A major structural reorganization of China's loss-making airline industry, which will see nine firms merged into three major airline groups, will be completed within two years, state press said yesterday.
The plan is going ahead as scheduled, despite reports it could be amended or even scrapped, the China Daily said, quoting officials from China's aviation industry watchdog.
All that was needed for the reforms to be implemented fully was approval from China's cabinet, the State Council, said Liu Jianfeng, head of the General Administration of Civil Aviation of China (CAAC).
Under the plans, first outlined in 2000, China's three largest airlines -- Beijing-based national flag carrier Air China, Shanghai's China Eastern Airlines and China Southern Airlines of Guangzhou -- would swallow up two smaller firms each.
Air China would merge with China Southwest Airlines and with China National Aviation Corporation, the parent of the Hong Kong-listed firm which owns a controlling stake in Hong Kong's Dragon Air.
China Eastern would combine with Yunnan Airlines and China Northeast Airlines, with China Southern being merged with China Northern Airlines and Xinjiang Airlines.
Each of the new firms would end up with assets of around US$6 billion and a fleet of about 200 aeroplanes, the China Daily said.
Many of the difficulties in the mergers have been linked to a refusal by the big airlines to take over the debt of the smaller companies, industry sources say.
According to Monday's report, other industry observers also expressed suspicion that the merger could be delayed or even called off after China's central economic planning body, the State Development Planning Commission, became involved.
However the CAAC's Liu told the newspaper the commission had simply wanted help to fine-tune the scheme, and had already handed it to the State Council for approval.
"But establishing three multi-billion aviation companies takes time," he told the newspaper.
The mergers were necessary for China's airlines to compete effectively in the global marketplace, especially following China's recent accession to the WTO, he said.
China's air sector has suffered heavily on the wake of the Sept. 11 terror attacks on the US, despite initial confident assertions that domestic flights would maintain its buoyancy.
The big three Chinese airlines stand to lose at least 3.35 billion yuan (US$404 million) as a result of Sept. 11, state media said earlier this month.
According to previously published figures, Chinese airlines lost over two billion yuan in the first half of last year.
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