By Huang Hai
Published: 2008-01-03

In the mean time, the airline had neglected its domestic routes and resulted in its domestic market share to drop from 37.6 percent to a mere 15 percent by 2001. The scenario had set Li thinking of re-positioning and re-strategizing.

In 2002, with approval from the State Council, Air China International, China National Airlines and China Southwest Airlines were merged into one new Air China emphasizing on both domestic and international routes.

By 2003, Air China's operations entered a new era and strengthen its grip on the market economy mechanism. It promoted Beijing as the international hub, Shanghai as a global gateway and Chengdu as the domestic regional hub to widen its service coverage.

In December of the same year, Air China joined the Star Alliance, an international airlines network for cooperation. The move has enabled Air China to reach out to 855 destinations in 155 countries without injecting extra investment or increasing its fleets.

Advancing Through Consolidation
As Li has strong conviction in consolidating Chinese airlines under the tagline of "alliance-merger-cross shareholding”, he is against Singapore Airline's move to become a major shareholder in China Eastern Airlines.

He considers the present of foreign airlines in China have eroded the market share of Chinese airlines. In the passenger flights sector, foreign players have garnered 56% of the market share for international routes; in cargo transportation, foreign airlines have carved out 82 percent of the market share.

Li believes that the future development trend for civil aviation industry is to have fewer but stronger airlines. He thinks that China's airline industry needs another round of restructuring and consolidation.

An industry insider reveals that a few years ago, Li had negotiated with China Eastern Airlines for alliance, suggesting that the two airlines to jointly operate overlapped routes. He had also proposed to merge the two airlines' cargo services to enhance competitiveness in the global stage. Another offer was to have cross-shareholding and exchange of senior management personnel between the two.

However, the negotiations were aborted when corruption scandal hit China Eastern Airlines. Nevertheless, Air China has found an ally in Cathay Pacific Airways and the two are currently negotiating to jointly set up a cargo freight company.

When news broke that Singapore Airlines planned to inject funds into China Eastern Airlines, Air China, which has been eyeing to enhance its share in the Shanghai market, became alarmed.

China National Aviation Holding Company, the parent company of Air China, then launched a series of purchases for China Eastern Airlines' H share in the Hong Kong stock market, and increased its holding on the latter up to 12.07 percent in an attempt to block the deal.

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