China's General Administration of Civil Aviation (CAAC) said consolidation of the three major airlines - Air China, China Eastern and China Southern - would be a premature move.

 

Yang Yuanyuan, head of the CAAC, said China's aviation industry needed competition.

 

He said: "If China were to have only one airline, with one fixed ticket price, it won't be good news for Chinese consumers."

 

He said the CAAC wouldn't interfere if the three airlines were to merge, but he "personally wouldn't agree with it".

 

China's State-owned Assets Supervision and Administration Commission (SASAC) said it would streamline state-owned enterprises and develop one or two industrial leaders in each sector, including the aviation sector, which ignited discussions of a possible merger of the three airlines.

 

Air China's board chairman Li Jiaxiang said late last month that it was necessary to merge China's airlines so as to meet foreign competition.

 

Cai Jianjiang, Air China's president, said in Hong Kong on August 29 that Air China would not "exclude the possibility of merging with China Southern".

 

Though China Southern later clarified it didn't have such plans at the time, discussions of the consolidation again started.

 

Contrasting with Air China's pro-merger stance, China Eastern's chairman Li Fenghua told Xinhua earlier this month that one "super carrier" would destroy the industry's competition.

 

He said the consolidation was aimed at improving international competitiveness, but not expanding operational scale.

 

Yang also said none of the three companies was fully capable of managing a merged airline. "The US has 100 to 120 airlines, of which six to seven airlines are dominating, and China should follow the trend."

 

The three airlines all belong to the SASAC. They must seek its permission before a merger can take place.

 

China's first aviation consolidation took place in 2002, when nine airlines merged into the current three major airlines.

 

(Xinhua News Agency October 31, 2007)