China Southern mixed ownership plan uncertain

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

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 State-owned enterprises were designated as pilot companies 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 Civil 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."