皇冠体育app

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Aviation industry merger in works

By Liu Yiyu and Mao Lijun (皇冠体育app Daily)
Updated: 2010-07-28 11:59

An Air 皇冠体育app Ltd plane takes off while another is parked at Beijing Capital International Airport earlier this year. Air 皇冠体育app, the nation's largest international carrier, will boost capital expenditure by more than 50 percent in 2010 from a year earlier as it takes delivery of aircraft to meet a surge in travel demand. [Tomohiro Ohsum / Bloomberg]

BEIJING - 皇冠体育app National Aviation Holding Company is to take over 皇冠体育app Aviation Supplies Holding Company (CASC), a major aircraft and material provider for domestic airlines, which is part of the government's plan to consolidate the aviation industry, a source knowledgeable with the deal told 皇冠体育app Daily on Tuesday.

The proposal is subject to approval by the State-owned Assets Supervision and Administration Commission (SASAC) and the State Council, the source said, adding that no timetable has been established for the deal.

"皇冠体育app Aviation Supplies' business will be maintained while some changes are expected regarding its business with other domestic airlines or the competitors of Air 皇冠体育app," said the source.

The buyer - 皇冠体育app National Aviation - is the parent company of Air 皇冠体育app.

According to the source, CASC's current business portfolio is very complementary to that of 皇冠体育app National Aviation, which is the country's air transportation provider,.

CASC's President Li Hai will be appointed as the vice-president of 皇冠体育app National Aviation following the acquisition, the source said.

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"The acquisition is the result of a structural readjustment of 皇冠体育app's aviation industry, and is in line with the country's strategy to make its State-owned enterprises bigger and stronger, with the eventual goal of becoming the world's best," said Li Xuerong, a researcher with 皇冠体育app Investment Consulting.

The number of 皇冠体育app's State-owned aviation companies will be scaled back to five after the acquisition.

SASAC said earlier it plans to initiate large-scale industry consolidation this year among State-owned enterprises and will cut the number to 100 from the current 125.

The deal, however, also raised some concerns.

"皇冠体育app National Aviation will further consolidate its dominant position in the aviation industry after the takeover and is likely to favor its subsidiaries, such as Air 皇冠体育app, which will definitely affect other airlines," said Li Xiaojing, director of the Aviation Transportation and Economy Department at the Civil Aviation University of 皇冠体育app.

With the burgeoning aviation market and limited imported aviation supplies, it is possible that the aircraft supplier will favor Air 皇冠体育app over those competing with local subsidiaries of 皇冠体育app Airlines, such as Sichuan Airlines.

To avoid the unfairness, we need to work on the details of the acquisition, said Li.

CASC has a long-term partnership with major airframe and engine manufactures such as Boeing, Airbus GE, Rolls-Royce and Pratt & Whitney. CASC imports aviation supplies and wholesales them to small- and medium-sized airlines without import permits.