China's revamp of its aviation industry is continuing, with yet another airline merger and the introduction of more liberal ownership rules.
China Southern Airlines agreed late in June to acquire 49% of China Postal Airlines. Days later, the government confirmed the limit on foreign ownership of airlines would be eased from August.
China Southern says its purchase of 49% of China Postal for 150 million yuan ($18 million) will "allow the carrier to strengthen its domestic and international logistics and freight business".
The small freight carrier, which operates a handful of domestically built Shaanxi Aircraft Y8 freighters, has a monopoly on Chinese air postal services.
While small, the deal is considered a strategic one as China Southern has been seeking to build up its freight operations internationally and within China. It recently took delivery of its first Boeing 747-400 freighter and a second is due for delivery in September.
The deal also comes as the Chinese airline sector is undergoing major changes in the form of a government-led consolidation that will see Air China, China Eastern and China Southern Airlines acquiring smaller carriers.
The present main shareholders in China Postal are the China State Post Bureau with 79.01%, and the Shanghai Municipal Post Office with 18.33%. Two other minor parties hold the remainder. The smaller shareholders will transfer their holdings to the China State Post Bureau as part of the deal, leaving it with 51%. China Southern will acquire its 49% by injecting 150 million yuan in cash directly into China Postal Airlines.
Meanwhile, from 1 August China will allow foreign shareholders to own up to 49% of local carriers, up from 35%. Individual foreign shareholders will be restricted to 25%, however.
The authorities have been considering ownership rule changes for years. China Eastern and China Southern are already publicly traded on overseas stock exchanges, while Air China has been seeking an international listing.
Hainan Airlines, which claims to be the country's fourth-largest airline grouping, was the first Chinese carrier to be approved for foreign ownership. In 1995 an investment fund part-owned by US financier George Soros took a 25% shareholding, although this was diluted after the carrier sold shares through an initial public offering in Shanghai.
Another Chinese carrier with limited foreign ownership is Shandong Airlines, which, like Hainan, has a domestic stock exchange listing.
Source: Airline Business
