Reference no: EM132578450

CHINA TO MERGE 3 CARGO AIRLINES

TO CREAT ASIA LEADER

China will merge its three biggest freight airlines and build the combined entity into Asia's largest air cargo operator, a top aviation official was reported as saying. "This work (the merger) is being actively pushed," the official Xinhua news agency quoted Zhou  Laizhen, deputy chief of the Civil Aviation Administration of China (CAAC) as telling an industry forum. China's top three cargo operators are the freight arm of Beijing-based flag carrier Air China, Shanghai-based China Cargo Airlines, and China Southern Airlines Cargo, headquartered in the southern city of Guangzhou, said the report. China has the world second's largest air transport system, but its cargo flight throughput grew just 7.8% last year to 135.6 million tonnes.

According to International Air Transport Association statistics, Asia's biggest cargo airline by freight tonne-kilometers in 2014 was Hong Kong-based Cathay Pacific, followed by Korean Air. Worldwide they were number two and three behind global leader Emirates.

"The value of China's international air freight only accounted for 17% of its total trade turnover in 2014," CAAC chief Li Jiaxiang told the Wednesday forum, compared to a global the figure of 35%.

China's imports slumped nearly 18% year-on-year in May, the seventh straight monthly decline, while exports also dropped for the third consecutive month. Growth in the world's second-largest economy dropped to 7.4% in 2014, the slowest pace in nearly a quarter of a century, and this year has seen few signs of any reversal in the slowing trend.

a) Demonstrate the potential advantages to China when merging the three top cargo airlines.

b) Analyse the dangers inherent in forming a huge company.

c) Evaluate the possibility that the slowdown in China's economy created the impetus for China's proposed merger.