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State takes control of China's first private airline: report

by Staff Writers
Beijing (AFP) March 19, 2009
China's first private airline will soon be nationalised, after a cash injection from a state-owned carrier, Chinese media reported Thursday.

Sichuan Airlines announced it would pump 200 million yuan (29 million dollars) into troubled United Eagle Airlines to increase its stake in the company to 76 percent, up from 20 percent, the Beijing News said.

United Eagle Airlines, based in the southwestern city of Chengdu, started operations in 2005, when China first allowed private capital to have a share in the largely state-controlled industry.

The carrier incurred 100 million yuan debt in 2008 and had to suspend the operation of two of its five aircraft early this year because of rising fuel costs, the financial crisis and other factors, previous Chinese media reports said.

The news comes shortly after it was announced that the government had ordered East Star, a cash-strapped private carrier based in the central city of Wuhan, to halt operations.

Rocketing debt led another private airline, OK Air to suspend its flights for several months from December.

Chinese airlines, like their counterparts around the world, have come under increasing pressure from volatile fuel prices and falling passenger numbers.

The country's small number of private airlines are especially vulnerable during the current economic downturn because their passenger base is relatively small and they do not have the same access to funding as state-owned competitors.

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