Shanghai Juneyao Group, the privately-owned parent company of Juneyao Air (HO, Shanghai Hongqiao), intends to halve its stake in China Eastern Airlines (MU, Shanghai Hongqiao) by selling off up to 156 million shares, equal to 0.826% of the state-owned carrier’s total equity, China Eastern revealed in a stock filing on September 21.

Shanghai Juneyao currently directly holds a 1.65% shareholding (311,831,909 shares) in the Chinese giant, but this is part of a wider combined stake of 8.9% that the group holds in China Eastern, as three of its subsidiaries also own separate stakes of 1.23% (Juneyao Air itself), 3.12% (Shanghai Jidao), and 2.90% (Juneyao Hong Kong).

“Due to the needs of Juneyao Group’s own business plan, within six months after 15 trading days from the date of disclosure of this announcement, it plans to reduce its holding of the company’s shares by no more than 155,915,954 shares through centralised bidding transactions,” the disclosure summarised.

Cooperation between the two airlines goes back nearly 20 years, and in September 2019 they finalised a cross-shareholding partnership, which they said would strengthen their positions in eastern China. At the time, they heralded it as the biggest share transaction in the country’s civil aviation sector, with the airlines investing a combined CNY13 billion yuan (USD1.82 billion) in each other.

However, the ongoing impact of the pandemic since then has been huge, and in the first half of 2022 revenue at China Eastern plunged 44% to CNY19.3 billion (USD2.73 billion), resulting in its biggest loss in two decades, exceeding CNY18.7 billion (USD2.64 billion). Juneyao Air also posted a net loss for the period, nearly quadrupling to about CNY1.9 billion (USD268 million). This means that three years on, Juneyao’s investment in China Eastern is still at a loss.

According to a recently released China Eastern operating data summary, for the first eight months of 2022, passenger-kilometres dropped by 45.57% year-on-year, passenger number by 47.86%, and cargo tonne-kilometres by 24.24%. However, for the month of August alone, the same stats surged - passenger-kilometres increased by 62.14% year-on-year, load factor was 67.01% up 11.18 points, and cargo tonne-kilometres rose 37.87%.