Sichuan Airlines extends local roots with United Eagle purchase

Chengdu-based United Eagle Airlines, a privately held carrier, agreed to merge with Sichuan Airlines through the sale of a 56% stake for CNY200 million ($29.2 million).

The deal comes days after another struggling private airline, East Star Airlines, rejected a purchase offer from Air China parent CNAC and was suspended by Chinese regulator CAAC (ATWOnline, March 17). Sichuan's stake in United Eagle has increased to 76%. Sichuan is controlled by the local government (40%) and China Southern Airlines (39%). The remaining 24% of UEA is held by five private companies led by Chengdu Huaying Investment Consultation (15.1% worth CNY45.4 million).

A Sichuan Airlines insider told ATWOnline that the carrier aims to be better positioned in its home market because China Eastern Airlines and Shenzhen Airlines plan to enter the area soon. Sichuan's "deeper cooperation" with UEA will focus mainly on regional transport.

Launched in July 2005, United Eagle has registered capital of CNY80 million and operates three A319s and two A320s on 17 domestic routes. Owing to its small fleet, scattered ownership structure and the difficult external operating environment, it has suffered heavy losses and carries a debt burden. In December 2008, Chengdu Shuangliu International Airport stopped providing service to it because of CNY30.5 million in unpaid landing and ground service fees (ATWOnline, Feb. 3).

The spokesperson told this website that UEA will use the CNY200 million to pay off its debts and expand its business with new routes and fleet additions. It plans to launch Chengdu-Lijiang flights on March 28 and will resume all routes it had to suspend earlier this year. In addition, it expects to take delivery of an A320 in July.