UPDATE 1-China Eastern Airlines turns Beijing unit into budget carrier

Tue Jul 1, 2014 11:18pm EDT

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BEIJING, July 2 (Reuters) - China Eastern Airlines Corp said on Wednesday that it has officially transformed its Beijing-based full-service subsidiary China United Airlines into a budget carrier.

China Eastern will also increase the number of planes in China United's fleet to 80 by 2019, from 26 as of the end of May, the carrier said in a statement. It was not immediately clear whether the airline would order more planes, or use aircraft from its parent's fleet.

China Eastern Chairman Liu Shaoyong told reporters China United hopes to bring on board a strategic investor.

The launch of China United may also raise questions about the fate of Jetstar Hong Kong, a budget carrier jointly owned by China Eastern, Macau gambling mogul Stanley Ho and Australia's Qantas Airways Ltd.

Intended to be the only low-cost carrier flying from Hong Kong, Jetstar Hong Kong has faced delays in securing its airline licence.

China's airline market, which is dominated by state-owned carriers China Eastern, China Southern Airlines and Air China, is believed by analysts to be on the cusp of a low-cost travel boom.

Northeast Asia, especially, is seen to be a laggard in the low-cost air travel market, with only a handful of small carriers flying in Japan and South Korea. ($1 = 6.2115 Chinese Yuan Renminbi) (Reporting by Fang Yan and Koh Gui Qing; Editing by Ryan Woo and Miral Fahmy)

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