[photopress:air_china_1_2.jpg,full,alignright]Air China, the world’s largest carrier by market value, will consider a merger with China Southern Airlines to fend off Singapore Airlines and other overseas carriers adding flights into the country.
Air China’s president, Cai Jianjiang said, ‘We don’t exclude this possibility.’ The Beijing-based carrier will also examine tie-ups with other airlines.
Air China generates about half of its sales outside the mainland and needs to bolster its domestic network as the government allows more flights by overseas carriers. Singapore Airlines is set to buy a stake in China Eastern Airlines to tap surging demand in the world’s second-largest aviation market.
Christopher Wong, who helps manage $25 billion at Aberdeen Asset Management in Singapore, said, ‘The cooperation between Singapore Airlines and China Eastern will be a potential threat to Air China. There is also a trend of consolidation, as China has agreed to open its skies to overseas airlines.’
Air China’s president, Cai Jianjiang said Air China’s merger plans are in line with the government’s policy of consolidating the country’s aviation industry. China formed its three biggest carriers by combining a number of smaller airlines.
A tie-up with China Southern, the country’s largest carrier, would give Air China a base in Guangdong, the richest province and a manufacturing hub. ir China has already expanded outside of Beijing by setting up a base in Shanghai and investing in Shandong Airlines, a regional carrier. It has also built up a 17.5% stake in Cathay Pacific Airways, Hong Kong’s largest carrier. Cathay owns a similar-sized stake in Air China.
U.S.-China flights will more than double to 23 a day by 2012 under an agreement which gives sort of ‘open skies’. According to the U.S. government full ‘open skies’ will come in 2010.
Source: International Herald Tribune