Hainan Airlines seeks to partner with China Duty Free Group in Hainan

Hainan Airlines Co. Ltd. (600221.SH) could cash in on the growing market for duty-free products once it gets approval from the relevant authorities, the official Shanghai Securities News reported on Thursday.

Hainan Airlines owns a 33% stake in Hainan International Tourism Island Development Co., a subsidiary of the carrier that is expected to run the duty-free business for parent Hainan Airlines Group, the paper reported, citing an unnamed insider from the group.

Hainan International Tourism Island, formerly known as Hainan Airlines Real Estate, was established in October 2010 with a registered capital of RMB 3 billion.

The company’s operations range from real estate to hotels and retailing, which includes two shopping malls and six duty-free and discount stores.

Hainan Airlines injected RMB 1.5 billion into the company last year, becoming the second-largest shareholder with a 33% stake, the carrier said in a statement on Dec. 22.

The carrier is said to be seeking cooperation partners to jointly undertake the duty-free business, with China Duty Free Group being a potential partner, the paper said.

China Duty Free Group is a state-owned enterprise specializing in nationwide duty-free shopping with the backing of the State Council. The group has branded stores at airports in Guangzhou, Xiamen and Shenzhen, among others.

"The group’s duty free shop at Haikou Meilan Airport is roughly ready for opening, and the shop has started to hire employees,” the insider said.

According to the insider, the duty free shop is divided into two sections and is set over an area of 2,150 square meters, while China Duty Free Group’s store in Sanya, Hainan province covers an area of 7,000 square meters.

The opening of the Sanya store on Wednesday attracted over 7,000 visitors between 10:00 a.m. and 2: 00 p.m., during which time over 2,480 transactions were made, the Beijing News quoted the store’s deputy manager Teng Rui as saying.

Hainan Airlines booked RMB 5.76 billion in sales revenues during the first quarter of 2011, while net profit climbed 8.24% year-on-year to RMB 273 million, the company said in a statement to the Shanghai Stock Exchange on Wednesday.