Competition in China's aviation market has intensified after China Eastern Airlines, the nation's second-largest carrier, announced plans to join the SkyTeam Alliance, linking it to overseas heavyweights such as Air France-KLM and Delta Air Lines.
China Eastern signed a memorandum of understanding with members of SkyTeam on April 16. Its official participation is expected to begin in the first half of next year. China Eastern will gain access to 856 destinations in 169 countries by joining the alliance.
Analysts said the Shanghai-based carrier's strategy is to boost its footprint globally and forge closer ties with China Southern Airlines, another member of SkyTeam. That will position China Eastern to compete more effectively with Air China, the country's international carrier and member of the rival Star Alliance.
"China's three largest carriers have all joined airline alliances, expanding competition in services and products," said Wu Yunying, an analyst of Changjiang Securities Co.
China's commercial aviation industry suffered setbacks following the drop in travel triggered by the global financial crisis in 2008. The industry returned to black last year with net profit of 12.2 billion yuan (US$1.78 billion), mostly contributed by government aid and fuel hedging gains.
The chase to restore profits and the need to consolidate a fragmented industry have ushered in a new era of mergers and acquisitions.
SkyTeam is the world's second-largest coalition after Star Alliance. It has nine members and two associate airlines, serving an estimated 384 million passengers a year on more than 13,133 daily flights. The other major grouping is Oneworld, whose only toehold in China is via Hong Kong-based Cathay Pacific.
Airline alliances seek to reduce costs by sharing such services as offices, maintenance facilities, catering, computer systems and check-in counters. They ostensibly provide travelers with more convenience and connectivity, though detractors would argue they can also result in higher ticket prices.
Beijing-based Air China, the nation's biggest carrier, announced last month that it will spend 682 million yuan to take control of Shenzhen Airlines as part of a strategy to dominate the aviation market in southern China.
That deal threatens China Southern, which was also said to be eying Shenzhen Air as a possible takeover target. The Guangzhou-based China Southern is the nation's largest airline by fleet size.
"China Eastern's participation in SkyTeam will deepen its ties with China Southern, so other carriers, such as Air China, must better position themselves and upgrade services to keep their market share," Wu said.
Officials at China Southern applauded China Eastern's move.
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