Tuesday, February 26, 2008

China Eastern's rejection of Air China puts it at odds with China's civil aviation minister

Li Jiaxiang was Air China chairman
but is now boss of the CAAC


China Eastern has formally rejected a proposal by Air China's parent China National Aviation (CNAC) for a tie-up between China Eastern and Air China.
In a rather frank letter to the Hong Kong stock exchange China Eastern accuses CNAC of being insincere, failing to properly think through its proposal and it says there is a lack of trust between the two sides.
Instead China Eastern says it has more to gain by working with an overseas strategic investor, namely Singapore Airlines.
What is puzzling is that China Eastern also says that it is rejecting the CNAC proposal on the grounds that there is uncertainty over whether the proposal would get the necessary regulatory approvals.
But the regulator is the Civil Aviation Administration of China which is now headed by Li Jiaxiang.
Li was effectively appointed to the top job in January and prior to that he was chairman of Air China and the chief architect behind the proposed tie-up between Air China and China Eastern.
Li's predecessor at the CAAC, Yang Yuanyuan, had wanted China's 'big three' carriers to remain separate and to compete against each other but Li is of the view that Air China and China Eastern should come together to create a much larger - and supposedly stronger - carrier that can compete more effectively against the foreign carriers moving into China.
If the head of the CAAC is behind the tie-up between Air China and China Eastern, I don't see how getting regulatory approval could be an issue.

No comments: