Air China to take control of Shenzhen Airlines

15:54, March 23, 2010      

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Air China will soon become the majority shareholder of Shenzhen Airlines, according to a recent announcement by Air China. Air China will inject 680 million yuan into Shenzhen Airlines in order to raise its equity from 25 to 51 percent. Following the deal, Shenzhen Airlines will no longer be the largest domestic private airline but a subsidiary of Air China, and the two companies' combined market share will surpass that of China Southern Airlines to rank first.

Shenzhen Airlines, founded in 1992, has never been in the red over the past 18 years. It owns 130 aircraft and 300 domestic and international air routes, holding 6 percent of the domestic market share. Huirun and Bright Oceans Corporation invested 2.72 billion yuan for 65 percent equity in Shenzhen Airlines in 2005 during the carrier's equity restructuring and sale. Afterward, Shenzhen became the largest private airline in China. In 2009, Shenzhen Airlines' senior consultant Li Zeyuan was investigated for alleged economic crimes, after which, the fight for Shenzhen Airlines shares renewed.

About 339 million yuan of the 682 million yuan investment by Air China will be used as the registered capital of Shenzhen Airlines, and the remaining 343 million yuan will serve as capital reserve. Total Logistics under the Shenzhen municipal government will invest 348 million yuan for 25 percent equity of Shenzhen Airlines after the completion of the capital increase. Since the bankruptcy administrator of Shenzhen Airlines' former major shareholder, Huirun, did not make an extra investment, its holding will be diluted to 24 percent. The domestic market share of China Eastern Airlines became higher than Air China after it took over Shanghai Airlines in 2009. Following Air China's takeover of Shenzhen Airlines, the market share of China's three major airlines will once again become even.

Air China said that Shenzhen Airlines' new equity structure following the completion the deal will benefit their cooperation, perfect their domestic and international air route networks and reinforce their market position in the Pearl River Delta. Currently, Air China has already initiated the integration of their airline business. Shenzhen Airlines' operating site at Beijing Capital International Airport will be relocated from Terminal 2 to Terminal 3 starting March 28.

By People's Daily Online
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