Hainan Airlines parent HNA Group reportedly established five planning groups in early May-2013 with the aim of receiving CAAC approval for its five new airlines quickly, including its proposed Urumqi Airlines, Heilongjiang Airlines, Chang’an Airlines, Fuzhou Airlines and Guangxi Airlines (NetEase, 23-May-2013). The five planning groups are expected to select their members within two weeks. HNA reportedly said financing is the major task in the establishing of the five airlines, and plans to invest no more than CNY5000 million (USD781 million) into the five new airlines. As previously reported, CAAC director general Li Jiaxiang, speaking at the 2013 China Civil Aviation Development Forum recently, said China will relax control on issuing operating licences to airlines and cut administrative approvals on new airlines branches and routes.
HNA Group to set up five new airlines as CAAC relaxes control
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Most importantly, open skies is a prerequisite for US approval of US-China airlines' joint ventures with antitrust immunity. These partnerships permit airlines to coordinate networks and pricing jointly – which, they say, increases consumer choice, but which other groups worry reduces competition, after experience in the trans-Atlantic market.
Perhaps paradoxically, the lure of a JV will mean that the airlines lobby their governments for open skies that might eventually reduce competition. US airlines will want greater slot availability at Shanghai and Beijing, which could occur in 2019.
Finally, airlines will need to have confidence in a shared future with their partner. China Eastern is close to Delta, while China Southern has a young partnership with American Airlines. Air China, however, does not feel close to United Airlines, which has the highest presence of its own metal in the market. Air China questions whether United actually wants open skies. There is unlikely to be any government deal without the support of Air China, the flag carrier, and a major airline that enjoys a close relationship with the regulator.
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Air France will likely grow partnerships with SkyTeam's China members, although Air France will need to make concessions on its existing China JVs. It is unclear whether Air France will revisit considerations of investing in China Southern.
Chinese airlines will become France's second largest source of foreign long haul flights, and in the long term China could surpass the US. For China, France could become its third largest long haul market after the US and Australia. France is China's third major aeropolitical expansion in recent months, after the UK and Australia. This could give China leverage to press the US and Canada to expand traffic rights, although these markets are far more convoluted.