China Southern set to join SkyTeam alliance
Deal will open carrier's domestic network to global traffic
China Southern Airlines will tie the knot with the SkyTeam Alliance next month after a two-year courtship, say SkyTeam executives.
The alliance's top managers will meet in Guangzhou on June 28 to sign an agreement giving SkyTeam its first mainland partner and only its second member airline in the booming Asian travel region.
It will signal a long-awaited breakthrough into the promising China market for SkyTeam, the world's second-biggest alliance by passenger traffic with about 22 per cent of the global market.
But some of SkyTeam's members have found profits hard to come by of late. Northwest Airlines and Delta Airlines are in Chapter 11 bankruptcy protection in the US, while losses continue to widen at Alitalia and AeroMexico.
Star Alliance, which provisionally welcomed Shanghai Airlines and Air China this month, is No1 with a 30 per cent share.
SkyTeam's influence is expected to help China Southern develop a better two-way flow of passengers on its growing network of international routes. Mainland carriers, which lack a professional image in the west, struggle to fill aircraft returning to China from overseas.
'One of the benefits of membership for China Southern is that the agreement will open its domestic network to an international traffic feed,' said Paul Dewberry, head of Asia-Pacific transport research at Merrill Lynch.
'SkyTeam in return gets access to China's biggest domestic carrier. But we don't expect the partnership to change China Southern's earnings outlook.'
The carrier lost 665 million yuan in the first three months. Mr Dewberry expects it to lose 600 million yuan for the year and has a sell on the stock, which has badly lagged the H-share index this year.
The agreement will leave only China Eastern Airlines among the mainland's 'big three' carriers without a membership in an alliance, heightening expectations that a deal with Oneworld, the industry's No3 group, is imminent.
Oneworld has yet to sign a mainland partner.
The full integration of China Southern, which officially began discussions with SkyTeam in August 2004, is expected to take a year. It will have to train multilingual personnel for all aircraft and airports it serves and its transition to e-ticketing will have to speed up. Fellow SkyTeam member Continental Airlines has said it will end interlining agreements with any carrier not online by December.
