China South­ern mixed own­er­ship plan uncer­tain

China Daily (Hong Kong) - - BUSINESS | MARKETS - By YANG ZIMAN yangz­i­man@chi­nadaily.com.cn

State-owned China South­ern Air­lines de­nied im­me­di­ate plans to bring other ma­jor share­hold­ers into the com­pany on Wed­nes­day — hard on the heels of reports the pre­vi­ous day of a mixed own­er­ship plan which pushed the stock price up 7.38 per­cent.

The com­pany made a state­ment say­ing par­ent com­pany China South­ern Air Hold­ing Co has been ex­plor­ing ways to push for­ward with the mixed own­er­ship re­form. Yet so far it has failed to come up with spe­cific plans.

The air­line’s shares fell 0.35 per­cent to close at 7.36 yuan ($1.06) per share on Wed­nes­day.

It was re­ported on Tues­day that in 2017, China South­ern Air­lines would bring in in­ter­net com­pa­nies and lead­ing global groups into its share­holder base to push for­ward with the mixed own­er­ship re­form.

In the coun­try’s Cen­tral Eco­nomic Work Con­fer­ence held in De­cem­ber, six Sta­te­owned en­ter­prises were des­ig­nated as pilot com­pa­nies mil­lion for di­ver­si­fy­ing own­er­ship of SOEs in 2017, in­clud­ing China Eastern Air­lines, China Uni­com and China South­ern Power Grid Com­pany Ltd.

China Eastern Air­lines took the lead in the mixed own­er­ship re­form among State-owned air­line com­pa­nies. Last July, Ctrip In­ter­na­tional, China’s largest on­line travel agency, pur­chased 3 bil­lion yuan worth of shares of China Eastern Air­lines.

Ear­lier in 2015, US com­pany Delta Air Lines Inc pur­chased 460 mil­lion shares of China Eastern Air­lines for HK$3.5 bil­lion ($451.5 mil­lion), tak­ing up 3.55 per­cent of the com­pany’s to­tal shares to be­come its big­gest out­side share­holder.

Li Xiao­jin, a pro­fes­sor of avi­a­tion eco­nom­ics at the Civ- il Avi­a­tion Univer­sity of China in Tian­jin, said that China South­ern Air­lines is likely to fol­low a sim­i­lar path to China Eastern Air­lines in re­cruit­ing out­side stake­hold­ers.

“The out­side stake­hold­ers will ex­tend the in­dus­trial chain, both up and down­stream,” Li said.

“The pres­ence of Delta Air Lines is go­ing to bring in part of the in­ter­na­tional mar­ket.”

Li said that go­ing by the cur­rent low flight fares and the in­creas­ing oil prices, com­pa­nies seek­ing to en­ter the avi­a­tion in­dus­try aimed to ex­tend their in­dus­trial op­er­a­tions in­stead of earn­ing high prof­its.

Un­like mixed own­er­ship re­forms in more prof­itable ar­eas such as the mil­i­tary and the power in­dus­try, the avi­a­tion in­dus­try was tak­ing a more pru­dent step, he added.

“In the past, ma­jor shuf­fles in the avi­a­tion in­dus­try of­ten brought about ac­ci­dents, some of which were very se­ri­ous,” Li said.

“Safety in avi­a­tion is non­nego­tiable. There­fore, air­line com­pa­nies will be very care­ful about any changes to their own­er­ship struc­ture.”

shares of China Eastern Air­lines that were bought by Delta Air Lines Inc in 2015

XIN­HUA

An em­ployee (right) of China South­ern Air­lines in­tro­duces the air­line's ser­vices to a vis­i­tor at an in­dus­try expo in Zhuhai, Guang­dong prov­ince.

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