Chinese Airlines’ Stocks Soar With News of US$232 billion Government Investment

By: EW News Desk Team   Date: 12 July 2011

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EconomyWatch, News Desk Team

 

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12 July 2011

Shares in China's top carriers – namely Air China, China Southern Airlines and China Eastern Airlines - rose yesterday as reports emerged citing the government’s interest to invest 1.5 trillion yuan (US$232 billion) in the aviation industry.

According to a Reuters report, the investment “will push consolidation among airlines to hone their international competitiveness.”

Li Jiaxiang, head of the Civil Aviation Administration of China (CAAC), told Shanghai Security News that the three top Chinese carriers were too small in scale compared to their global rivals and needed upgrading in both their hardware and software environment.

" "We should press ahead with industry alliance and consolidation via government guidance and market operations in order to form two or three carriers with a large network and global competitiveness,” said Li.

 

Since he assumed leadership of the CAAC in 2007, Li has voiced concerns over domestic carriers’ position vis-à-vis their global rivals.

Chinese carriers had a 44% combined share of the domestic passenger air market in 2010, and a combined 32% share of the mail and cargo market, Li said, a situation that should be improved through a restructuring of the industry to create “super carriers”.

 

Furthermore, the government will offer subsidies and tax rebates to its national carriers so as to boost their international competitiveness, which in turn would allow the carriers to open new international passenger and cargo routes.

The Chinese aviation industry is expected to double in size over the next five years with the construction of more than 45 new airports as well as a 5000-planes increase in fleet sizes for all the national carriers.

Li told the the Shanghai Security News that China's aviation industry would still be in its "golden era" for the next 20 years.

On Monday, China Southern Airlines closed at 8.48 yuan per share on the Shanghai Stock Exchange – an increase of 2.5 percent from the previous day. Shares for China Eastern Airlines on the hand rose by 0.6 percent to 5.32 yuan while Air China shares went up by 1.7 percent to 10.37 yuan.

Infographic Source: China Daily

 


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