China Eastern Inks Joint Venture Agreement With Virgin Atlantic, Air France And KLM

China Eastern has announced an intention to enter into a joint venture with Virgin Atlantic, Air France and KLM, providing more options between Europe and China. 

Based at Shanghai Hongqiao International Airport, China Eastern currently operates as a joint venture partner with Air France and KLM on a portfolio of flights between China, Amsterdam and Paris. If approved, the new agreement would formally replace the current joint venture China Eastern has with Virgin Atlantic's future partners, Air France and KLM, which already work together on flights between China, Amsterdam and Paris.

The addition of Virgin Atlantic adds value to the joint venture. For full-year 2018, the carrier posted its strongest revenue performance in the last five years, as revenues grew 13% year-on-year to £222 million ($286 million). This record result was supported by a 6% annual growth in cargo volume to more than 244,000 tons, the airline's best result since 2010. Growth was achieved across the majority of commodities carried, with high-value segments such as pharmaceuticals seeing a 50% year-on-year volume growth. 

The carriers in the joint venture stand to profit from trade with China as the world's second-largest market for pharmaceuticals and the fastest-emerging market for the sector. And China has ambitions to become a powerhouse in exporting generic medication.

As one of the three major Chinese national carriers, China Eastern and affiliates operate a network of international and domestic services from main hubs at Shanghai Pudong International Airport and Shanghai Hongqiao International Airport. China Eastern is China's second-largest carrier by passenger numbers after Air China. China Eastern operates a modern fleet of 750 passenger and cargo aircraft.

China Eastern cargo subsidiary China Cargo Airlines is China's first all-cargo airline operating dedicated freight services across the China Eastern route structure.

Parent company China Eastern Air Holding Co. (CEHC) has total assets valued at about $50 billion. While the Chinese government retains a majority 62% ownership of the airline, a portion of its shares are listed in Shanghai, Hong Kong and New York. The holding company also focuses on MRO operations, airline catering, technological innovation, finance and industrial investment. 

The announcement reaffirms China Eastern's commitment to the European market, which will allow for new international development, network construction and service improvement and will also contribute internationalization of China's civil aviation and the country's Belt and Road Initiative, a global development strategy adopted by the Chinese government.

With Virgin Atlantic joining the existing partnership between China Eastern, Air France and KLM, the enlarged cooperation will offer strengthened benefits, including increased travel options and optimized connectivity across Europe and China, further facilitated by a developed joint network as well as competitive joint commercial propositions.

The China-to-U.K. markets are expected to be pivotal at a time when China Eastern and Virgin Atlantic services linking London to Shanghai are part of the mutualized offer. China Eastern plans to seek a codeshare agreement for the first time on Virgin Atlantic services between London and Shanghai. This will open up a range of benefits, including the opportunity for travelers to earn and redeem miles across both carriers on flights between China and the U.K.

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