Nicholas Ionides/SINGAPORE
China National Aviation (CNAC), the major shareholder in Hong Kong-based Dragonair, is looking for new aviation investments as it seeks to dampen speculation that it will be forced to sell its holdings in the sector when its parent, the Civil Aviation Administration of China (CAAC), is stripped of commercial ties.
While Beijing has decided that the CAAC must surrender control of 10 Chinese airlines ahead of the restructuring of the sector around Air China, China Eastern Airlines and China Southern Airlines, CNAC's executive general manager Thomas Tsang claims it will not be affected by the move.
The confusion arises because CNAC is Hong Kong-listed, and its direct parent, China National Aviation (Group), is also incorporated there, yet its ultimate parent is Beijing's China National Aviation Corp, an arm of the CAAC.
"The ultimate parent will be affected as such by the restructuring scheme, under which the CAAC will separate itself from commercial activities," Tsang claims. "But there will be more opportunities for us overall."
Tsang says CNAC's investment plans were "stalled" by the Asian economic downturn, which hit around the time of its December 1997 listing, but that these are now being revived. "We hope to expand our aviation and aviation-related businesses both within Hong Kong and elsewhere," he says.
CNAC owns 43% of Dragonair, saying it is "no secret" that it would like to increase its stake, though there is "not necessarily a willing seller", plus 50% of ground handler Jardine Airport Services and 25% of a new Hong Kong-based logistics venture.
CNAC in Hong Kong also has first right of refusal on Air Macau and Zhejiang Airlines, both controlled by China National Aviation Corp, and Tsang says it is "reviewing things all the time" and may pursue a take-over. Being incorporated outside mainland China, it will be able to buy only 35% of Zhejiang, however, though this does not apply to Air Macau.
CNAC's net profit climbed 47% to HK$311.2 million ($40 million) last year, thanks to growth from Dragonair. Turnover fell to HK$31.92 million from HK$48.26 million because of reduced property investments, but its share of profits from associated companies jumped more than 50% to HK$307.57 million.
Shanghai-based China Eastern Airlines saw net profits more than double to 175.5 million yuan ($21 million) last year, but its profit from operations fell to 778.3 million yuan from 921.9 million yuan, and analysts say that when gains from a change in accounting policy (which inflated last year's net figure by 127.9 million yuan but depressed 1999's by 66.33 million yuan) are stripped out profits were well down. China Eastern was hurt by higher fuel costs, as the Chinese Government does not allow hedging. Turnover grew to 11.22 billion yuan from the 10.16 billion yuan in 1999. BAE Systems and Hangxin Aviation Engineering of China are to establish a repair centre in Guangzhou to service the UK manufacturer's Airbus and Boeing civil aviation products.Source: Flight International
