Hainan Airlines will spend 600 million yuan (US$85.71 million) to buy an office building in Beijing, and it will also sell its stake in a company supplying airline food.

"Beijing is Hainan Airlines' key operation base but the company does not own an office building here. With its business rising and more employees expected to work here, the company decided to purchase a building and lease idle floors to others," according to a statement the carrier filed to the Shanghai Stock Exchange.

The building, covering 42,380 square meters, has a leasing capacity of 37,295 square meters. The carrier will pay another 150 million yuan if the developer, Beijing Yida Real Eastate Co, can raise the capacity by 10,000 square meters within five months, according to the statement.

Hainan Airlines also plans to sell its 51-percent stake in Beijing Xinhua Airport Aviation Food Co to HNA Aviation Food Holding Co for 70.6 million yuan, the company said in a separate statement. The stake was held by China Xinhua Airlines, a subsidiary of Hainan Airlines, the country's fourth-largest airline.

HNA Group, the carrier's parent, last week signed a strategic cooperation agreement with the State-owned Assets Supervision and Administration Commission of Yunnan Province to inaugurate Yunnan Airlines.

Grand China Air, a subsidiary of the group, and the Yunnan provincial government will jointly inject capital into the group's Lucky Air, and Grand China Air will be the controlling shareholder.

The move is expected to fuel the competition in Yunnan's aviation market, and the new company plans to expand its fleet to 30 aircraft in three years.

Shanghai-based China Eastern Airlines, which had some of its Yunnan routes taken away or had frequencies on the routes reduced because of the "flights return" controversy, may now have to contend with the new carrier in the market.

The Civil Aviation Administration of China suspended China Eastern from flying two routes and cut the number of flights on six routes in Yunnan after some of its pilots flew back to the departure points without reaching the destinations to protest their working conditions.

(Shanghai Daily June 13, 2008)