Watchlist – the airline industry mergers

It is well known that the airline industry, especially in the US, is one of the lowest performing of all times. Despite the government protection granted to virtually all the national airlines and despite all the non- market advantages they have, the airline companies have undeperformed systematically the markets.

This is why certain airlines are now trying to merge, in order to get some economies of scale. For example, China’s central government and the Shanghai city government are discussing merging Shanghai Airlines with China Eastern Airlines, major Chinese business magazine Caijing reported on its website on Wednesday.

High global oil prices and slowing growth in China’s air passenger traffic have increased speculation the government may encourage restructuring in the industry.

“At present the discussion is between government agencies, and the two companies have not taken part,” the magazine quoted an unnamed, senior source in Shanghai’s aviation industry as saying.

Senior officials at both Shanghai-based airlines, contacted by Reuters, said they had not heard of such a plan and had not held talks. China Eastern will issue a statement soon to clarify the situation, said a senior executive at the airline, who declined to be identified.

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