Foreign interest in the Chinese market continues to grow, with Korean Air and Taiwan’s China Airlines both looking to take equity stakes in new starts.
Korean Air says it has signed a letter of intent with recently launched Okay Airways to buy an unspecified stake. The maximum stake foreign companies are allowed to own in local airlines under Chinese law is 25%.
Okay launched services in March as the first private airline in China, which has been easing its restrictions over the past couple of years to allow new operators. Korean Air has had a relationship with Okay since the beginning, as the new passenger airline launched operations with a wet-leased Boeing 737-900 from the South Korean flag carrier.
Korean Air has also said it is considering establishing a joint-venture cargo airline in China with Okay. If launched, the operation would be managed by the Korean carrier and could begin operating as early as next year.
Okay is based in the port city of Tianjin, outside the capital Beijing. Its owners are Xinjiang Qili Investment, Ao’kai Investment Development and Beijing Qili Logistics.
Meanwhile, Taiwan’s China Airlines is seeking to buy 25% of freight carrier Yangtze River Express, which is part owned by China’s Hainan Airlines group. The airline is based near Shanghai and operates regional and domestic air cargo services. China Airlines’ investment is conditional on it securing approval from Taiwanese regulatory authorities.
China and Taiwan are political rivals and there are no diplomatic relations or direct flights between the two sides. However, airlines from both sides have long been seeking to expand their relationships in anticipation of direct flights being allowed in future.
This is the second time China Airlines is attempting to buy into a mainland Chinese cargo airline. In September 2001 it agreed to purchase 25% of China Eastern Airlines subsidiary China Cargo Airlines, but a deal was never concluded.
It hopes this time it will be successful, however, noting that “the investment in Yangtze River Express Airlines reflects China Airlines’ desire to expand its operations in mainland China”.
Foreign interest in China’s fast-expanding airline market has grown in recent years as growth projections remain bullish. The parent of China Airlines’ home-based rival EVA Air has reportedly been in talks with Shanghai Airlines on a proposed cargo airline joint venture.
Earlier this year, Singapore Airlines subsidiary SIA Cargo and a subsidiary of Singapore government investment arm Temasek Holdings signed an agreement to form a joint-venture cargo airline in China with state-owned China Great Wall Industry. The planned Shanghai-based airline is expected to be called Great Wall Airlines and is aiming to start operations in 2006.
Two other Singapore-based companies have not been successful in their attempt to set up a joint-venture airline in China, however. Aerospace systems and components supplier A-Sonic Aerospace and logistics firm Airocean Group say they have dropped a plan to launch a passenger and cargo airline in China with a local partner after regulatory approvals were not secured in time to meet deadlines set in their original partnership agreement. The two Singaporean companies announced plans to start the Chinese airline in September last year, saying it would be majority owned by state-owned travel agency group China Travel Service.
NICHOLAS IONIDES/SINGAPORE
Source: Airline Business
