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Produced by Aspire Aviation Daniel Tsang August 2011
Prologue .......................................................................................................................................................................... P.3 List of Major Chinese Airline Groups ......................................................................................................................P.4 – P.6 Detailed Shareholding Structure of Chinese Carriers ............................................................................................. P.7 – P.17 Financial Results of Chinese Carriers in latest FY .............................................................................................. P. 18 – P. 24 Conclusion – Chinese Airlines Fly High ............................................................................................................. P. 25 – P. 29
Copyright @ Aspire Aviation 2011. All Rights Reserved. This report cannot be reproduced, in whole or in part, including illustrations, in any form without the written permission of the publisher. http://www.aspireaviation.com Aspire Aviation – where aspirations take flight.
China is projected to be one of the largest domestic air travel markets after the United States in the next 20 years, and its traffic is set to exceed 1 billion passengers by 2029, according to Boeing Commercial Airplanes (BCA)’s latest Current Market Outlook (CMO) released in 2010. Yet the shareholding structure of major Chinese carriers has been a topic whose understanding is little or limited amid the relatively lack of transparency of Chinese carriers. Aspire Aviation's report provides a clear picture of major Chinese airline groups, their subsidiaries and their respective shareholding structures, and is a must-have for airline industry personnel who want to reap the potential benefits of this huge market. Importantly, Chinese carriers have arguably got rid of their poor reputation of operating gas-guzzling, unreliable Russian-built turboprops several decades ago and have developed into mega carriers that focus on their respective hubs in the biggest cities in the most populous country in the world. Boosted by different kinds of state supports which include the financial injection during the unprecedented 2007-2009 global financial crisis, the “Big Three” – Air China, China Eastern Airlines and China Southern Airlines have managed to keep their heads above water and have been playing leadership roles in consolidating struggling unprofitable domestic carriers to help make the air transportation system in China a leaner one, such as the now defunct East Star Airlines and Shanghai Airlines, which has become part of the China Eastern Airlines Group. With 80% of the country’s air space still under control by the military, it is apparent that structural inefficiencies and bureaucracies regrettably exist, coupled with incompatibility with international accounting standards and an ever-worsening delay problem owing to the lack of air space, these are impediments hampering Chinese airlines from realising their fullest potentials and become one of the world’s most profitable ones.
China Eastern Air (Yunan) Ltd. China Eastern Air (Wuhan) Ltd.List of Major Chinese Airline Groups 1.) Air China Group Air China Shandong Airlines Shenzhen Airlines Air China Cargo Henan Airlines Kunming Airlines Jade Air Cargo Beijing Airlines Tibet Airlines China Eastern Airlines Group China Eastern Airlines Shanghai Airlines China Cargo Airlines Shanghai Airlines Cargo China Eastern Air (Jiangsu) Ltd.) 2. China United Airlines Joy Air 4 .
3.) 4.) - China Southern Airlines Group China Southern Airlines Xiamen Airlines Guangxi Airlines Zhuhai Airlines Guizhou Airlines China Southern (Group) Shantou Airlines Chongqing Airlines HNA Group Hainan Airlines Lucky Air Capital Airlines (formerly known as “Deer Air”) Tianjin Airlines Yangtze River Express Chang’an Airlines China Xinhua Airlines Grand China Air West Air 5 .
) - Sichuan Airlines Group Sichuan Airlines Chengdu Airlines Hebei Airlines 6.) China Postal Airlines 11.) Juneyao Airlines 10.) Donghai Airlines 6 .) Okay Airways 7.) China Express Air 9.) Spring Airlines 8.) Great Wall Airlines 12.5.
) Air China Group BlackRock. China National Aviation Holding Company (CNAH) 40.43% 20% 51% Air China Limited 51% 49.08% 29.99% Cathay Pacific Airways 49% 19.8% Aviation Group 42% Corporation Shandong Airlines 10% Sichuan Airlines 31% 80% Beijing Airlines 20% Beijing Provincial Gov’t 51% 51% % Air China Cargo Air Macau STDM 14% Lufthansa Cargo 25% Shenzhen Airlines 100% 80% Henan Airlines Wang Qingmin 20% Kunming Airlines 51% Jade Air Cargo China Southern Airlines 39% Shanghai Airlines 10% Tibet Airlines 7 . Inc.1.4% Shandong 22.4% 100% China National Aviation Corporation Group (CNAC) TAP Portugal 2.27% 11.
