New Aviation Group Formed

A new aviation group combining six airlines will be set up here soon in an attempt to meet challenges from the domestic and overseas aviation market, according to China Daily report.

The six airlines are Shandong Airlines, Shanghai Airlines, Shenzhen Airlines, Sichuan Airlines, Wuhan Airlines and China Postal Airlines and an agreement has already been signed to organize them into the China Sky Aviation Enterprises Group.

Zhou Chi, president of Shanghai Airlines, will be chairman of the board of directors.

"Organizing the six into one is aimed at reinforcing their competitive edge," said Zhou.

The co-operation will also mean a nationwide aviation network giving more convenience to customers, he added.

The new group has assets of 30 billion yuan (US$3.6 billion), 100 planes and more than 500 air routes. Last year, they handled 8 million passengers and saw sales of more than 8 billion yuan (US$964 million).

Local governments and big companies invested in most of the member airlines in the early 1990s.

With small fleets and a relatively modern management system, the airlines were widely regarded as reacting more acutely to market forces than their giant rivals.

One insider said the merger is considered a "strategic step to challenge the fierce competition from home and abroad."

The Civil Aviation Administration of China (CAAC), China's aviation regulator, announced on Friday that it would regroup the 10 airlines under its control into three groups.

Under the scheme, the three will be the Beijing-based Air China, the Shanghai-based China Eastern Airlines and the Guangzhou-based China Southern Airlines. Each of them will have assets worth about 50 billion yuan (US$6 billion) and some 500 aircraft each.

The new China Sky Aviation Enterprises Group will become the nation's fourth largest aviation group. Unlike the three groups under the CAAC, the new group does not merge the finances of each airline but allows them to work together in certain areas, Zhou said.

He added that agreements will be signed so that they can co-operate in code-sharing and the transporting mail and cargo.

The idea of merging the six came from Shandong Airlines.

Important decisions will be made by the board of directors who come from all six, he said.

Industry insiders suggested CAAC will welcome the formation of the new group, although it has been encouraging the airlines to join one of the three new aviation groups.






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