Corruption in China

China Southern Airlines graft probe nets top boss Si Xianmin after rout of senior roles

PUBLISHED : Wednesday, 04 November, 2015, 7:53pm
UPDATED : Wednesday, 04 November, 2015, 11:44pm

China Southern Airlines chairman Si Xianmin is being investigated for “serious discipline violations”, the Communist Party’s Central Commission for Discipline Inspection said on its website yesterday evening.

On the mainland, “discipline violation” is generally used as a euphemism for corruption.

Si is the highest ranking official to fall at the state-owned airline listed in Shanghai and Hong kong. It is China’s largest airline by passenger traffic. It also boasts Asia’s largest fleet of aircraft that is expected to grow to 657 by the end of the year.

The news has shaken  the mainland’s aviation circle as it marks the biggest graft probe to date into China’s booming state-owned aviation airlines. The top management at these airlines usually have career trajectories across the Civil Aviation Administration of China (CAAC) and the “Big Three” airlines – China Southern, Air China and China Eastern Airlines Corp.

LOOKING BACK: China Southern graft probe puts booming mainland airline industry on edge

But many industry insiders said they were not surprised as Si is said to have been under watch over allegations of bribery since the central government’s graft busters inspected the company late last year.

The graft probe has already resulted in the removal of five senior directors at the company –  former chief financial officer Xu Jiebo and deputy managers Chen Gang, Zhou Yuehai, Tian Xiaodong, and, most recently, Liu Qian.

China’s aviation industry is among the latest targets of Communist Party graft busters who have been making the rounds of state-owned enterprises and government bodies across the mainland.

Sources with direct knowledge of the investigation said “there is more to come” involving other airlines and leasing companies.

Si, 58, has been the chairman of China Southern since 2009. He began his aviation career in 1975 and has been with the group since 1992. He served as the listed company’s president from 2004 to 2009.

The unprecedented management reshuffle at the Guangzhou-based airline this year has fuelled speculation that the airline is in for a merger with flag carrier Air China, as rumours of a sector-wide consolidation intensified this month.

China Southern is China’s only operator of the Airbus A380 double decker aircraft. The airline has only just gained permission from the authorities to operate international routes using the A380 from Beijing to Paris.

READ MORE: Something in the air: stock deals suggest Air China and China Southern may merge

It reported a net profit of 4.66 billion yuan (HK$5.69 billion) for the first three quarters of this year, up 271 per cent compared with the same period last year.

HSBC yesterday said it had initiated coverage of the airline and had a “buy” recommendation for China Southern’s H shares with a target price of HK$7.50, and a “reduce” recommendation for its A shares with a target price of six yuan.

Analyst Jack Xu said in the report that the airline will move 100 aircraft into Beijing Daxing International Airport, the new airport for the nation’s capital, on its completion in 2019, rising to 150 by 2025.

China Southern’s shares closed 4.4 per cent higher at 8.40 yuan yesterday in Shanghai. It traded down 2.95 per cent to HK$6.25 in Hong Kong. The news broke after the market’s close.

HSBC’s forecast net profit for the airline this year is 5.89 billion yuan.

“International business is expected to be a new profit driver, helped by the zero hedge position and robust international demand. CSA has doubled its capacity on the Japan and Thailand routes, while the Netherlands and US routes have grown 50 per cent year on year,” Xu wrote.

The CAAC, Air China and China Eastern are also among those inspected by the CCDI. But no executive of Si’s level has been probed yet.

At least three CAAC officials have been taken away on suspicion of corruption, according to mainland media.

Beijing Capital Airport said in a notice to the Hong Kong stock exchange on September 17 that its general manager, Shi Boli, had resigned from his post and all directorships at the firm  after media reports that  the  former CAAC official  had also been taken away for investigation.