Airlines on Global Flight, New Tie-Ups Ahead? 航空公司环球飞行，未来有新合作？

By newsdoug on June 6, 2012

Sichuan airlines goes international A sudden flurry of aviation news in the Chinese media leads me to suspect the government has issued a new directive for the country’s airlines to be more global, setting the stage for what could be an interesting worldwide expansion that could even include some mergers and acquisitions. Of course, I’m ultimately quite cynical about this kind of government directive, if that’s indeed what is driving this recent flurry of news, as it’s a typical move driven by central leaders in Beijing rather than market forces. But that said, I shouldn’t downplay the importance of support from Beijing for this new global drive, since the success of any global expansion will clearly require such support. Let’s look at the flurry of news first to give a flavor of what’s happening. Leading off the reports, Sichuan Airlines is in the headlines as it becomes one of China’s first regional carriers to launch international service to a Western market, in this case to the Canadian city of Vancouver. (company announcement) On the same day of the announcement, the China Daily, which focuses on global readers, also has 2 prominent stories centered on a recent drive by the nation’s airlines to become more global. Neither of those stories contains any hard news, but instead both are focused on efforts by China’s big carriers to recruit more foreign staff, especially flight attendants, to better serve international travelers. (English article) To underscore the internationalization message, the China Daily also contains another article saying Airbus will soon make its first sale to a non-Chinese customer for planes built at its joint venture in the city of Tianjin, with plans to deliver a jet to AirAsia Group in December. This flurry of stories comes just 2 months after China Eastern (HKEx: 670; Shanghai: 600115; NYSE: CEA), one of China’s top 3 carriers, announced plans to partner with Australia’s Quantas (Sydney: QAN) to launch a China-focused regional budget airlines based out of Hong Kong. (previous post) The timing behind all these announcements seems a bit too close to be coincidental, hence my earlier assertion that the airlines are probably acting on a new directive from Beijing to be more international. I’m not normally a big fan of airline stocks, but in this case a new global drive could open some interesting possibilities that might make these and other regional airline stocks interesting buys for their short term potential as acquisition targets and also joint venture partners. Air China (HKEx: 753 Shanghai: 601111), another of China’s top 3 carriers, already has a strong international partner in Hong Kong’s Cathay Pacific (HKEx: 293). But look for potential new tie-ups between the other 2 big carriers, China Eastern and China Southern (Shanghai: 601766; NYSE: ZNH; HKEx: 1055), and also perhaps even some deals involving the smaller carriers like Sichuan Airlines as part of this new international drive.

Bottom line: A recent flurry of moves by Chinese airlines indicates they may be embarking on a drive to become more global, setting the stage for a new wave of potential international tie-ups.

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