Are China Southern Airlines and Air China about to merge?
Speculation about mergers among China's airline companies have emerged after the country unveiled plans in September to reform state-owned enterprises.
Speculation about mergers among China’s airline companies have emerged after the country unveiled plans in September to reform state-owned enterprises.
China Southern Airlines and Air China are the latest state-owned companies rumored to have merger plans, but both companies denied the reported rumor Oct. 22, according to China Economic Net.
Both state-owned carriers said they have not received any information from the government about the rumored
If the merger of the two Chinese carriers takes place, their combined fleet of 794 aircraft, as of the end of 2014, will be ranked among the world’s top three airline companies in terms of fleet size, rivaling American Airlines and Delta Air Lines, earlier media reports said.
The Shanghai Securities News also reported another speculated consolidation of China’s state-owned carriers that emerged before the rumored merger of China Southern Airlines and Air China.
The Chinese government has been reported to be considering a plan to merge the cargo departments of Air China, China Southern Airlines and China Eastern Airlines to form the largest freight carrier in Asia. The report has been denied by the authorities.
China published guidelines on state-owned enterprise reforms in mid-September, aiming at building more robust and healthy business controlled by the government by 2020.
The Chinese government plans to introduce private investors to state-owned companies categorized as “for-profit entities” and to encourage these companies to go public.
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Analysts expect to see consolidation of state-owned companies in five areas — nuclear power, aviation, shipping, defense and railways — under the new round of reforms.
According to Shenwan Hongyuan Securities, 43 Chinese state-owned companies made it on to the list of the world’s top 500 companies last year, mainly in the defense and petrochemical sectors.
The Chinese government is likely to push for consolidation in the aerospace, aviation and transportation sectors, given the country’s less significant presence in these industries, the brokerage said.
Li Jin, head of research at the China Enterprise Research Institute, said that a top-down approach will be required in pushing through the state-owned enterprise reforms, since companies might not be willing to let go their profitable businesses.