NICHOLAS IONIDES SINGAPORE
Action is finally being taken on long-planned consolidation of China's airlines, with the Civil Aviation Administration of China (CAAC) confirming the make-up of mergers among the 10 airlines under its direct control.
The plan had been under consideration for nearly a year but was publicly revealed in April, allowing formal merger talks to begin. As expected, Air China will take over China Southwest Airlines and China National Aviation Corp (CNAC), which owns Zhejiang Airlines and Air Macau.CNACis also the main shareholder in Hong Kong's China National Aviation Co, which in turn has the biggest single stake in Dragonair. The parent of China Eastern Airlines will take over China Northwest, Great Wall and Yunnan Airlines, while the Southern Airlines Group, parent of China Southern, will take over China Northern and Xinjiang Airlines.
The CAAC has been calling for some time for China's 30 or more airlines to merge into a handful of large groups Secon-tier carriers are already scrambling to merge on their own. In early May, six smaller airlines announced an alliance aimed at helping them better compete in the changing environment. The tie-up is to be known as China Sky Aviation Enterprises and will be made up of China Postal, Shandong, Shanghai, Shenzhen, Sichuan and Wuhan Airlines.
Members initially aim to rationalise operations through codesharing, followed possibly by equity ties. Jinan-based Shandong Airlines is seen as the brainchild of China Sky, and the carrier says the grouping will be the fourth largest in the country. Its members will have a combined fleet of around 100 aircraft and operate on 500 routes.
The China Sky announcement left many observers wondering about the future of Hainan Airlines, which was conspicuously left out. Hainan has been aggressively seeking to expand through mergers of its own and has already acquired Changan and China Xinhua Airlines.
Days after the China Sky announcement was made, however, Shandong revealed that more than six months of talks on a take-over of tiny Shanxi Airlines had failed. Hainan quickly announced it would take over Shanxi.
While observers are closely watching China Sky to see how the tie-up progresses, many believe Hainan has the right idea in acquiring airlines outright because past alliances have not worked out. For instance, in 1997, Hainan, Shandong, Shenzhen, Sichuan, Wuhan and Zhongyuan Airlines announced they would form the New Star Airline Alliance to co-ordinate flight schedules, share codes and jointly order aircraft. Little was ultimately accomplished.
In a related development that will allow carriers more commercial freedom, the CAAC has confirmed that it will cut equity ties in the 10 airlines it directly controls. It will also give up stakes in four aviation service companies, which are to be merged.
Source: Airline Business
