A merger between China’s airlines seemed imminent until Air China revealed that it would be reinvesting billions of dollars into itself. The company hopes that through updates of its airlines and workforce, the company can expand its offerings to produce a better experience for its customers.
The $4.4 Billion Plan
Through 2011, Air China is expected to spend as much as $4.4 billion improving its own internal infrastructure. It was previously expected that Air China would merge with two smaller firms, China Eastern (of which it holds a 12% stake) and China Southern Airlines. The three would merge in an agreement sponsored by the Chinese government to rid the three companies of any unnecessary expenditures.
Shrinking Budget, But Larger Spending
Air China reduced its expected spending by 30% and hopes to add the extra capital to improve its services. The firm recently cut back on destinations and will focus on servicing fewer passengers, but with better quality and likely more profitable flight. Air China recently expanded to include one additional destination, Singapore, which services many Chinese business travelers.
Going On Its Own
Chinese airlines have been subject to many takeover threats, including a recent offer last year from Singapore Airlines. China National Aviation countered the offer with its own bid to buy the firm, although neither purchases were completed.