China airline mergers finally on the cards

The increasing pace of Chinese restructuring has sent the shares of mainland airlines through the roof.

For over a year now the Civil Aviation Administration of China CAAC has talked about consolidating the 10 airlines under its control into three groups. Investors are finally paying attention and its latest reiteration of this policy has proven a significant factor behind a surge in the prices of listed H-shares China Southern Airlines CSA and China Eastern Airlines CEA, both of which have more than doubled since late May.

The reason investors are sitting up and taking notice is, in part, due to last week's Rmb5.77 billion $670 million takeover of Shandong Huaneng Power Development Cmpany by Huaneng Power International. The deal has fuelled hopes that the Chinese government is...

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