Source: The Standard Author: Kathy Wang 08/07/2008
Subject Concerned: Opinion Airlines
China Eastern Airlines said it plans to establish a separate business-jet service unit as the Shanghai-based carrier sees the huge market potential in the mainland's commercial center.
China Eastern will invest 50 million yuan (HK$57 million) in the wholly owned subsidiary, it confirmed in a statement on Aug. 6. The business-jet unit, previously a department of China Eastern, made a profit of 5 million yuan in 2007.
"This is a profitable business and we see a lot of opportunities in the field. After the new corporate law taking effect from 2008, we are now able to make it a more independent unit legally, to serve the growing market," said a source familiar with the situation.
More than 400 of the top S&P 500 firms have investments in China, and some 80 percent of these multinationals use corporate jets.
Foreign corporate-jet business is growing 20 percent annually in China, according to the carrier.
China Eastern said it currently has a 95 percent share of the corporate-jet service market in Shanghai.
Meanwhile, rival Air China operates a similar business, but it is more focused on the Beijing market.
"This is a lucrative business and high growth market, given the booming foreign investment in China ... and Beijing and Shanghai have different client bases," said Edward Xu, airline analyst at Morgan Stanley.