JUNEYAO Airlines and its parent are investing US$1.9 billion for a stake of around 5 percent in State-owned China Eastern Airlines, saying the investment is in line with Chinese policy and will boost Juneyao’s brand abroad. The investment, which was unveiled as part of China Eastern’s up to US$2.23 billion share sale announced Tuesday, comes as the government has promised to open up more of the nation’s State-owned sectors to private investment as part of a wider effort to make companies more globally competitive. Juneyao Airlines said the investment was meant to improve the strategic partnership between State-owned capital and private capital in line with Chinese policy and to help build up its brand internationally. The Juneyao investment in China Eastern could allow the two Shanghai-based airlines to tighten their grip on the aviation market in Shanghai, where combined they control half of the seats, according to Corrine Png, CEO of Singapore-based transport research firm Crucial Perspective. “This makes sense from China Eastern and Juneyao’s perspective but consumers may not like this,” she said. “Following Juneyao Group’s investment in China Eastern, competition between the two rivals is likely to ease and cooperation could ensue.” Juneyao Airlines and its controlling shareholder Juneyao Group are expected to own more than 5 percent stake in China Eastern if they fulfil the upper limit of the proposed share subscriptions. China Structural Reform Fund Corp., whose mission includes the reform of State-owned companies, will also invest up to US$301.6 million. China Eastern said it will use the proceeds from the share sale to fund the purchase of 18 airplanes, 15 flight simulators and 20 backup engines as well as to boost working capital. (SD-Agencies) |