NICHOLAS IONIDES SINGAPORE
China is insisting that a sweeping consolidation of the country's airlines will go ahead as planned this year despite claims that disputes among some of the prospective partners are threatening to derail the entire process.
Late in December state-run media reported that disputes over control and financial terms may force the regulatory Civil Aviation Administration of China (CAAC) to rethink its merger blueprint. The reports said that flag carrier Air China and China National Aviation (CNAC), owner of Zhejiang Airlines, are in a fight for control of the enlarged entity. China Eastern Airlines is also said to be unwilling to take on ´3 billion ($362 million) of the debt of China Northwest Airlines. Only talks by China Southern Airlines to take over two other carriers are reported to be proceeding well.
Civil aviation authorities are angrily denying the reports, however. While acknowledging some delays, the CAAC says suggestions of major problems are "totally groundless" and claims that the merger process should be finalised in the first half of this year.
"We should stay patient enough for the long merger process," says CAAC official Ma Songwei. He adds that agreements being finalised by the airlines are "still keeping up with the CAAC's original plans".
Nearly two years ago the CAAC called for the 10 airlines under its direct "control and administration" to merge into three groups headed by Beijing-based Air China, Shanghai-based China Eastern and Guangzhou-based China Southern.
The carriers then reached basic merger agreements and these were approved by the CAAC in April 2001. The State Development Planning Commission is currently assessing the airline plans and final approval from the top-level State Council, China's de facto Cabinet, is to be sought shortly, the CAAC says.
Under the CAAC-approved consolidation plan, Air China will take over China Southwest Airlines and CNAC; China Eastern will acquire China Northwest, Great Wall Airlines and Yunnan Airlines; and China Southern will take over China Northern Airlines and China Xinjiang Airlines.
Airline officials privately acknowledge that many issues remain to be addressed, but say the plans will almost certainly go forward as envisioned as the government ultimately controls the airlines. "What the government wants, the government will get," says one industry observer in China. "It may take longer but it will go ahead."
Source: Airline Business
