SOE snaps up private carrier Northeast Airlines

08:43, June 08, 2010      

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Private Northeast Airlines, which has been in the red, reportedly accepted a recent capital injection from State-owned Sichuan Airlines Group.

Just three months ago, State-owned Air China took control of private Shenzhen Airlines.

There are only three private carriers - Spring Airlines, Juneyao Airlines and Okay Airways - remaining from a past total of more than 20.

Launched in February 2006, Northeast Airlines was the last private carrier approved by the Civil Aviation Administration of China (CAAC) in 2005, but its performance was hurt by the financial crisis and rising oil prices.

The carrier transferred its base from Shenyang, Northeast China's Liaoning Province to Guilin, South China's Guangxi Zhuang Autonomous Region, to look for investors half a year ago.

According to a report in the Southern Metropolis Daily Monday, Sichuan Airlines Group will increase its stake in Northeast Airlines from the current 33.5 percent to 97 percent for 101.6 million yuan ($14.88 million).

Although the CAAC allowed private capital to enter the aviation sector in 2004 in a bid to "promote competition," most private carriers have not done a better job of surviving.

In March 2009, United Eagle Airlines, the first-approved private carrier, received a 200 million yuan ($29.29 million) capital injection from Sichuan Airlines, which became its biggest shareholder.

Okay Airways became mired in shareholder disputes last year, while Kunpeng Airlines was renamed Henan Airlines, and East Star Airlines went bankrupt.

"The private carriers are vulnerable to being hit by the market due to their small scale compared with the giants," Li Xiaojin, a professor with the Civil Aviation University of China, told the Global Times Monday.

"The competitive environment lacks fairness compared with the State-owned carriers, and it is hard for us to win more flight schedules," said Wang Zhenghua, founder and chairman of Spring Airlines, in an interview with Oriental Outlook magazine last month.

Wang added the company could not get approval for any flights from Shanghai to Beijing when it launched five years ago.

"When new companies enter the market, some existing ones will die," Li said.

Source: Global Times


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