29% of H shares HKSCC Nominees Limited 55.79% 42.) China Eastern Airlines Group China National Aviation Corporation (CNAC) 5.16% of H shares China Eastern Air Holding Company 100% CES Global Holdings (Hong Kong) Limited China Southern Airlines 39% Sichuan Airlines 30.09% 5% 95% Joy Air 10% Shandong Airlines China Aviation Supplies (CASGC) 20% China United Airlines 80% 10% 100% China Eastern Airlines 62.2.6% China Eastern Air (Jiangsu) 70% 30% 56% 68% China Eastern Air (Wuhan) China Eastern Air (Yunan) China Ocean Shipping (COSCO) Aviation Industry Corporation of China (AVIC) Shanghai Airlines 100% Shanghai Airlines Cargo China Cargo Airlines 8 .84% 17.
3.32% Nan Lung Holdings Limited 9.) China Southern Airlines China Southern Air Holdings Corporation 59.08% 60% Chongqing Municipal Development & Investment Company 40% Chongqing Airlines China Southern Airlines 60% 60% 95% Guangxi Airlines 60% Zhuhai Airlines 60% Guizhou Airlines 70% Xiamen Airlines China Southern (Group) Shantou Airlines Southern Airlines Group Shantou (different from the first one) 40% 39% Xiamen Construction & Development Group Shandong Airlines 10% Sichuan Airlines 10% Shanghai Airlines 9 .
4.5% 100% Chang’an Airlines Hainan Airlines 60% China Xinhua Airlines 8. 31.4% 100% Grand China Air 35% 46% 83.1% Changjiang Leasing Co.6% 18.2% Hainan Meilan Int’l Airport Hong Kong Airlines Hong Kong Express 1.2% Tianjin Airlines 15. West Air 48.8% 48.1% .3% Tianjin Port Free Trade Zone Investment Co.62% 12. American Aviation LDC 10 3.) HNA Group HNA Group Hainan Provincial Gov’t George Soros 70% Deer Air Co.6% Yangtze River Express Grand China Airlines Holding Co. Ltd 100% Capital Airlines (formerly Deer Air) 46% 35% Jianying Investment Ltd Lucky Air 30% BTG 68% 32.
5. Chengdu Airlines Hebei Airlines 48% 11 .) Sichuan Airlines Group Shandong Airlines China Southern Airlines Shanghai Airlines 10% 39% 10% Sichuan Airlines 41% Chengdu Communications Investment Group Commercial Aircraft Corporation of China (COMAC) 11 % 97% 3% Shenyang Zhongrui Co.
Ltd. 100% Spring Airlines 12 .) Spring Airlines Shanghai Spring International Travel Service Co.) Okay Airways Tianjin Datian W Group (bought from Juneyao Group) 63% Okay Airways 7.6..
) China Express Air Cathay Fortune High Zero Tampines International 40% 25% 24% China Express Air 9.) Juneyao Airlines Juneyao Group 11% Others 100% Juneyao Airlines 13 .8.
Ruiti Investment Co 20% 31% 39% 10% Tibet Air 14 .) Tibet Air (to be launched in 2011. Air China Sanli Investment Co.10. no web site yet) Tibet Investment Co.) China Postal Airlines Chinese Postal Bureau China Southern Airlines 51% 49% China Postal Airlines 11. 3 A319s ordered.
) Great Wall Airlines Singapore Airlines China Eastern Air Holdings (bought from “Beijing Aerospace Satellite Application Corporation (BASA)”) in Mar 10 100% Singapore Airlines Cargo EVA Air China Ocean Shipping Co. 16% 51% 16% 17% Great Wall Airlines 15 .11.
) Donghai Airlines^ Yonggang Donghai United Group Shenzhen Donggang Trade 25% 25% 51% Donghai Airlines 16 . data compiled through Centre for Asia Pacific Aviation (CAPA) is consistent with those obtained from Wikipedia.^ Information cannot be verified through the official web site due to a web site glitch. However. 12.
13. 1 Source: Air Transport World. boosting its share in the carrier to 49%.) Shenzhen Airlines^ Air China Shenzhen International Holdings 51% 49% 1 Shenzhen Airlines Shenzhen International Holdings purchased a 24% stake in Shenzhen Airlines for CNY789 million in May 2011. accessible on http://atwonline.com/airline-finance-data/news/shenzhen-airlines-sells-24-stake-local-government-0515 17 .
