geoff dixon - Orient Aviation

CHINA
Consolidation: so far so good,
but more work needed
On October 11, 2002 China
turned a new page in the
history of its civil aviation
industry. It was the day
w h e n t h r e e C h i n e s e
airline groupings and three civil aviation
service groups, China TravelSky Holding
Company, China Aviation Oil Holding
Company and China Aviation Supplies
Import and Export Group Corporation were
formally established.
With three years having past since that
historic day we should ask whether the airline
mergers and the Civil Aviation Administration
of China (CAAC) have achieved
the targets set out in the CAAC’s reform
programme.
The three airline groups are: China
National Aviation Holding Company, China
Eastern Air Holding Company and China
Southern Air Holding Company.
AIR CHINA
Air China International Corporation
(based in Beijing), China National Aviation
Corporation, which owns Zhejiang Airlines
(based in Hangzhou), and China Southwest
Airlines (based in Chengdu) were integrated
into China National Aviation Holding
Company (CNAHC) with Air China as the
lead carrier. The ‘new’ Air China remains
the country’s flag carrier.
The consolidation process was completed
A CHINA PERSPECTIVE
Senior economist Zhang Kaijian, a 35-year veteran of China’s
airline industry, was deputy chief economist for Air China before
retiring in 2002. He has also held the posts of general manager of the
passenger transport division and director of marketing and sales. In
the Eighties he was a CAAC general manager based, at various times,
in the United Arab Emirates, Iraq and Kuwait.
China Southern Airlines: has major shareholdings in six subsidiary carriers
32 ORIENT AVIATION DECEMBER 2005-JANUARY 2006
in 2003. China Southwest Airlines and
Zhejiang Airlines were dissolved as
legal entities and their respective airline
operations, assets and liabilities and
employees were integrated with Air China.
In addition, Air China owns 51% of Air
China Cargo and, indirectly, 35.2% of Air
Macau through its subsidiary companies.
Air China’s parent, CNAHC, holds 25%
of Shenzhen Airlines, 29.9% of Dragonair
and 22.8% of Shandong Airlines. Also,
Air China has code-share agreements with
Dragonair and Air Macau.
In December 2004, Air China listed
on both the Hong Kong and London Stock
Exchanges. Hong Kong’s Cathay Pacific
Airways has a 9.9% shareholding in Air
China.
Since the consolidation, Air China
has made remarkable strides forward.
Comparing 2004 with 2001, both revenue
and revenue passenger kilometres (RPKs)
By Zhang Kaijian
increased 130% during that time. The flag
carrier also climbed from 39th to 23rd in
the world’s top 100 airlines’ list in terms of
revenue (see page 34).
CHINA SOUTHERN AIRLINES
China Southern Airlines (based in
Guangzhou), Shenyang-based China
Northern Airlines and Urumqi-based Xinjiang
Airlines were integrated into China
Southern Air Holding Company.
Because China Southern was publicly
listed on the Hong Kong and New York Stock
Exchanges, the carrier did not complete the
merger of the core business and assets with
China Northern and Xinjiang Airlines until
the end of 2004.
It needed time to accomplish assets
evaluation and necessary procedures of
acquisition.
In 2003, as a first step in the integration,
China Northern and Xinjiang Airlines
started using China Southern’s two-letter
code “CZ”. Other developments at this time
included schedule adjustment, re-painting of
aircraft into one livery, ground handling and
the adjustment of frequent flyer programmes
(FFP).
On December 31, 2004 a general meeting
of China Southern Airlines Company
shareholders approved the acquisition plan
to buy the core assets of China Northern and
Xinjiang Airlines from China Southern Air
Holding Company and the consolidation was
completed.
China Southern has 60% equity in six
subsidiary carriers: Xiamen Airlines, Shantou