Bumpy flight to recovery for Chinese airlines
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"Frequent flights may help airlines hold on to passengers in the short run, but the strategy won't work in the long run due to its weak profitability, so the high-speed railways will push the airlines to restructure further in the future," he said.
China Southern also plans to begin talks with railway authorities in March about possible cooperative ventures to make connections between air and rail transit more seamless, encouraging rail passengers to consider flights for part of their trips.
Macquarie Equities Research said it expects high-speed rail to become more of a diversionary factor for Chinese airlines beginning in 2012 or 2013, once the new networks are completed.
"China Southern has the largest exposure on its routes between hub and focus cities, but we think its proactive approach in seeking to cooperate with high-speed rail provides a long-term solution for mitigating the risk of intermodal substitution," the research company said.
Mergers and acquisitions will also shape the domestic airline industry this year. Shanghai-based China Eastern is expected to complete its takeover of Shanghai Airlines next month, increasing its market share in China's commercial center to more than 50 percent.
China Southern and rival Air China are circling Shenzhen Airlines as a possible takeover target, with an eye toward increasing their presence in the south of the country, according to sources.
China Southern fueled takeover speculation last month when it signed a cooperative agreement with the Shenzhen municipal government as part of efforts to raise its share of the Shenzhen aviation market to 50 percent from 30 percent in the next five years.