005 1.62% 75.27% 483.Profitability Report on Chinese carriers Air China (public) Reporting Period 1st quarter 2010 2 quarter 2010 First-half 2010 3 quarter 2010 4th quarter 2010 Full-Year 2010 1 quarter 2011 st rd nd Profit / (Loss) (CNY mln) 2.7% 150% (23%) 18 .520 4.23% 60.140 12.170 2.33% 29.610 5.670 YOY increase (decrease) 121.170 2.
2010 – 31st December.51% 79.71% 111.32% 99.6 205 338 543.5% Shenzhen Airlines (private) Reporting Period FY2009 1H 2010 19th April.5 YOY increase (decrease) 59. 2010.5 169.44% 89. 2010* Profit / (Loss) (CNY mln) 500 HK$415 mln (CNY 355 mln)¹ HK$143 million (CNY119.7 mln) YOY increase (decrease) 1823% N/A N/A ¹ Data from Shenzhen International Group’s 2010 interim report.4 110.2% 82. 19 . Converted to CNY based on exchange rate provided by Bloomberg on 24th November.Shandong Airlines (public) Reporting Period 1st quarter 2010 2 quarter 2010 First-half 2010 3rd quarter 2010 YTD 2010 1 quarter 2011 st nd Profit / (Loss) (CNY mln) 94.
Not Available 20 . Converted to CNY based on exchange rate provided by Bloomberg on 17th May. 2011.* Data from Shenzhen International Group’s filing on Hong Kong Stock Exchange (HKEX) for May 2011’s purchase of an additional 24% stake in Shenzhen Airlines. Jade Air Cargo (private) .
524.3) (91) (42) YOY increase (decrease) (28.760 3.45% n/a 2590% 31.83% 4.80% 78.5% Profit / (Loss) (CNY mln) 26.200 5.150 0.25% N/A YTD 2009 (134) ¹ Latest available data before SAL was acquired by CEA. 21 .China Eastern Airlines (public) Reporting Period 1st quarter 2010 2 quarter 2010 First-half 2010 3rd quarter 2010 4 quarter 2010 Full Year 2010 1 quarter 2011 Shanghai Airlines (private) Reporting Period¹ 1st quarter 2009 2 quarter 2009 First-half 2009 3 quarter 2009 rd nd st th nd Profit / (Loss) (CNY mln) 769 990 1.72%) N/A (1140)% 90.80% 13.010 YOY increase (decrease) 1819.300 1.3 (117.
China Southern Airlines (public) Reporting Period 1st quarter 2010 2 quarter 2010 First-half 2010 3rd quarter 2010 4 quarter 2010 Full-Year 2010 1 quarter 2011 Xiamen Airlines (private) 2008: CNY210 million st th nd Profit / (Loss) (CNY mln) 1.6%) 22 .041 683 5.800 1.197 in 2nd qtr 09) 8184% 970.19% .77% 1797% 1657% (12.419 652 2.240 YOY increase (decrease) 539.071 3.(due to a loss of $0.
010 273.2% Spring Airlines (private) Reporting Period FY2008 FY2009 First-half 2010 Jan – August 2010 FY2010 Profit / (Loss) (CNY mln) 20 158 160 400 470 YOY increase (decrease) (70%) 790% 390% N/A 197% 23 .7% 227.Hainan Airlines (public) Reporting Period 1st quarter 2010 2 quarter 2010 First-half 2010 3rd quarter 2010 4 quarter 2010 Full-Year 2010 1 quarter 2011 st th nd Profit / (Loss) (CNY mln) 250 340 590 1.8% 598% n/a n/a 8.230 3.3 YOY increase (decrease) 693% 49.220 1.
Chengdu Airlines. Tibet Air has not entered commercial operations yet at press time. Donghai Airlines is unavailable. China Express Air. whereas data for Chongqing Airlines. China Postal Airlines. Sichuan Airlines. Hebei Airlines.5 108 416 YOY increase (decrease) N/A 839% 285% Okay Airways Reporting Period FY2008 FY2009 First-half 2010 Profit / (Loss) (CNY mln) N/A (500) YOY increase (decrease) N/A N/A Centre for Asia Pacific (CAPA) said in a paid consultation paper that Okay Airways made a “profit” in H1 2010 Note: Sufficient data for Shenzhen Airlines. 24 . Great Wall Airlines. Xiamen Airlines is not available.Juneyao Airlines (private) Reporting Period FY2008 FY2009 FY2010 Profit / (Loss) (CNY mln) 11.
