A sweeping consolidation exercise in China involving state-owned airlines is coming to a formal close, with China Eastern preparing to acquire the assets of two smaller carriers.
China Eastern says it expects to finalise its long-planned takeover of China Northwest Airlines and Yunnan Airlines in the coming months. The major carrier signed agreements on 12 May under which it will pay up to CNY986 million ($119 million) to acquire the assets of the smaller airlines, which are already owned by China Eastern’s parent company CEA Holding. They already operate all services under the China Eastern name.
When the deal closes it will effectively mark the completion of a government-directed airline consolidation exercise that began several years ago. The government essentially ordered airlines under the direct control of the regulatory Civil Aviation Administration of China to merge into three main groups based around Beijing-based Air China and China Eastern and Guangzhou-based China Southern Airlines.
The consolidation exercise has already seen Air China completing its mergers with China Southwest Airlines and CNAC Zhejiang Airlines. China Southern has also completed its acquisition of China Northern Airlines and Xinjiang Airlines.
Shanghai-based China Eastern says the final price to be paid for the two smaller airlines’ assets is subject to adjustment based on their earnings. “Through the proposed acquisition, the group will be able to expand its scope and size of operation, effectively rearrange the deployment of available market resources, integrate the existing marketing network, readjust the combined air routes operated by CEA Northwest and CEA Yunnan under CEA Holding, and capitalise on the transport potentials of its aircraft fleet as it will be expanded after the proposed acquisition,” says China Eastern.
In another development, Chinese flag carrier Air China has been outbid in a public auction for control of fast-growing southern China-based Shenzhen Airlines. State-run media have identified the new owners of Shenzhen Airlines as Bright Oceans and Shenzhen Huirun Investment, which offered CNY2.72 billion ($329 million) in a public auction for 65% of Shenzhen Airlines.
Air China reportedly capped its bid at CNY2.71 billion, sealing its loss of the stake, which was put up for auction by former majority shareholder Guangdong Development Bank Holding. The bank said it wanted to sell its airline stake as part of a reorganisation.
Air China already owns 25% of Shenzhen Airlines, while the remaining 10% is held by Shenzhen-based Total Logistics. The carrier is based in the booming southern Chinese city of Shenzhen, which is just across the border from Hong Kong.
Source: Airline Business
