China Eastern Airlines (MU, Shanghai Hongqiao) is moving ahead with plans to introduce a Low Cost Carrier amid signs the airline is once again on the look out for a new strategic investor.
Industry publication, Aviation Week, says the carrier's management has already dispatched teams to Europe to study the operations of Ryanair (FR, Dublin International), easyJet (London Luton) and SAS Scandinavian Airlines (SK, Copenhagen Kastrup). A recent internal memo to China Eastern staff lauded "EasyJet’s great success in online ticket sales, Ryanair’s record of continuous profits and the high loyalty of SAS customers."
As it stands, China Eastern has already begun to dabble in China's fledgling LCC industry with the metamorphosis of China United Airlines (KN, Beijing Daxing International) from a full service carrier into a budget carrier already underway.
The proposed transformation comes against the backdrop of impending economic policy changes in Beijing which could see government playing a lesser role in state institutions while giving private investors, and management, a greater say in the running of their respective enterprises.
In line with this move, China Eastern General Manager, Ma Xulun, said the securing of a new strategic investor, while bringing in much needed capital, could benefit the carrier more in terms of managerial advice as well as operational cooperation, should the right partner be found.
“Money is an issue, but it is not a core issue,” he said. “Our first consideration is the cooperation we can get from a partner and how the partner can boost our business. That is the pre-condition.”
China Eastern has put itself on the market in the past. In early 2008, a provisional agreement with Singapore Airlines (SQ, Singapore Changi) and Singaporean state investment firm, Temasek Holdings, in which the Singaporeans were to have acquired a 24% in China Eastern for USD920million, collapsed when minority shareholders in the Chinese carrier rebuffed the offer.
