Air China to decide on merger of maintenance arms this year

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Air China will make a decision by the end of the year on whether to merge its maintenance arm Air China Technics with its MRO joint venture Ameco Beijing.

Discussions to merge the two entities started more than a year ago but progress has been slow, says a Chinese source. The company's original target was to finalise an agreement or find a temporary solution by the end of 2011.

Part of the reason for the delay is because of Lufthansa's involvement in Ameco Beijing, and uncertainty over where the merger would leave the German carrier, should it come through, says the source.

It is understood that Lufthansa is still interested in being part of the equation, but details on the extent of its involvement still need to be ironed out.

"They have to decide on the various shareholders' stakes and how much Lufthansa would hold if the two are merged," adds the source.

Ameco Beijing is a 60:40 joint venture between the Chinese flag carrier and Lufthansa.

Discussions to merge Air China Technics and Ameco Beijing surfaced after Air China identified the MRO business as a central area of its future growth strategy, and as there are "overlaps" in the work done by the two. Besides supporting its own fleet, Air China also wants the maintenance arm to attract more third-party customers.

The merger would create China's largest maintenance firm and one of the largest MRO players in Asia. This could also compete against Lufthansa's own maintenance arm, Lufthansa Technik.

Air China Technics, founded in 2004, focuses mainly on line maintenance of Air China's fleet and has facilities across eight cities in China. Ameco Beijing, meanwhile, gets 50% of its business from maintaining Air China's fleet.

Air China and Lufthansa set up the MRO in 1989 with a 40-year joint venture contract.