China Southern Mulls A380 Sydney Flights as Beijing Talks Stall - Businessweek

China Southern Airlines Co. (1055), the nation’s only operator of Airbus SAS A380s, may fly the superjumbo to Sydney as the carrier’s talks with Air China (753) Ltd. to cooperate on Beijing-Paris services are stalled.

China Southern is studying the feasibility of operating the A380 to Sydney from its home in Guangzhou, Chief Financial Officer Xu Jiebo said in a telephone interview. Services to the Australian city with the double-decker jet may begin as early as October if talks with Air China collapse, he said yesterday.

For more than eight months, the carrier has been working to reach an agreement with Air China so that it can gain access to Beijing airport slots and start A380 flights to Paris. Lack of an accord with its rival, the biggest in the Chinese capital, has forced China Southern to mainly fly its five superjumbos on domestic routes from Guangzhou, a smaller city with less traffic than Beijing.

“The A380 saga is an embarrassment to China Southern even though it doesn’t hurt much financially,” said Kelvin Lau, a Hong Kong-based analyst at Daiwa Securities Group Inc. “They should’ve come up with a contingency plan much earlier.”

In October, China Southern missed its target of introducing the A380 on Paris-Beijing route. Air China seeks to lease two A380s equipped with cabin crew from China Southern to avoid “cut-throat competition,” Chairman Wang Changshun said last month. Xu didn’t say what are the disagreements with Air China, Asia’s biggest carrier by market value.

China Southern rose 4.1 percent, the most in almost two months, at close of Hong Kong trading yesterday. The stock has gained 16 percent in the past year compared with Air China’s 21 percent jump and Hang Seng Index’s 5.2 percent increase.

Aviation Landscape

Air China has a lock on Beijing routes because of the aviation landscape established by the Civil Aviation Administration of China, according to Li Yanhua, a professor at Tianjin-based Civil Aviation University of China. China Eastern Airlines Corp. (670) similarly controls Shanghai, the nation’s financial capital, while China Southern has Guangzhou.

“At present, both sides can’t agree on some key terms and therefore the talks have been temporally stopped.” Xu said, without saying when the discussions will resume. “We are evaluating the Guangzhou-Sydney flight as a back-up plan.”

Air China spokeswoman Rao Xinyu didn’t immediately reply to an e-mail seeking comments.

Melbourne, Brisbane

China Southern has boosted capacity on Australian routes more than 50 percent annually since 2009, the carrier said in an April 9 statement on its website. It currently operates 38 flights a week to Australian cities including Sydney, Melbourne and Brisbane. By 2015, the airline plans to have 110 flights every week to Australia and New Zealand.

Since China Southern received its first A380 in October 2011, it has mainly used the planes on the about 1,900-kilometer (1,180 miles) flights between Beijing and Guangzhou that take about three hours. The aircraft are designed to fly as far as 15,400 kilometers. The carrier also began A380 flights to Los Angeles from Guangzhou in October.

China Southern had 491 planes in its fleet at the end of last year, according to a company statement. It also has 10 Boeing Co. 787 Dreamliners on order.

To contact the reporter on this story: Jasmine Wang in Hong Kong at jwang513@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net