China Southern Airlines

Founding

China Southern Airlines was established on 1 July 1988, as part of the Chinese government's initiative to decentralize the Civil Aviation Administration of China (CAAC), and liberalize the Chinese aviation market. This restructuring aimed to transform CAAC's regional divisions into independent commercial entities. China Southern emerged from the former Guangzhou Regional Administration of CAAC, marking its inception as a separate airline. However, the airline's first commercial operations under its own name and livery didn't launch until February 1991.

The airline completed its decentralization from CAAC when it gained independence on 10 October 1993. During the airline's early years, the carrier was the dominant domestic carrier. Together with the two major airlines of China – Air China and China Eastern – the airline handled half of the passenger traffic carried by all Chinese carriers. Owing to Air China's status as the country's flag carrier, the airline is entitled to extensive international service rights, with China Eastern and China Southern's international networks confined to mainly East Asia and within Asia, respectively. Like other Chinese carriers, China Southern was subjected to CAAC's exclusive right to grant route-specific operating licenses and domestic prices.

Expansion

To raise its operating standards and distance itself from mostly unprofitable second and third-tier domestic airlines, the carrier signed agreements with several foreign carriers regarding staff training and aircraft maintenance, with the ultimate aim of being listed on the New York Stock Exchange, possibly as soon as early 1995.

Starting in the mid-1990s, China Southern sought to expand its international reach beyond Asia. In December 1995, the Chinese and United States governments signed an aviation agreement that would allow the commencement of non-stop air services between the two countries. After having been granted the right to establish services to Amsterdam in early 1996, the airline started Guangzhou–Beijing–Amsterdam, its first long-haul route, in November 1996. The following year, the carrier commenced non-stop trans-Pacific services to Los Angeles, as well as services to Brisbane.

The start of European and American services coincided with the arrival of the long-range Boeing 777s, the first of which was delivered in late December 1995, as well as a general expansion and upgrade of the carrier's fleet and the associated facilities. Due to engine certification and labor relations issues, the delivery of the first Boeing 777 was more than a month behind schedule. As a result, the carrier considered, but ultimately decided against, leasing the Boeing 747-400, which would have been used to cover anticipated delays as well as to launch trans-Pacific services to the United States. Nevertheless, the airline planned to double its fleet of 67 aircraft. In April 1996, the Chinese government placed an order, on China Southern's behalf, for 10 Airbus A320s; the delivery of the first aircraft, and China Southern's first Airbus, was made the following year. Guangzhou Aircraft Maintenance Engineering Company, which was jointly established with Lockheed Aircraft Services International and Hutchinson Whampoa, was carrying out expansion of its aircraft maintenance facilities in anticipation of the increase.

In July 1997, China Southern Airlines went public, listing on both the Hong Kong and New York Stock Exchanges. The airline raised $600–$700 million, which was mainly used to expand its fleet, pay off debt, and invest in other key areas. In 2003, China Southern Airlines listed domestically on the Shanghai Stock Exchange. By 1997, the airline, along with its joint-venture airlines Xiamen Airlines, Shantou Airlines and Guangxi Airlines, was carrying some 15 million passengers per year using about 90 aircraft, operating about 270 routes among 68 destinations and almost 2,450 flights per week. The airline group's revenue totaled some US$1.4 billion with a net income of $90 million.

Mergers and acquisitions

The end of the 1990s was a period of consolidation for the Chinese airline industry. Initially, China Southern looked to acquire several smaller non-profitable domestic carriers as it sought to highlight its expansion plans intoaise funds; among the deals was the purchase of 60% shares of Guizhou Airlines. Due to the weakening economy amidst the 1997 Asian financial crisis and intense competition among the some 30 Chinese carriers, in 1998, CAAC considered a comprehensive restructuring of the industry that would see the consolidation of the airlines into three or five carrier groups. At one stage, it was reported that CAAC was contemplating a forced merger of Air China and China Southern. Given the latter's dual listing in Hong Kong and New York, it was thought that such a merger would have eased Air China's path towardits own share offering. China Southern confirmed that such talks between them were occurring, although they ultimately proved fruitless.