February 12, 2020 / 5:56 AM / 9 days ago

China's aviation regulator says supports airline mergers amid virus outbreak

BEIJING (Reuters) - China’s aviation regulator will support restructuring or mergers to help airlines cope with the coronavirus outbreak, it said on Wednesday, noting that the epidemic has hurt the bottom lines of many carriers.

Flight crew members wear masks at the Pudong International Airport in Shanghai, China January 27, 2020. REUTERS/Aly Song

The epidemic, which originated in the transportation hub city of Wuhan and quickly spread to the rest of China, has caused global airlines to cancel thousands of flights after dozen of countries imposed travel restrictions amid virus fears, dampening demand.

On Feb. 11, airlines cancelled 12,662 flights in China, according to aviation data provider Variflight.

The Civil Aviation Administration of China will continue to lobby authorities to subsidise airlines hurt by travel curbs due to the coronavirus, Xiong Jie, a CAAC spokesman, told a media briefing, adding that more fees would be waived for carriers.

The regulator will also support restructuring and mergers among airlines based on their needs, and support them to optimise capacity so they can weather the difficult time and win the battle against the virus, Xiong said.

Discussions of possible mergers have swirled since conglomerate HNA, which owns Hainan Airlines, started experiencing liquidity issues, said Chinese aviation expert Li Xiaojin. Li added that small airlines such as Lucky Air and Okay Airways were looking to get acquired.

“But the issue is the airlines looking to be bought were asking for a high price... after the outbreak, everyone is having difficulties, but small airlines may struggle more, so it’s possible for them to lower their asking prices,” Li said.

Passenger traffic in China declined 5.3% in January from a year earlier, compared with a growth rate of 7.9% for 2019.

“The coronavirus has had a huge impact on the civil aviation industry, which resulted in significant reductions in flight volume and could create new or spill-over safety risks,” Xiong said.

The CAAC hopes countries will lift virus-related travel restrictions as soon as possible, in line with guidance from the World Health Organization and International Civil Aviation Organization, said Liang Nan, another CAAC official at the briefing.

For international flights affected by the coronavirus, the CAAC, in communication with other aviation authorities, will strive to retain the rights and landing slots for airlines, Liang said, adding that flights would be restored as soon as possible when market demand returns.

Reporting by Stella Qiu and Brenda Goh; Editing by Himani Sarkar and Gerry Doyle

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