Economy

Air China says Shenzhen Airlines to retain brand

By Hou Lei (chinadaily.com.cn)
Updated: 2010-03-23 21:47

Shenzhen Airlines will retain its brand after Air China gains control, Tuesday's Beijing Times reported.

Huang Bin, Air China's board secretary, told the Beijing Times Monday that Shenzhen Airlines will not change its place of registration and will keep its logo as well as maintain the current market positioning.

Air China said Sunday it will gain control of Shenzhen Airlines, the country's fifth largest carrier, through a 682.1 million yuan ($100 million) capital injection, increasing its stake to 51% from the current 25%.

Another shareholder, Total Logistics Co., also injects capital with Air China and will raise its stake from 10% to 25%.

The stake of Shenzhen Huirun Investment, which is Shenzhen Airlines controlling shareholder now, will fall from the current 65% to 24% after the other two shareholders increase their stakes.

When asked whether Air China is interested in this 24%, Huang said the carrier now has no plan to further raise its stake in Shenzhen Airlines.

Analysts believe that the deal could have a significant impact on the market.

"Currently, Air China, China Eastern and China Southern have 23%, 24% and 29% shares respectively in the market. Air China's share may increase to 30% (after the deal),” said Zou Jianjun, an associate professor with Civil Aviation Management Institute of China, according to Beijing Times.

Industrial analyst Li Lei told the newspaper that the deal is good for both Air China and Shenzhen Airlines, as the former could further strengthen its foothold in southern China while the latter may expand its businesses to other parts of the country by means of Air China's brand name influence.

In 2005, Li Zeyuan, the boss of private company Shenzhen Huirun Investment, won 65% shares of Shenzhen Airlines together with another firm in a bid of 2.72 billion yuan ($398.8 million). Li is now under police investigation for economic crimes.