Shenzhen turns to Henan government for Kunpeng rescue

Shenzhen Airlines plans to sell a partial stake in its Kunpeng Airlines subsidiary to the Henan government in order to raise funding for the troubled regional carrier. "We are still negotiating with the Henan provincial government on how much of a stake to sell and at what price to sell," a Shenzhen spokesperson told ATWOnline. Kungpeng may change its name to Henan Airlines as part of the deal. Similarly, Hainan Airlines sold a 20% share in Grand China Express to Tianjin authorities, then relaunched the rebranded Tianjin Airlines in June (ATWOnline, June 15). Kunpeng was launched by Shenzhen and Mesa Air Group in October 2007. It originally was based in Xi'an but moved to Zhengzhou, capital of Henan Province, in August 2008. It has been operating at a loss since launch, and Mesa concluded the sale of its 49% stake to Shenzhen in the spring (ATWOnline, April 8).

Seeking help from local governments is a growing trend in Chinese commercial aviation. Hainan signed a framework agreement with the Yunnan provincial government in June 2008 to launch Yunnan Airlines from the assets of Lucky Air, which received a CNY290 million capital injection from the government in June 2009 (ATWOnline, June 3). The government also injected funds into China Eastern Airlines' Yunnan branch company (ATWOnline, June 2). But industry analysts have pointed out that local funding will alleviate the airlines' financial pressure only in the short term and could aggravate domestic capacity further.