Why China will launch a new airline despite the coronavirus crisis

Text by: Joris Zylberman Follow

The second largest Chinese airline will launch a new one, even as the pandemic has caused a global collapse in passenger numbers. Behind the paradox, the strategy is consistent with the revival of domestic consumption.

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It is not an improvised adventure. To launch its new airline, China Eastern Airlines brought together strong partners. Among them, Juneyao Airlines (Shanghai) and especially Trip.com, the leader in online travel on the Chinese market. A project centered on one of the major tourist destinations in China: the island of Hainan, nicknamed "little Thailand", with its eight million inhabitants and its status as a free zone.

Observers, who are wondering about the timing chosen for this new project, are not lacking, at a time when the airline sector is fighting for its survival, largely weighed down by the coronavirus pandemic.

According to an announcement made on Sunday on the Hong Kong stock exchange, China Eastern, state flagship of the sector, will own 51% of the capital of the new company. It will be called Sanya Internatinal Airlines, from the name of the city of Hainan most popular with tourists. The launch date has not yet been officially set. The project still requires the green light from the Chinese regulator.

Xi Jinping and the largest free zone in China

The shareholders' objective is simple: capitalize on the growing importance of Hainan in China. The island is 30 times larger than the territory of Hong Kong and is increasingly asserting itself as a popular holiday destination for Chinese tourists.

However, it is not just a simple capital transaction. It is also the symbol of Xi Jinping's strategy. The Chinese president wants to make Hainan the largest free zone in the country. Beijing intends to lower the income tax to 15% for certain categories of people and businesses, and to soften the criteria for obtaining a visa for tourists and businessmen.

Global air sector in turmoil

The Sanya Airlines launch plan comes as the Covid-19 nailed the planes to the ground and forced the establishment of strict quarantines to stop the spread of the virus. Many companies are fighting for life, like Thai Airlines or Virgin. The sector could lose more than $ 84 billion in 2020 , according to the International Air Transport Association.

The bet is far from being won, according to Greg Waldron, managing editor of FlightGlobal magazine interviewed by the BBC: "  The official launch of the company will undoubtedly depend on the resumption of domestic air traffic in China and the situation of the Covid -19 both in the country and in the region. It takes time to build an airline: it takes a lot of work to set up equipment and personnel before the first plane takes off.  "

Tourist and duty-free patriotism

But for Shaun Rein, founder of the China Market Research Group , the period chosen to launch Sanya Airlines would be the right one. "  Even before Covid-19, 2020 was the year of domestic tourism in China when the Chinese want to focus on their own country, particularly important destinations like Hainan, Yunnan or emerging destinations like Gansu  ", analyzes- he does for the BBC. According to Shaun Rein, the Sino-American trade war has "  brought out patriotism among Chinese citizens eager to show their children the greatness of their country and to teach them more about the national heritage."  "

In addition, the pro-democracy protests still going on in Hong Kong have discouraged large numbers of travelers from mainland China from visiting the former British colony. "  Hainan is in high demand right now, especially because the government is encouraging tax-free shopping," said the analysis. And then the island does not impose quarantine or other travel restrictions.  "

(With agencies)

► Read also: China authorizes foreign airlines to operate one flight per week

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