Something in the air: stock deals suggest Air China and China Southern may merge
Stock ownership changes suggest Air China and China Southern may join
A company associated with Air China has emerged as the 8th largest shareholder of China Southern Airlines, the strongest hint yet of a possible merger of the mainland's two largest state-owned airlines.
China National Aviation Corporation (Group), a wholly owned subsidiary of Air China's parent, China National Aviation Holding, appeared on the list of the 10 largest shareholders of China Southern - holding 49 million shares - when the latter reported third-quarter results on Friday evening.
That stake represents 0.5 per cent of China Southern's total shares. Two financial companies under the central government - China Securities Finance Corp (CSFC) and Central Huijin Investment - were also in the top 10 for the first time. CSFC came fourth, with 2.99 per cent stake, while Central Huijin was 6th with a 0.66 per cent holding.
There was talk in the market last month that a merger between the two airlines could be on the agenda of decision-makers at the plenum meeting in Beijing as part of the wider consolidations state-owned enterprises.
The on October 22 cited "unconfirmed market talks" that the two airlines could merge, sending their stocks surging on the day. Air China and China Southern issued statements saying they were not aware of the plan.
CSFC and Central Huijin were the main companies the central government used to intervene in the summer market crash by buying stakes in 724 companies, spending more than 600 billion yuan (HK$730.33 billion).
China Eastern Airlines' third-quarter financial results last week also show the companies had been newly added to the top shareholder list, with CSFC at 5th with a 2.89 per cent stake and Central Huijin at eighth, with a 0.54 per cent holding.
Qi Qi, a lecturer at Guangzhou Civil Aviation College, said Air China would have had no reason to prop up rival China Southern's shares or vice versa.
"This shareholding supports the idea of a merger between Air China and China Southern," Qi said adding a tie-up made economic sense. China Southern's large number of narrow-body planes and strong domestic market share complemented Air China's strength in premium and international long-haul business,
Another industry insider who did not wish to be named said a corruption investigation at China Southern had helped pave the way for restructuring.
