Cargo News
28th Jan 2008
By Susan Geng, Beijing
The man who helped shoot down the bid by Singapore Airlines and parent Temasak for a stake in China Eastern is a former air force officer who rose through the ranks from squad leader to major general, during his 31 years in the PLA.
Former Major General Li Jiaxiang is noted for his acumen, diligence, perseverance and military strategies while in the air force that he joined in 1969.
The general's career took a new twist on the evening of November 1, 2000, while he was addressing a squadron in far away Xian. He received a phone call from a senior Party official from Beijing in charge of China's state enterprises who ordered him to fly down to Beijing immediately because he was being demobilised. The general was concerned. The next morning he was called to a meeting of several hundred executives of Air China and introduced as the new Party chief of Air China.
The man, who had spent his entire career in the military and had no experience of running a civilian airline was completely taken by surprise. But Li, who was cited six times by the air force as a model political commissar, accepted the challenge.
Referring to his appointment as head of Air China, he told the China Enterpreneur magazine: "Life is like a drop of water in a rushing river, you don't know which wave will put you where.''
When Li was put in the pilot's seat at Air China, the carrier had a deficit of US$276 million, accumulated since 1998. In seven years Li wiped the debt slate clean and the airline has recorded a profit every year since.
Asked about his style of management that helped the carrier erase the red ink, Li said: "Management is maths plus philosophy. Maths is how you count your bills and the latter is your thinking.''
Li favoured cost efficiency and his first major move was to terminate investment in all projects that might cause deficits. The former major general said: "A deficit-ridden company is like an army that suffers a defeat. The commander should reorganise his forces and choose new targets.'' By 2003, Li cut the number of subsidiary companies under Air China from more than 100 to 27.
Li was known in the air force as a tough officer who was a strong believer in air safety and efficiency. In 1991, after he was named commissar of a flight unit there were four accidents in three years. He disciplined 36 officers in three months and there were no further accidents. Asked about the incident after his appointment to Air China, he said: "I also cited 98 other officers.''
Over the years, Li cut Air China's operational costs, mainly maintenance and fuel, to below the level of some overseas giants. He also upgraded the business and first class sectors. In an effort to boost the image of the airline, he unveiled a strategy with the slogan: "Feel assured, comfortable, happy and moved'' (Each word carries the character heart in Chinese.)
Li believes Air China will one day become a super air carrier, the most valuable and profitable air company in China and one of the most competitive in the world. He admitted, however, that it was a long way to go. "Currently, not only Air China but the whole Chinese civil aviation sector is weak compared with international rivals.''
The regrouping of Air China's subsidiaries has laid a sound foundation for its expansion and Li believed the carrier was worth more than analysts surmised.
Before Air China listed its H shares in Hong Kong, an investment firm offered a model to raise close to $1 billion. But Li said this underestimated Air China's strength and rebuffed the proposal three times. The company's executives pointed out that it was the best offer and bluntly told him he had no experience in listing of shares. Li replied to them. "It's true I never traded in shares before but I used to sell cucumbers - and knew which kind sold well.'' When Air China was finally listed in Hong Kong and London on December 15, 2004, the total funds raised surpassed $1.3 billion.
The highlight of Li's strategy was the cross-holding deal he struck with Hong Kong's Cathay Pacific that placed the carrier in a stronger position on the international scene.
In October 2007, Li summed up his moves toward the deal in his book Route to Fly in which he outlined Air China's strategy of opening fields, positioning the company, choice of proper personnel, brandishing of brand, management and control, capital operation, future outlook, and thinking.
Writing is Li's hobby. He has published around 80 stories, poems and other commentaries. Over the years he has improved his English tremendously and often reads English publications. "I'd like our Air China staff to study and use English,'' he said.
Now the former general and writer-turned entrepeneur-administrator has a new task: Making the China's civil aviation industry stronger in his role as Acting Minister of the General Administration of the Civil Aviation of China (CAAC).
In his first major speech at a national civil aviation conference this month, Li emphasised safety, innovation and transformation of development modes. Citing 2008 as a year of policy implementation, he gave priority to inner strength of the industry instead of simple expansion of routes and capital.
Analysts expect the industry will move to cut operational costs and strengthen co-operation instead of cut-throat rivalry among domestic airlines. Li did not mention whether this would mean more mergers but analysts predicted the scene was being set for consolidation.
The China Eastern-Singapore Airlines-Air China saga
May 10, 2007 - Singapore Airlines reveals it had 10 months of talks with China Eastern on acquiring a stake in the carrier.
May 23 - Rumours of SIA to acquire a 25 percent stake in China Eastern for US$1 billion.
May 29 - Concern in the corridors of power.
September 2 - SIA and parent Temasek offer $920 million for a 24 percent stake.
September 3 - China Eastern shares jump 76 percent to a record as trading resumes after being suspended since May.
September 24 - Cathay Pacific wants parent of partner Air China, CNAC (China National Aviation Corp) to buy into China Eastern.
November 9 - SIA and Temasek sign tentative deal with China Eastern on the stake purchase.
December 13 - China Eastern says the bid from Singapore Airlines and Temasek Holdings is a "final deal", which sent its shares skidding.
January 1 - CNAC calls the deal unfair and cheap. China Eastern and SIA insist it is fair.
January 6 - CNAC vows to pay HK$5 per share for between 24 to 30 percent of China Eastern, 32 percent more than SIA and Temasek's HK$3.80 per share offer.
January 7 - Cathay Pacific will consider joining CNAC in a higher bid to counter SIA's offer.
January 8 - Minority shareholders vote against China Eastern's proposal to sell a 24 percent stake to Singapore Airlines and Temasek.
January 22 - Air China shares dived 15.18 percent after China Eastern snubbed a CNAC US$1.9 billion proposal which would give it a 30 percent stake in the carrier.
http://www.cargonewsasia.com/secured/article.aspx?id=15&article=15465
