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China Weighs Membership in Air Clubs
The latest regrouping of China's aviation sector is expected to accelerate its steps to open wider to overseas competition as the industry watchdog considers encouraging domestic companies to join international alliances, according to Business Weekly.
China will open its skies wider to foreign airlines once the country joins the World Trade Organization, and domestic airlines should spare no efforts in improving competitiveness on international flights before foreign airlines storm in, said Liu Jianfeng, minister of the Civil Aviation Administration of China (CAAC£©, China's aviation market regulator.
Another CAAC official further suggested that joining certain international aviation alliances would be good moves for the three new groups currently forming out of the previous 10 national airlines to grab more international market share.
The official, who only gave his surname as Wu, told Business Weekly that CAAC supports domestic airlines joining big aviation alliances without any preconditions.
Wu said membership in international alliances, which are operated by the most experienced international air carriers, would help Chinese airlines to be connected to worldwide aviation networks.
Making use of the mass air links from alliances, domestic airlines could extend their access to nearly the whole world, and they would see a sharp increase in passengers, Wu said.
"Through group purchasing, easier signal check-in and the use of common airport lounges, Chinese airlines could cut their cost in international business dramatically."
Though facing many advantages, no domestic airline has clearly expressed a desire to join an international aviation alliance.
Currently, there are four major aviation alliances - Star Alliance, One World, TeamSky and a global alliance launched by Northwest Airlines and KLM Royal Dutch Airlines. All of them have close relationships with one of the three biggest Chinese airlines.
Germany's Lufthansa Airlines, a member of the biggest alliance - the Star Alliance - and Northwest Airlines now share codes with Air China£» American Airlines from One World shares codes with China Eastern Airlines and Delta Airlines from TeamSky shares codes with China Southern Airlines.
These alliances say they would welcome Chinese companies's participation, but all three Chinese airlines denied having any plans to join those alliances, though the possibility still remains.
"They all well understand that joining those alliances may make them lose big shares of China's huge potential aviation market," said Wang Yongtao, marketing researcher with Air China.
Last month, CAAC announced a landmark plan of combining 10 airlines into three new groups based on Air China in Beijing, China Eastern Airlines in Shanghai, and China Southern Airlines in Guangzhou. The move is widely believed to be a key step forward to enhancing local companies' competitive edges to address forthcoming rivalry from abroad.
Wang said those three groups, which each has some 50 billion yuan£šUS$6 billion£©in assets and fleets of some 100 planes, were far smaller than their rivals and would hand the more lucrative China's aviation market to their partners.
"It's just like a child working with a group of adults in a gold mine, who will be the winner can be distinguished easily, " Wang said.
He indicated only when two or all of China's three biggest groups were combined together could they compete internationally. Air China discussed merger plans with China Southern Airlines in 2000, which was later denied by CAAC under the excuse of avoiding possible monopolies.
"But competing internationally does need a flagship airline, like a merger between Air China and China Southern," Wang said.
He suggested the combination could be carried out when those three groups finish their combination with smaller airlines in two years.
Minister Liu used the successful merger of Air Canada and Canadian Airlines as an example when announcing the industry regrouping plan last month. His words were widely seen as a signal that those three new groups may continue to combine when CAAC severs economic ties with them in the near future.
Comparing with Air China and China Southern Airlines, China Eastern is more likely to be the first to join a international aviation alliance.
Hong Kong-based Cathay Pacific, a member of One World, said last week it would invest considerably in China Eastern in the near future. It had earlier expressed interests in investing in the China Cargo Airlines, in which China Eastern holds major shares.
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