China Southern Air buys two airlines

China Southern Airlines Co Ltd (中國南方航空), the nation's largest carrier, will buy 16.9 billion yuan (US$2 billion) worth of assets from its parent to expand flights as demand for air travel increases.

The company, based in Guangzhou, will buy China Southern Airlines Northern Co (中國北方航空) and Xinjiang Airlines (新疆航空) from its parent, it said in a statement to the Shanghai stock exchange yesterday.

China Southern's parent bought Northern and Xinjiang Airlines in 2002 as part of an industry overhaul.

Hong Kong-listed China Southern said the deal will enable the company to start services to northeast and northwest China.

Northern Co, based in Shen-yang, operates 106 domestic routes while Urumqi-based Xinjiang Airlines has 42.

Rising urban incomes are boosting air travel in China, the world's fastest-growing aviation market. Passenger traffic within China is forecast to grow at an annual 8.1 percent in the next two decades, compared with a global average of 5.2 percent, according to Boeing Co.

China Southern will take over about 15 billion yuan of debt from the two airlines.

Excluding the debt, the company will pay 1.9 billion yuan to its parent, which will be funded by cash and a US dollar loan, the statement said.

China Southern said the purchases will increase its fleet to 214 planes from 139 at the end of June.