China Eastern, Yunnan Province Plan Airline JV

China Eastern Airlines, one of China's three major airlines, plans a joint venture with the government of Yunnan province to bolster its business in southwest China's lucrative tourism market.

The airline said in a statement on Monday that it would own 65 percent of the venture, using its Yunnan unit as a platform, while the provincial government would hold the remainder.

The two sides have yet to work out financial details of the agreement.

The official China Securities Journal quoted China Eastern planning executive Chen Xin as saying the venture would aim to boost its market share in Yunnan province, a popular tourist destination with striking mountain and river vistas, above 50 percent by year-end, compared with the China Eastern unit's current market-leading share of 42 percent.

The venture plans to add three Boeing 737-700 aircraft to the unit's existing fleet of 37 aircraft this year, with the aim of expanding to 50 aircraft by 2011, the paper said. It also aims to expand its annual passenger volume to 8 million from 6 million.

China Eastern posted a CNY13.9 billion yuan (USD$2.04 billion) net loss in 2008 under Chinese accounting standards, as a slumping economy hit air travel demand and volatile fuel prices boosted costs. It received a CNY7 billion cash injection from the government as it struggled with losses.

The company's board secretary told a briefing in April, however, that the airline may return to the black this year as economic stimulus measures by the Chinese government helped to spur economic growth.

China Eastern's Yunnan unit was embroiled in a pilot's dispute in the spring of last year, culminating in a suspension of China Eastern's operating licenses on certain Yunnan routes in April after pilots returned several flights to their departure airports in what local media described as a wildcat strike.

Two other major Chinese carriers, Air China and China Southern Airlines, also operate in Yunnan.