overview
together and realise awin-win situation,”Kong Dong, chairman of Air China, said. Air China revealed that the joint venture company is
expected to become operational this summer. Kongmade plain hewas after the foreign express operatorswho have taken the lion’s share of volumes out of Shanghai in the past decade, and to chase these firms out of themarket the international know-howand expertise of Cathay is needed. “The cargomarket in China should develop quicker than
the passengermarket and I have themost confidence in this joint venture company,”Kong said. All Chinese airlines are coming to termswith the slewof high-speed railways thatwill criss-cross the nation at record speeds, taking huge passenger numbers fromthe airlines in the process. In late December, for instance, theworld’s fastest train started operating betweenWuhan in central China and Guangzhou, slashing travel times from10 to three hours. Airline passenger numbers on this route have plunged.
SHENZHEN OPPORTUNITY South of Guangzhou, adjacent to the former British colony of Hong Kong, lies the Special Economic Zone of Shenzhen, home to China’s fifth-largest airline, Shenzhen Airlines. In thewake of corruption allegations hounding the former president of the airline, Air China hasmoved in to snap up Shenzhen Airlines. An Air China executive, Fan Cheng, has been parachuted in fromBeijing to run the airlinewith a viewto a complete takeover soon. At present, Air China is the second-largest shareholder of
Shenzhen Airlineswith 25 percent of the stock. The Air China chairman said thisMarch: “Froma strategic perspective, Shenzhen Airlines is very important to us and I’mlooking forward to integrating Shenzhen Airlines.”
Taking over the southern airline, Air China intends tomake Shenzhen its secondmost important hub after Beijing. Shenzhen Airlineswas established in December 1992, and is nowone of themost profitable airlines in China. It flew 306million ton-kmof cargo andmail in 2009, up by 27.8 percent and 22 percent respectively year-on-year. Citigroup analyst AllyMa said in a research note that the
proposed takeover “could elevate (Air China’s) competitiveness to an unprecedented level”. In December, Air China alsowon the bidding to take over the bankrupt assets ofWuhan-based East Star Airlines. Four-year-old East Star had a fleet of 15 planes, carrying cargo as bellyhold freight.
CAUTIOUS ATTITUDE Among the BigThree, then, it is just China Southern that is not rushing intomergers and acquisitions just yet. China’s largest airline has cancelled plans to forma joint venture cargo firmwith Air France/KLMand it seems content at the moment to pursue organic growth. A spokesman fromthe Guangzhou airline observed:
“China Southern has already developed to be a top airline ranked number one in Asia and number four in theworld. The company always holds a cautious attitude to consolidation.” However, like Air China, the southern-based airline has its
eyes on Shanghai’s cargo pie and is deploying new freighters at the city’smain airport.With two B747-400Fs and six B777-200Fs expected to join its fleet by 2011, the airline plans to introduce newservices fromShanghai to Vienna, NewYork, Dallas and othermajor destinations across Europe and North America. Currently, China Southern operates cargo services fromShanghai Pudong
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