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China's private airlines ready for take-off

www.chinanews.cn 2005-01-21 13:36:05

Chinanews, Jan. 20 - The Licensing Regulations for Public Air
Transportation Enterprises officially took effect on January 15. All
private enterprises that comply with its requirements will be allowed to
operate private airlines in China. It is reported that currently almost
ten private enterprises have already filed applications under this new
regulation.
In 2004, the General Administration of Civil Aviation of China (CAAC)
approved five private airlines to be set up. One of these airlines, with
a registered capital of 300 million yuan (36.7 million US dollars), has
already rented a few 737-900 passenger aircrafts, headhunted more than
ten pilots and some top managers away from Hainan Airlines, and hired
over ten foreign pilots. It plans to be the first to commence commercial
operations during the Spring Festival period which starts on February 9.
The new rules relax the requirements for access to the civil aviation
industry. The requirements for state-owned entities to invest in
establishing public air transport enterprises are now also applicable to
private entities. However, as it is a capital-intensive industry, it is
not easy to set up an airline. The huge initial investment presents a
relatively high entry barrier, and causes many enterprises that are
thinking of entering the industry to have second thoughts.
It is difficult for private airlines to beat the existing state-owned
civil air industry in terms of the scale of operations, airline networks
and extra services. In order to attract passengers, it would be essential
for these airlines to use cheap tickets as their selling point. Several
private airlines have introduced the idea of "budget airlines" one after
another, indicating that they will compete with other airlines by means
of low cost and low ticket prices.

E-mail: zhangqinghua@chinanews.com.cn Tel: 8610-88387443 Fax:
8610-68327649

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