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China: three is the magic number
01 December 2004
It may have taken almost three years, but the consolidation of China's state-owned carriers is almost complete. Dominic Jones looks at how it affects their balance sheets.
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China Southern
The major consolidation drive for China's big three airlines is finally nearing conclusion. But while it should mean a more stable operating environment for Chinese airlines, the process has added additional debt to balance sheets already straining under high levels of gearing.
It may make the carriers' routes more efficient, but, all three airlines require significant revenue growth if they are to avoid major financial difficulties.
Air China's December initial public offering concludes several years of restructuring and consolidation following the acquisition of China Southwest Airlines and CNAC-Zhejiang Airlines.
In the case of China Southern Airlines, the company signed a sale and purchase agreement for the business, assets and debts of China Northern Airlines and Xinjiang Airlines on November 12. China Southern Air Holding Company, the controlling shareholder of China Southern, already owned Northern Airlines and Xinjiang Airlines.
Su Liang, China Southern's company secretary says that Rmb16.9 billion ($2 billion) of assets and Rmb15.1...
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