Stocks related to China's two largest aircraft makers soared yesterday after they announced a merger over the weekend.

China's largest aircraft manufacturer, China Aviation Industry Corporation I, will merge with AVIC II to create China Aviation Industry Corp. The combined group aims at listing in 5 years, according to a news conference in Beijing.

The new group targets revenue of 1 trillion yuan (US$146.5 billion) by 2017 with an annual growth of more than 20 percent from the current 150 billion yuan. It will list its subsidiaries within 3 years and list the entire group within 5 years, its deputy general manager Wu Xiandong told media.

The group runs nearly 200 subsidiaries, owns assets of more than 290 billion yuan and 400,000 employees. Its business covers 10 sectors, including defense, engines, helicopters, aircraft, trade and asset management.

There are 21 listed companies under the group, and mergers are inevitable as the country's stock watchdog ruled that a group can't own two or more listed companies in the same sector to avoid horizontal competition, Wu said.

Wu said the financial crisis didn't affect the group and it has sufficient capital to conduct restructures and mergers. "It is an extremely good opportunity for us to conduct a capital restructure at present," he said.

Lin Zuoming, general manager of the new company, told media that it plans to inject good-quality capital into listed companies and also seeks overseas capital.

Shares rise

Lin said the company plans to place its helicopter headquarters in Tianjin, a commercial aircraft engine center in Shanghai and a universal aircraft center in Zhuhai.

The news of the merger sent shares of Hafei Aviation Industry Co Ltd, controlled by AVIC II, to rise 6.92 percent to 8.34 yuan. Sichuan Chengfei Integration Technology Co soared 6.18 percent to 5.50 yuan.

Xi'an Aircraft International Co rose 8.12 percent to 10.65 yuan and Guihang Automotive Components added 8.46 percent to 5.51 yuan.

"The merger will change the layout of the industry and eliminate infighting competition, which will bring productivity into full play and optimize resources," said Zhen Yi, an analyst with China Jianyin Investment Securities Co. "It's a favorable move for the industry's long-term development."