Car­rier buys into China South­ern

China Daily (Latin America Weekly) - - 14 Business - By WANG YING in Shang­hai wang_y­ing@chi­nadaily.com.cn

Shares of Spring Air­lines surged 3.7 per­cent on the Shang­hai Stock Ex­change on Fri­day after the Shang­haibased bud­get car­rier said it would in­vest in State-owned China South­ern Air­lines.

The low-cost car­rier said that it would spend 846 mil­lion yuan ($123 mil­lion) to ac­quire 1.63 per­cent of China South­ern’s A-share non­pub­lic of­fer­ing, mak­ing it the fifth largest share­holder in the air­line. In a no­tice, China South­ern said six other in­vestors have also sub­scribed to the non­pub­lic of­fer­ing, in­clud­ing par­ent China South­ern Air Hold­ing Co, China Na­tional Avi­a­tion Fuel Group Ltd and China Life As­set Man­age­ment Co Ltd.

It also marked the sec­ond time that a do­mes­tic pri­vate car­rier is in­vest­ing in the na­tion’s three largest State air­lines — Air China, China South­ern Air­lines, and China East­ern Air­lines.

In July, China East­ern Air­lines an­nounced plans to in­tro­duce strate­gic in­vestors in­clud­ing pri­vately-owned Juneyao Air­lines in an in­vest­ment up to 11.8 bil­lion yuan.

Com­ment­ing on the Spring Air­lines move, Yu Nan, an in­dus­try an­a­lyst from Haitong Se­cu­ri­ties, said in-depth co­op­er­a­tion be­tween air­lines will not only ex­pand their flight net­work, but also com­ple­ment each other in var­i­ous ways.

Ac­cord­ing to Tan Wan­geng, pres­i­dent of China South­ern, Spring Air­lines is likely to help China South­ern ex­plore the low-cost busi­ness model.

“The com­pany is look­ing into pos­si­bil­i­ties for co­op­er­a­tion with bud­get air­lines, though their busi­ness, op­er­a­tion and prod­ucts are quite dif­fer­ent,” Tan was quoted by China Busi­ness News as say­ing.

Amid global eco­nomic un­cer­tain­ties, air­lines should join hands to com­bat neg­a­tive cir­cum­stances, added Yu.

“The in­vest­ment will help the two car­ri­ers to co­op­er­ate and pos­si­bly lead them to dif­fer­en­ti­ate busi­ness mod­els,” said Spring Air­lines in an an­nounce­ment.

Spring Air­lines is China’s largest low-cost car­rier, which has a quite dif­fer­ent cus­tomer base, prod­uct de­sign, and net­work com­pared with China South­ern. The co­op­er­a­tion will pro­mote re­source in­te­gra­tion among the two car­ri­ers and help cash in on mu­tual ad­van­tages for syn­ergy, said Spring Air­lines.

China South­ern plans to raise 9.5 bil­lion yuan to ac­quire 41 air­craft and lightweight seats for its A320 fleet.

The in­vest­ment from Spring Air­lines will fur­ther di­ver­sify China South­ern’s own­er­ship, to en­hance strate­gic co­op­er­a­tion be­tween State-owned and pri­vate-op­er­ated en­ter­prises, ThePaper.cn re­ported.

YIN LIQIN / CHINA NEWS SER­VICE

Crew mem­bers serve drinks on a flight of Spring Air­lines.

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