Yang Yuanyuan rejects suggestions China should promote mergers among the "big three"
China is seeking to put to rest suggestions it may seek to merge the country's three main airlines into two giant carriers.
Civil Aviation Administration of China minister Yang Yuanyuan has stated that consolidation among Beijing-based Air China, Shanghai-based China Eastern Airlines and Guangzhou-based China Southern Airlines would not be beneficial to either the airlines themselves or to consumers. In recent months there has been growing speculation the Chinese government may force mergers among the three main airline groups to make them more competitive, with China Eastern being seen as a possible takeover target because it is the weakest.
But Yang says in response to the speculation: "If China were to have only one airline, with one fixed ticket price, it won't be good news for Chinese consumers."
He adds that the CAAC would not interfere if there were mergers but he "personally wouldn't agree with it". Yang also says that none of the three main Chinese carriers is "fully capable of managing a merged airline".
Air China, China Eastern and China Southern all became much bigger companies following a state-overseen consolidation exercise in 2002 that saw them taking over seven other airlines. "The US has 100 or 120 airlines, of which six to seven airlines are dominating, and China should follow the trend," says Yang.
Air China, which joins the Star Alliance in December, has been the most open in suggesting it may be interested in buying a rival carrier and its parent company recently considered teaming up with Hong Kong's Cathay Pacific Airways to make a bid for China Eastern. Air China, which is 17.5%-owned by Cathay, has in recent months been quietly buying shares in China Eastern and it now owns around 11%.
But China Eastern says it has no interest in teaming up with another Chinese carrier, and in September it agreed to a buy-in by Singapore Airlines and Singapore government investment arm Temasek Holdings. Formalised agreements were signed in November and the deal is due to be completed before year-end after China Eastern shareholders give approval. The move has been seen in large part as a defensive one to make it more difficult for another Chinese carrier to take it over.
China Southern is meanwhile in talks with some of its new SkyTeam alliance partners on possible equity-link arrangements. China Southern formally joined SkyTeam in November.
Source: Airline Business
