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Aviation History
2003
2003 - 2005.PDF
Cover story: airlines agreed to acquire China Northwest and Yunnan Airlines; and China Southern's parent agreed to take over China Northern and China Xinjiang Airlines. China Eastern also acquired Great Wall Airlines as part of the process. Integration efforts have been moving ahead since late last year, and eventually the 'big three' will control around 80% of the market. The mergers are not the only ones in the country, however, as second- and third-tier regional and provincial air lines have also been seeking partners. Fast-growing Hainan Airlines has taken over Changan Airlines, Shanxi Airlines and China Xinhua Airlines, becoming the fourth-largest airline grouping in the coun try. And some of the smaller "indepen dents", such as Shandong Airlines, are now seeking equity partners among the 'big three' to help ensure their very survival. Some regard the consolidation work as a return to the past for China, but for the CAAC it is a step forward. Larger, stronger airlines will result and this is necessary in a world where liberalisation is unavoidable. "We can't say whether or not it will be a success as the consolidation process is still going on, " says a CAAC official in Beijing. "But it is a step forward. The airlines need to consolidate so we can build bigger and stronger airlines at home, but also so they can compete with foreign airlines." The CAAC has given up ownership of the airlines under its direct control and is now focusing solely on a regulatory role. Ownership of the enlarged airlines has been transferred to other government agencies. The CAAC is also taking steps to reduce internal bureaucracy and speed up deci sion-making. It will abolish 24 local arms, leaving only seven CAAC "regions" across the country. Aviation service companies, such as jet-fuel supplier China Aviation Oil Air China is Supply, are also being restructured, while one of the management of most airports is passing 'big three' into the hands of provincial governments. airlines that China is also liberalising air services regu- will control lation. It has long maintained restrictive air 80% of the services policies to protect its state-owned market airlines, but that is changing. The CAAC, which negotiates bilateral air services agree ments for the government, has been giving foreign carriers progressively more rights to operate to the country's gateway airports at Beijing, Guangzhou and Shanghai. More competition Additionally, China has been signalling its willingness to open up further and allow more competition between foreign airlines and the country's major carriers. Earlier this year, Singapore Airlines became the first foreign carrier to win rights to operate ser vices beyond China to a third country. Its cargo subsidiary, SIA Cargo, has been oper ating fifth-freedom services to Chicago via Xiamen and Nanjing since May. This was seen as a small but important first step and authorities have hinted that similar rights could be awarded to other carriers, possibly through the booming commercial city of Shanghai. Now a more liberal policy is being pushed through. Authorities recently agreed on a ground-breaking "open skies" regime for the southern island province of Hainan that will see foreign airlines given unlimited rights to operate passenger and cargo services to and beyond the province. No changes will be required to existing bilateral air services agreements between the CAAC and other countries. Foreign air lines will not be allowed to operate from Hainan province to other points on the Chinese mainland, however. CHINA'S 'BIG THREE' AIRLINE GROUPINGS CD Urumqi Mongolia m Beijing Shenyang NOHH Kor Air China China Southwest Airlines CNAC-Zhejiang Airlines @ Beijing Chengdu Hangzhou China Eastern Airlines Shanghai China Northwest Airlines Xi'an China Yunnan Airlines Kunming Air Great Wall Ningbo nSyn China Southern Airlines Guangzhou «< China Northern Airlines Shenyang China Xinjiang Airlines Urumqi —^ c oChengdu C3 Kunming Xi'an «#» Guangzhou Shanghai South Koi Hangzhou , Ningbo Vietnam Hainan FLIGHT www.fliqhtinternational.com FLIGHT INTERNATIONAL 16-22 SEPTEMBER 2003 43
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