NICHOLAS IONIDES SINGAPORE
Chinese regulatory authorities have unveiled an unofficial draft for sweeping consolidation of the country's carriers that will see Air China, China Eastern Airlines and China Southern Airlines taking over seven other state-controlled airlines.
The details, published in a state-run newspaper five months after the Civil Aviation Administration of China (CAAC) demanded drastic consolidation among the country's more than 30 carriers, are regarded as tentative, but they lay out a plan for rationalisation.
Under the plan, Air China will take over China Southwest Airlines and CNAC-Zhejiang Airlines; China Eastern will take over China Northwest Airlines and Great Wall Airlines; and China Southern will take over China Northern Airlines, China Xinjiang Airlines and Yunnan Airlines.
Much of the new structure had been expected as airlines in the months following the CAAC's initial consolidation announcement began scrambling to find partners and begin shaping basic plans.
It had already become clear that China Southern would take over China Xinjiang while China Eastern would take over Great Wall. China Southern has also been in talks on a takeover of China Northern. However, this combination is far bigger than others discussed to date and is much more complicated.
Guangzhou-based China Southern, already the country's largest airline, will become even larger if the new structure comes together as envisaged. The carrier, which is listed on the Hong Kong and New York stock exchanges, would also be taking over what are relatively sound airlines.
Shanghai-based China Eastern, which is also listed in Hong Kong and New York, will likely have a harder time coping with the airlines it appears to have been allocated. Although Great Wall is a very small operator, China Northwest is one of the largest and is struggling financially.
Unlike Eastern and Southern, which have adopted western accounting practices and become more open and accountable in their operational structures, Beijing-based Air China is known for its bureaucracy and inefficient internal systems. But taking over China Southwest and CNAC-Zhejiang is seen as a positive move. China Southwest, also one of the largest carriers in the country, is already effectively controlled by CNAC, or China National Aviation - the powerful commercial arm of the CAAC.
The merger plans among the 10 CAAC-controlled airlines are not the only ones in the country, as second- and third-tier regional and provincial airlines have also been seeking partners in a bid to survive an anticipated "second wave" of forced consolidation.
Fast-growing Hainan Airlines has taken over Changan Airlines while Shandong Airlines has been working to acquire Shanxi Airlines. China Southern's parent, Southern Air Group, took over Zhongyuan Airlines in August in the first deal to follow the CAAC's announcement.
Source: Airline Business