according to Boeing’s latest China market outlook.96 billion) worth of subsidies to ride through those unprecedented turbulent times. 25 . coupled with its majority stake in Air Macau and its strong partnership with Hong Kong-‐based Cathay Pacific. Beijing-‐based Air China has been leading the way and has so far been the most profitable one among the state-‐owned carriers and this trend seems to have no signs of abating as it posted a CNY9. this looks promising to strengthen CA’s foothold in the lucrative Shanghai freight market and enable CA’s profitability to take flight in the foreseeable future. which.Chinese Airlines Fly High In a dramatic turnaround from the 2007-‐2009 global financial crisis during which the “big three” – Air China. Notwithstanding this glamourous feat. its Shanghai-‐based cargo joint venture with partner Cathay Pacific Airways. Moreover. is expected to commence operations shortly at press time.26 billion) collective profit for the first nine months of this year amid booming domestic air travel market whose traffic is projected to exceed 1 billion passengers per year by 2029. resulted in a significant boost in its presence in southern China. the Shanghai passenger market remains one of Air China’s weaknesses now that its arch-‐rival.86 billion profit for the first nine months of 2010. China Eastern Airlines (CEA) has merged with Shanghai Airlines (SAL) and this seems to be the only white spot that Air China does not have a strong presence in following CA’s acquisition of a 51% stake in Shenzhen Airlines earlier this year. they have posted a CNY15 billion (US$2. China Eastern Airlines (CEA) and China Southern Airlines collectively received CNY13 billion (US$1. Phoenix keeps soaring higher Having recorded a staggering 150% year-‐over-‐year increase in its 2010 yearly profit to CNY12 billion. according to Cathay Pacific chairman Christopher Pratt. however.
Eastern Revival China Eastern Airlines. On the cargo front. CEA is still facing a lot of challenges on many fronts.5 million and a 2010 first-‐half profit of CNY335 million. respectively. meanwhile. are faring reasonably well and have posted a nine-‐month profit of CNY543. Moreover.590% increase over the prior-‐year period. having posted a first-half profit of CNY2.3 billion.071 billion which represents a dramatic 8184% increase over the prior year and a full-year 2010 profit of CNY5. an 1657% increase over the prior year. Its affiliates. which was mainly owing to its merger with Shanghai Airlines (SAL).8 billion. the merger between China Cargo Airlines and Shanghai Airlines Cargo is a step in the right direction to consolidate their operations before the formidable player Air China Cargo. including the need to further develop a considerably more comprehensive route network based on a sound hub strategy to fend off the threat arising from Shanghai-‐based low-‐cost carrier (LCC) Spring Airlines which has a significantly lower cost base. consistently posting healthy profits throughout 2010. 26 . service attributes to maximise its revenue streams which may bode well for it and boost its profitability. Steadily-‐Performing China Southern China Southern Airlines has been a steadily performing carrier. Shandong Airlines and Shenzhen Airlines. posted a 2010 full-‐year profit of CNY5. commences operations. China Eastern Airlines could up-‐gauge its product offerings. a cargo joint venture between Air China and Cathay Pacific Airways. under the leadership of Liu Shaoyong who had successfully turned China Southern Airlines into the largest Chinese carrier in terms of the number of passengers. Despite the cost and revenue synergies that CEA is starting to reap from its merger with SAL. in light of the booming Chinese financial industry and an increasing size of middle class of which Shanghai is a key financial hub. an astonishing 2.
