China Southern Air Acquires Stake in Postal Air

China Southern Airlines Co. (ZNH) is to acquire a 49% stake in China Postal Airlines for 150 million yuan [U.S.$18.1 million] (US$1=CNY8.28), a company source said Monday. The source said the two parties are to sign an agreement in Beijing Tuesday. China Southern Airlines expects to fund the acquisition with internal resources, the source said. The deal is pending Chinese government approval, the source said. China Postal Airlines, which is controlled by the State Postal Bureau of China, provides mail and parcel shipment services for mainland post offices. China Postal Airlines was established in 1997. It has three Shaanxi Aircraft Y8F-100, according to the March edition of Flight International magazine. 'The scale of China Postal Airlines is fairly small, but the deal will help China Southern to strengthen its air cargo and logistics operations,' said an analyst from a U.S. investment bank. The acquisition is unlikely to boost China Southern's cargo volume but it will strategically expand its cargo network, the analyst said. The deal would tie in well with China Southern Airlines' plans to strengthen its grip on China's air cargo business from its market share of 23% in 2001. China Southern carried a total of 397,400 metric tons of cargo and mail that year. The carrier said in April it expects its cargo business to grow 'exponentially' as a result of China's accession to the World Trade Organization. The two carriers have already worked together for nearly a year. China Postal and China Southern's parent Southern Airlines Group signed a series of business agreements last August. They included one on shipping mail on Southern Airlines flights and another for China Postal to act as an official agent for Southern Airlines Group's tickets. Guangzhou-based China Southern is the mainland's largest airline based on passenger traffic, number of scheduled flights per week, number of hours flown, number of routes and the size of its fleet. China Southern shares were suspended from trading Monday. They closed Friday at HK$3.225, down 2.5 HK cents. The airline hopes to resume trading Wednesday, the source said.

China Post Signs Deal with Airline
June 19, 2002 (from postalinsight.com) — Hou Mingjuan, China Daily (Beijing): "The State Postal Bureau (China Post) yesterday inked an agreement with China Southern Airlines Co to restructure and jointly operate China Postal Airlines Co. China Post and China Southern Airlines hold 51 per cent and 49 per cent stakes in the new company respectively, according to the agreement. This is a major moving forward for China Post, which used to be a government bureau. The former China Post Airlines was a subsidiary of China Post and handled express mail delivery. With a hub in Shanghai, the company had flights linking the major cities of Beijing, Guangzhou, Shenzhen, Chengdu, and Shenyang and owned a fleet of 10 planes. With the growing demand for express mail services, the volume of shipments of China Postal Airline increased 105 per cent in 2001. With the current policy banning overseas express delivery companies from providing express mail services inside China, it is the only airline providing domestic express mail services. But with the prospect of increasing competition from international express delivery giants as a result of China's guarantee to gradually open up its service sector in the coming years, China Post was worried about its small operation scale and outdated aircraft. The small airplane fleet, limited coverage, and lack of airline management experience have been barriers to the development of China Postal Airlines, said Liu Liqing, director general of China Post. The company is also actively seeking capital support to buy more aircraft and expand its network coverage. According to sources close to China Post, the bureau is seeking an overseas listing to help it upgrade management and attract capital for its further development. Its express mail sector, especially the airline is the most profitable service of China Post, so it is very probably to be included in the public listing, according to sources. China Southern Airlines has the most flight routes of all domestic carriers and rich experience in both aviation management and financial operation in the capital market. As a Hong Kong-listed firm, China Southern will help its partner open doors to the international capital market, sources said. 'China Southern will help the new company more effectively exploit the postal sector's huge market, its far reaching network and strong ground transportation capability,' said Yan Zhiqing, president of China Southern. The newly restructured postal airline firm will be brought into China Southern's overall plan to establish a transportation network linking both airborne and ground facilities, he said. More aircraft will be purchased in the near future and new flight crews will be trained, the president said." (Source: China Daily, Hou Mingjuan)