ATW Daily News

Shenzhen in flux as controlling shareholder arrested

Wednesday December 2, 2009

Shenzhen Airlines promised to maintain its operational stability following the Sunday arrest of controlling stakeholder Li Zeyuan, who was accused of economic crimes. Shenzhen President Li Kun has taken charge of the carrier in the interim. Launched in 1995, Shenzhen originally was a state-owned airline but was privatized when Shenzhen Huirun Group and Shenzhen Yiyang Group purchased a 65% share in May 2005. Li Zeyuan holds 89% of Huirun.

CAAC and Air China, which holds a 25% stake in Shenzhen Airlines, have sent a working group to the carrier to help maintain stability. It is widely speculated that CA will seize the opportunity to increase its share, but the Beijing-based airline has refused to comment. Citigroup pointed out yesterday that if CA raises its stake in Shenzhen to 90% by acquiring the 65% controlled by Li Zeyuan, its national market share would equal that of the merged China Eastern Airlines and Shanghai Airlines. In addition, "CA's 30% [Cathay Pacific Airways] stake and 90% Shenzhen stake could elevate its competitiveness to an unprecedented level," Citi said. Shenzhen ranks fifth among Chinese carriers with a fleet of 84 aircraft. It transported 12 million passengers last year.

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