Hainan Airlines has weathered the global financial crisis without receiving any state aid and has been solidly profitable throughout 2010 and has posted a 2010 full-year profit of CNY3. however. China Southern Airlines should price its A380 flights appropriately as its relatively insufficient amount of frequencies and inadequate service attributes when compared to other A380 operators such as Emirates Airline and Singapore Airlines (SIA) put its ability to charge a price premium at doubts.41 billion loss recorded in the prior year. has an unrivalled and ambitious expansion plan that is much more than its current profitability can tell. Chang’an Airlines and China Xinhua Airlines and merge with them into a seamless operation.01 billion. China Southern Airlines should build a more comprehensive international network and add more frequencies to prevent traffic spill to its neighbouring competitor Cathay Pacific Airways now that Dragonair offers a daily flight to CZ’s hub at Guangzhou. Originally launched in late 2007. of which the latter would acquire all the remaining shares of its subsidiaries – Shanxi Airlines. China’s fourth-largest carrier by fleet size. Grand China Air was created and intended to be the parent company of Hainan Airlines.9 trillion in 2009 and the labour force mainly consisting of expatriates from other provinces. However.With the Guangdong province continuing to be the economic powerhouse of the Chinese economy and its gross domestic product (GDP) surpassing CNY3. which would then compete with Chinese flag carrier Air China in Beijing effectively. Regrettably the painfully slow pace of the consolidation within the HNA Group is significantly hampering the airline from achieving its fullest potential and delivering an unmatched profitability level. 27 . Hainan’s Ambitious Expansion Unlike most of its peers. With its first A380 delivery due in 2011 summer. a significant reversal over the CNY1. the burgeoning domestic traffic is likely to be sustained in the foreseeable future. No phrases can ever characterise the progress of consolidation within the HNA Group like the old saying of “it is easier said than done”.
etc that have a wide coverage. travellers’ and employees’ in truly creating a seamless operation with a united identity. Worse yet. Luanda. The seemingly most significant barriers preventing Hainan Airlines from realising its fullest potential and becoming the most successful private Chinese carrier are its complicated shareholding structure and the confusing corporate identity from a traveller’s perspective and therefore Hainan Airlines may consider hiring the world-renowned consulting firm Bain & Co. coupled with a planned capacity increase of 15% in 2011. all these subsidiaries. the vision of being the most successful private Chinese carrier looks achievable and surmountable. often resulting in confusions over the identity of each carrier. whereas the “big three” are all 3-star carriers. little progress has been made and only Shanxi Airlines has been successfully merged into Hainan Airlines. should the challenges facing the carrier be overcome. giving it the same rating as some of the most recognised names in the global air transport industry. Emirates Airline.From the restructuring programme was launched in 2007. just to name a few. share the same aircraft livery and brand design but with different names. despite the high quality of services that they deliver which was reaffirmed after being designated as China’s only “4-star airline” by London-based Skytrax in 2009. LCCs Blossom Meanwhile. common employment contract. Brussels. thereby minimises its total operational cost . Lufthansa and British Airways (BA). the low-cost sector of the Chinese aviation industry is also blossoming. Further taking into account its international presence which includes destinations such as Seattle. 28 . to increase the pace of consolidation within the HNA Group as its invaluable insights in helping Delta/Northwest and United/Continental to integrate may turn out to be in not only Hainan’s best interest. including Hong Kong Airlines and Hong Kong Express in which HNA Group holds a 45% stake in each of them. but also its shareholders’. Moscow. such as Swiss International Air Lines. Pertersburg. Toronto. with virtually all the low-cost carriers (LCCs) being profitable so far in 2010. Berlin. St.
reported a 2010 first-half profit. In conclusion. namely Cathay Pacific. Similarly. that even OK Airways. which used to be on the brink of insolvency before Tianjin Datian W Group acquired a 63% stake in the carrier in March 2010 and prevented it from failing. according to the Centre for Asia Pacific Aviation (CAPA). said that it expects its 2010 full-year profit to soar to a record-breaking CNY400 million. there is undoubtedly a brighter future lying ahead of them. including the inflexibility in adjusting the level of fuel surcharges due to legal constraints. the potential of soaring fuel prices and the catch-up that needs to be played to bring their business propositions to be ones that are as sustainable as those of the industry leaders. Juneyao Airlines. As aforementioned. coupled with the cheap airfares that significantly stimulated passenger demand. the burgeoning Chinese domestic economy seems to be so robust. 2010. Shanghai-based low-cost carrier Spring Airlines posted a record-breaking eight-month profit of CNY400 million which surpassed the previous record of CNY158 million recorded in FY2009. 29 .Owing to the Shanghai World Expo that ran from May 1 to Oct 31. Singapore Airlines (SIA) and Emirates Airline. also based in Shangai. although there are still many challenges facing Chinese carriers. waiting to be explored. Spring Airlines can very well steal a march on China Eastern Airlines (CEA) and snare away its lower-end customers with the LCC’s cheap airfare that ran as low as CNY99. In the meantime.
com Phone: +852 6383 3471 Twitter: http://twitter.com 30 .Aspire Aviation – where aspirations take flight.aspireaviation.com/aspireaviation e-mail: webmaster@aspireaviation. URL: http://www.
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