Potential Gains From Aviation Industry Mergers In China

The world economic with weak growth with the constant opening of today's policy,most enterprises not only take mergers as a means of transformation and upgrading,but also serves as effective way to improve their monopoly status,integrate resources and create self-values.China's civil aviation industry has experienced many mergers and combinations in the past,especially in 2002,which is a major change for the civil aviation industry.It is mainly the integration of the previous nine major airlines into three large hubs of aviation,which is controlled by the General Administration of civil aviation.The three major state-owned aircraft are Chinese International Airline,China Southern Airline and China Eastern airline.Some airlines all belong to the local level type,and the scale is not so large as the state-owned.These local airlines are also slowly acquired or controlled by the state airlines in the future,such as the air airlines and Shenzhen airlines,which have been held by international airlines.After 2004,new types of airlines,such as spring and autumn air and auspicious air,have appeared in the market.Because of their low cost,the prices are more attractive to passengers.First of all,using the data of 7 listed airlines in China from 2011 to 2016,we use the translog cost function model to estimate the cost elasticity and evaluate the overall scale economy of the listed airlines.The results show that the listed airlines in China are uneconomical on the whole,and their economies of scale are gradually optimizing and reaching the optimal level.The scale economy of the state-owned airlines is superior to the private airlines,and it is also proved that the potential of mergers and acquisitions under the diseconomy of scale is the most effective.So airline efficiency is gradually improved through mergers and acquisitions.Then using the simulation of M & A of listed airlines in China,we use the pre-analysis method to analyze the efficiency of M & A based on the work of Bogetoft and Wang(2005)and so on.The income is decomposed into three specific aspects,such as learning or individual technical effect,harmony or scope effect and scale effect,and further exploring how merger and acquisition can improve the efficiency of the enterprise.The study shows that mergers between the three major airlines will bring some potential benefits,among which the potential benefits of M & A are the largest,while the overall M & A of the three major airlines can increase the efficiency of 10.48%.China Southern Airline and some low-cost airlines will have greater potential gains when they are merging and restructuring.However,the potential benefits of mergers and acquisitions among low-cost airlines are relatively limited.Accurately evaluating the scale economy of airlines is the premise to optimize their scale.But the potential benefits will not be fully realized in practical operation.In order to enhance the efficiency of M & A,we should pay attention to strategic decision,information,finance and operation in practical operation.The meaning of the study on the merger and reorganization policy of the aviation industry is that if the government further promotes the efficiency of the M & A of the three major airlines is very limited,the leading factor is the increase of the market power brought by the three major airlines mergers and acquisitions,so it should be fully considered.Private aviation should carefully plan the medium and long term fleet,optimize the time of airline network and flight,control the operating cost actively,and gradually develop the company to the direction of scale economy.Besides,the government and related institutions should strive to create a better development environment and policy support for the aviation industry,giving full play to the coordination role.In the future,the government should not ignore the role of low-cost airlines while they reorganize and rectify the aviation industry,they should encourage more such companies to enter the market.In this paper,three large state-owned airlines and low cost airlines are reorganized.Only the potential benefits of South China Airlines,spring and autumn,auspicious mergers and acquisitions are larger,and the potential benefits of M & A are relatively small,so it is better to choose South Airlines more efficiently.Therefore,the government should consider which airlines mergers and acquisitions should be comprehensive analysis,choose the efficient way,should not arbitrarily push the state-owned three major airlines and some low-cost airlinesmergers and acquisitions.The government should make clear the position of its own function,give play to the positive role of the market,give certain preferential policy to the M & A of air transportation enterprises,encourage the development of intermediary agencies,play the role of intermediary agencies actively,and reduce the information asymmetry between the two parties.The suggestion to the enterprise is to optimize the input-output relationship,control the cost,actively promote the technological innovation,control the scale of the enterprise moderately,avoid excessive expansion and take the intensive and efficient development path.