VZCZCXRO2626
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #1211 3130845
ZNR UUUUU ZZH
R 090845Z NOV 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6651
INFO RUEHOO/CHINA POSTS COLLECTIVE
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC

UNCLAS GUANGZHOU 001211 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM SECOR AND YAMAMOTO 
STATE FOR EEB/AN ROBL AND LIMAYE-DAVIS 
STATE FOR EEB/CBA MERMOUD AND THOMPSON 
STATE PASS DOT A/S ANDREW STEINBERG 
STATE PASS DOT DAS SUSAN MCDERMOTT AND GLATZ 
 
E.O. 12958: N/A 
TAGS: EAIR CH
SUBJECT: China Southern Gets Called Up to the Majors with Membership 
in Sky Team 
 
 
¶1. (U) Summary: China Southern has made it to the Big Leagues: it 
will soon become China's first carrier to join an international 
airline alliance as a full member of Sky Team.  After considerable 
investment upgrading its operations and services, China Southern 
sees membership in the alliance as the perfect complement to its 
extensive network of domestic routes.  Membership in Sky Team is 
indicative of the rising standards and increasing international 
competitiveness of China's airlines.  End summary. 
 
China Southern Suits Up 
----------------------- 
 
¶2. (U) China Southern will become China's first airline to join an 
international airline alliance when it becomes a member of Sky Team 
on November 15.  Sky Team has ten member airlines, including 
Northwest, Delta, and Continental, as well as three associate 
airlines.  China Southern, which is based in Guangzhou, will be the 
second Asian airline to join the alliance after Korean Air. 
 
Getting in Shape for the Team 
----------------------------- 
 
¶3. (SBU) China Southern has made substantial improvements in its 
operations and services in order to qualify for Sky Team.  It 
adjusted its budget and financial management procedures and upgraded 
its information technology systems.  China Southern executives told 
us that the upgrades cost the firm approximately RMB 300 million 
(US$40 million), and it would take time to see return from the 
investment.  One manager speculated that the benefits of joining Sky 
Team might not be apparent in the carrier's bottom line for 
three-to-five years. 
 
Playing to Its Strengths 
------------------------ 
 
¶4. (U) She also said that joining the alliance fit perfectly into 
China Southern's growth strategy.  China Southern is China's largest 
airline by fleet size and number of passengers carried, but its 
strength lies in its domestic routes.  Air China, by contrast, earns 
more revenue than China Southern in part due to its more extensive 
international network.  As part of Sky Team, China Southern will be 
able to attract more international travelers to its domestic routes 
and offer its Chinese customers more options for international 
travel. 
 
A Big Win for China's Airline Industry 
-------------------------------------- 
 
¶5. (U) China Southern's membership in Sky Team is an important 
milestone in the development of China's airline industry.  Chinese 
aviation officials have pointed out that it shows China's airlines 
are becoming more competitive with international carriers in 
management and quality of service.  China Southern sees the move as 
a key step in developing its international brand.  China's other 
airlines will likely follow soon into other alliances. 
 
GOLDBERG