China's sweeping airline consolidation efforts won strong praise from Pierre Jeanniot as he addressed his last IATA annual general meeting (AGM) after a decade as director general. Held in Shanghai in June, it was the association's first AGM to take place in China.
Chinese civil aviation authorities have been steering a revamp of the local industry through a mammoth consolidation programme and by overhauling the regulatory regime for the past two years. In particular, Jeanniot welcomed the moves to separate ownership and regulation as the Civil Aviation Administration of China (CAAC) withdraws from airline ownership to focus purely on regulating the industry.
"Will it be successful? I certainly hope so," Jeanniot said of China's restructuring efforts. "They are tackling it in the right way." He cautioned, however, that the process should not be rushed as "mergers are always difficult to do".
"It's better to take longer than to rush it. But I think they are approaching it in the right way," he said. "As the economy of China continues to experience growth rates which will double the gross output every 10-12 years, a major challenge will be managing that growth efficiently." He added, however: "One could say that China is in the enviable position of being able to avoid in its long-term policies the mistakes made elsewhere."
Few at the AGM were left in any doubt as to the potential in China. As the Chinese economy continues to boom, its economic powerhouse in Shanghai is undergoing phenomenal and visible growth. The airlines too are growing, lending an upbeat feel to the event which could have been a wake in the light of last year's losses which reached an unprecedented $12 billion. The next AGM takes place in Washington and some in IATA were privately thankful that the event had not been held there this year.
The AGM was hosted in its home town of Shanghai by China Eastern, which will now become one of only three mammoth groups alongside Air China in Beijing and China Southern Airlines in Guangzhou. The consolidation was sparked off two years ago when the CAAC effectively demanded that the 10 carriers under its direct "control and administration" merge.
Under the consolidation plan, Air China will merge with China Southwest Airlines and China National Aviation; China Eastern will acquire China Northwest, Great Wall and Yunnan Airlines; and China Southern will take over China Northern and China Xinjiang Airlines. China Eastern has already completed its takeover of Great Wall Airlines as part of the process. The consolidation effort is expected to take up to two years to complete, after which the 'big three' will control around 80% of the domestic market.
At the same time, the CAAC will, having shed its ownership role, restructure its own internal operations and offices throughout the country. The moves are designed to reduce cut-throat competition within China, where in the 1990s dozens of airlines were launched, leading to heavy discounting and widespread losses for the industry as a whole in the latter half of that decade.
Source: Airline Business
