China Southern Airlines Co Ltd (China Southern) will soon acquire 16.91 billion yuan (US$2.04 billion) worth of assets from Northern Airlines and Xinjiang Airlines.

The sale and purchase agreements were signed on Friday between the trio and China Southern Airlines Holdings Co (CSAHC).

Both northern and Xinjiang airlines are wholly owned subsidiaries of CSAHC, which is the controlling shareholder of China Southern with a 50.30 percent stake.

Accordingly, China Southern will assume their debts of 15.09 billion yuan (US$1.82 billion), which are related to their civil aviation businesses.

The business and assets under acquisition consist of certain airline operations, other intangible assets and property such as planes, engines and spare parts.

China Southern will finance the acquisition and assumption of the debts through its internal resources and short-term loans from commercial banks.

The substantial gain will represent an attractive opportunity for China Southern to consolidate its already strong market position and improve its financial performance. Both northern and Xinjiang airlines are leading carriers in their respective regions, an announcement on Friday revealed.

Potential commercial benefits are expected to range from an increased fleet size and transportation capacity to reduced costs and enhanced overall efficiency.

As the flight networks of the three airlines are highly diverse, the acquisition will also significantly broaden China Southern's flight network, it was claimed during the announcement.

The carrier, based in Guangzhou, presently offers a very limited service in the nation's north and northwest.

Northern Airlines, which is based in Shenyang, capital of Northeast China's Liaoning Province, is a dominant carrier with flights to South Korea and Japan.

Xinjiang Airlines, based in Urumqi, capital of Northwest China's Xinjiang Uygur Autonomous Region, occupies a strong market position on domestic routes between Xinjiang in the west and other parts of China, in additional to its international routes that take it to Russia, the Middle East and Western Asia.

Under the deal, China Southern's fleet will grow from the present 139 planes to 214.

And the increased economies of scale will contribute to a greater transportation capacity, higher operating efficiencies, lower operating and maintenance costs, and more flexible flight scheduling, in addition to other advantages.

(China Daily November 17, 2004)