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China Southern Airlines Invests in NE China Hub

China Southern Airlines, Asia's largest carrier by passenger numbers, said on Wednesday it would invest 10 billion yuan (US$1.46 billion) in Liaoning Airport Group in a bid to build an aviation hub in the northeast Asia-Pacific region.

With the investment, China Southern would be entitled to a 40 percent stake in the airport group, with the remaining 60 percent would be owned by Liaoning's provincial government.

The carrier said it would build a new terminal at Shenyang Taoxian airport, the largest airline hub in northeast China within Liaoning Airport Group. It also plans to base 100 planes at the airport by 2010, and open five to eight new international routes in the next five years.

China Southern's move is widely regarded by industry insiders as a step to further consolidate the airlines' leading position in northeast China as its northeastern branch, China Northern Airlines, is based at Taoxian.

"Northeast China is of strategic importance to us," said Shao Fuqiang, a spokesman for China Southern's Party committee.

"We already have Guangzhou and Wuhan as the southern and central hubs. Now Shenyang will become our new hub for Northeast Asia and enhance our competitiveness internationally."

Xia Fulu, an analyst from Shanghai-based Industrial Securities, said the investment would help China Southern better manage risk control.

However, the current global economic recession means that short-term returns on the investment may be hampered by the gloomy market sentiment, he said.

China's flagship carrier Air China announced a net loss of 1.9 billion yuan in the third quarter, in contrast to a 2.2 billion yuan profit in the same period last year.

China Eastern Airlines, the nation's third largest carrier, posted a 2.3 billion yuan net loss in the quarter.

China Eastern Airlines said  that given the "relatively big losses" in the first three quarters and soft market demand, it expects to book a net loss for the whole of 2008.

(China Daily October 30, 2008)

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