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Air China aims to buy Shenzhen Airlines

(Agencies)
Updated: 2010-03-04 15:11

Air China Ltd, the nation's third- biggest carrier, intends to buy Shenzhen Airlines Co to add a hub in the south of the country.

"Shenzhen Air is very important in terms of building a strategic network," Chairman Kong Dong said today in Beijing, where he is attending a meeting of policy makers. Air China has begun an audit of the smaller carrier's assets, which should be completed this year, he said.

Air China, which owns 25 percent of Shenzhen Air, wants a hub in the Pearl River Delta to compete with Guangzhou-based China Southern Airlines Co, the nation's largest carrier. Beijing-based Air China took management control of Shenzhen Air in December after police began a probe of the smaller airline's top executive and largest shareholder, Li Zeyuan.

"A takeover would help Air China optimize its domestic network by expanding to southern China," said Jack Xu, an analyst at Sinopac Securities Co in Shanghai. "It's very complicated. The carrier has to sort out financing and get approval from the government and shareholders."

Closely held Shenzhen Air, the nation's fifth-biggest carrier, has more than 100 planes and the group company has over 14,000 employees, according to a spokesperson, who declined to be identified, citing company policy. Li can't be contacted because of the investigation, the person said.

Police began the probe in December, the carrier said at the time. Li's private company defeated an Air China-led group to get a controlling 65 percent stake of Shenzhen Air in 2005.

China has encouraged consolidation among airlines to pare losses and to build globally competitive carriers. China Eastern Airlines Corp surpassed Air China as the nation's second- biggest carrier in January after buying Shanghai Airlines Co

Air China shares are suspended from trading in Shanghai and Hong Kong pending an announcement about a possible stock sale.