Nicolas Ionides SINGAPORE
Major Chinese airlines are set to win greater autonomy under a long-planned restructuring of the country's aviation bureaucracy that will see the Civil Aviation Administration of China (CAAC) giving up ownership of airlines.
Industry sources in China say the country's State Council has decided after years of debate to strip the CAAC of equity ties to the 10 airlines under its direct "control and administration". Airlines believe the changes, which will be carried out alongside the restructuring of the 10 carriers into three groups, led by Air China, China Eastern and China Southern Airlines, will allow them to compete more effectively, take their own decisions on aircraft orders and free them from CAAC meddling.
It is unclear whether the decision to force the CAAC to give up ownership was taken formally or unofficially by leading members of the country's de facto cabinet. Sources say it is finally clear that the long-discussed changes will indeed take place but are most likely to do so after sweeping consolidation of the country's major carriers is finalised.
The CAAC has been pressing for consolidation for some time and last year demanded mergers among the 10 airlines under its direct control. A draft consolidation plan was approved by the CAAC earlier this year and forwarded to the State Council for final approval. Under the proposal, Beijing-based Air China will take over China Southwest and CNAC-Zhejiang Airlines; Shanghai-based China Eastern will take over China Northwest, Great Wall and Yunnan Airlines; and Guangzhou-based China Southern will take over China Northern and China Xinjiang Airlines.
Carriers have been lobbying for the CAAC to give up ownership of airlines for years and instead be solely tasked with regulating the industry as a "technical entity". Some predict the changes will come this year as China prepares to take up membership at the World Trade Organization; others say it may take longer to carry out as such action has been promised in the past but delayed.
CAAC's stakes, held through major airlines' unlisted parent companies such as China Southern's Southern Air Group and China Eastern's China Eastern Group, are to be transferred to a state-owned property management bureau under the State Council, which controls holdings in companies in other strategic areas of the economy, sources say. The CAAC, which has lost much of its power in recent years, reports directly to the State Council.
Chinese carriers say they have yet to be officially notified but airline sources are already welcoming the news. "This has been talked about for a long time but now we are all expecting it to happen," one says. "It is only a matter of time. Of course we will be very happy about it when it does happen."
Source: Airline Business
