AIRYY Air China Limited (PK)

   By Joanne Chiu 
 

HONG KONG--China Southern Airlines Co. (1055.HK) is set to name the former head of flag carrier Air China Ltd. (0753.HK) as its chief, in an effort to fill a leadership void after its chairman resigned due to a disciplinary probe against him by the Chinese Communist Party.

A new head will help the nation's biggest airline by fleet size make a fresh start after being mired in a series of anticorruption and disciplinary probes over the past year.

The Chinese government on Wednesday said it named Wang Changshun, deputy head of China's Ministry of Transport, as president of China Southern Air Holding Co., state-owned parent of the Guangzhou-based airline.

He will also assume the chairmanship of Hong Kong- and Shanghai-listed China Southern, following approval from the company's board, said a person familiar with the situation.

The appointment of 58-year-old Mr. Wang, comes after former Chairman Si Xian Min stepped aside in early November, when the Communist Party's antigraft watchdog launched a probe against him on suspected "severe disciplinary violations."

Mr. Si, who couldn't be reached for comment on Wednesday, resigned in January.

The investigation of Mr. Si came nearly a year after the antigraft unit scrutinized China Southern's operations in a sweep, during which inspectors said they uncovered irregularities and signs of corruption in the airline's accounting, sales and procurement processes, among other problems.

The inspection's findings resulted in the removal of several senior executives who were under investigation for "job-related crimes." The executives, who included the airline's then-chief financial officer and an executive vice president, couldn't be reached for comment and it wasn't clear if they had legal representation.

Mr. Wang's appointment is positive and will bring management stability to the carrier, said a senior executive at China Southern, who declined to be named. There has been speculation that China Southern may merge with rivals amid ongoing state-owned enterprise reforms.

"With his background, Wang's appointment will help further drive China Southern's network expansion overseas as a standalone Chinese carrier," said the executive, ruling out a near-term consolidation in China's aviation industry.

Mr. Wang's appointment also comes as the carrier seeks to expand its international reach amid congestion at home and competition from thriving domestic budget carriers.

China Southern has embarked on an ambitious fleet expansion plan by ordering about 120 aircraft from Boeing Co. (BA) and Airbus (AIR.FR) last year. It currently operates a fleet of more than 600 aircraft and has the biggest domestic presence, but its main hub in the southern city of Guangzhou puts the airline at a disadvantage against its two main rivals, which operate out of Shanghai and Beijing.

"China Southern has to offer cheaper air fares to lure passengers, particular business travelers, to transit via Guangzhou instead of flying through Hong Kong or even Shenzhen. That undermines the profitability of its long-haul operations," said Daiwa Capital Markets analyst Kelvin Lau.

Mr. Wang, who chaired Air China for about two years, left the top post at Air China in January 2014 to become a deputy minister in China's transport ministry. He was a deputy director at the Civil Aviation Administration of China before joining Air China in late 2011 and held senior executive roles at the listed China Southern in the early 2000s.

Write to Joanne Chiu at joanne.chiu@wsj.com

(END) Dow Jones Newswires

March 02, 2016 00:32 ET (05:32 GMT)

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