establishing a new joint-venture carrier - China Eastern Airlines Wuhan.
Wuhan Airlines itself will hold 40%, while Shanghai Junyao (Group) will hold 18% and Wuhan High-technology Holding Group will take 2%.
China Eastern says the company will be capitalised at 700 million yuan ($85 million). Wuhan Airlines will acquire its stake by injecting assets, whereas the three other shareholders will put up cash.
The Civil Aviation Administration of China (CAAC) has already approved the deal, China Eastern says, paving the way for final negotiations that will begin to firm up an agreement.
Wuhan operates eight Boeing 737-300s and -800s, as well as a handful of Xian Y-7s. After completion of the deal, the carrier will cease to exist in its own name and will instead operate under the China Eastern brand.
The CAAC has been calling for consolidation among the country's 30-plus airlines for years.
Under a revamp approved by the Chinese government earlier this year, majors Air China, China Eastern and China Southern Airlines will acquire seven other CAAC-controlled airlines, creating three mammoth groups, each with around 50 billion yuan in assets and around 150 aircraft (Flight International, 12-18 February 2002).
Source: Flight International
