According to the Centre of Asia Pacific Aviation (CAPA) the Chinese government is considering consolidating its big three airlines of Air China, China Southern and China Eastern into two mega carriers.

CAPA executive chairman, Mr Peter Harbison, said, ‘Profitability of the big three came under pressure in 2006, mainly due to higher fuel costs, but Shanghai’s China Eastern also struggled under the weight of a bloated cost structure. . . . A deal between China Eastern and China Southern is logical, as the latter retains significant operations in Guangzhou and Beijing, but is facing intense competition from the powerful Air China-Cathay Pacific combination.’

As matter stand, the big three have main hubs in Beijing, Shanghai and Guangzhou. If the merger goes ahead one possibility will be that the integrated carriers will have a big presence in all hubs.