China's major supplier of fighter jets and bombers is pressing
ahead with plans to build a marketing platform for its commercial
aircraft.
China Aviation Industry Corp I (AVIC I) is trying to strengthen
its civilian aircraft business to capitalize on the country's
booming commercial aviation market.
AVIC I set up an aircraft leasing company at the beginning of
the year. Now it's in the process of launching a new carrier.
The aircraft maker recently said it has been approved by the
General Administration of Civil Aviation to set up a regional
airline. The new carrier will mainly operate two types of regional
aircraft developed by AVIC I.
The move, which is rare in the world's aircraft manufacturing
industry, could be the most direct way for AVICI to push its
products to the market, analysts said.
While holding a controlling stake in the new carrier, AVIC I
also wants to attract other investors, such as airlines, investment
companies and private investors, AVIC I's President Lin Zuomin said
recently.
"Setting up an airline of its own could ensure stable orders for
AVIC I's ARJ 21 and MA 60 aircraft," said Li Lei, an aviation
analyst with CITIC China Securities.
"It could also help AVIC I improve the quality of its aircraft
because its manufacturing team would be able to get feedback on the
performance of the aircraft from the operator more easily and
efficiently," Li said.
"But AVIC I needs a good partner to make its airline profitable
because it only has manufacturing experience, which is totally
different from running an airline," Li said.
AVIC I is assembling the 70-100-seat ARJ 21 in Shanghai. It is a
turbo fan regional jet launched by AVIC I in 2000. Its first flight
is scheduled for next year and it will begin service in 2009. AVIC
I has received 71 orders from domestic airlines.
The 50-seat MA60, or Xinzhou 60, is a turboprop launched in
1998. It has received 36 orders from nine countries. AVIC I has
delivered nine MA60s to four countries: Zimbabwe, Laos, Zambia and
the Republic of Congo.
AVIC I may also be lured by the potential of China's fledgling
regional air travel market, analysts said. As the country's
urbanization picks up speed, there will be increasing air travel
demand from small and medium-sized Chinese cities, which is an
ideal market for regional aviation.
"If more companies promote regional air travel, China's aviation
industry development will become more balanced, which is also
helpful to boost economic growth in the country's less developed
regions," said Liu Weimin, a senior analyst with the Civil Aviation
Management Institute of China.
Over the past decade, China has been giving priority to
developing trunk-line services. Less than 9 percent of the over 900
aircraft in service in the country are regional planes. Feeder
planes account for 34 percent of the world's total aircraft.
The government said early last year that it would encourage
regional aviation during the 11th Five-Year Plan period (2006-10)
to balance the development of trunk and feeder routes.
Industry watchdog the CAAC began subsidizing airlines flying
regional routes in Northwest China at the end of last year.
The government is likely to design more subsidy programs and
offer airlines more incentives, including reduced landing fees,
said Liu Jieyin, president of Okay Airways. The Tianjin-based
private carrier recently signed a leasing contract for 10 MA60s to
explore feeder-line service markets in Northeast, Northwest, North
and Central China.
A number of carriers are already showing their determination to
push ahead with regional air routes.
Shenzhen Airlines last December signed an agreement to set up a
feeder airline with US regional carrier Mesa Air Group. The new
company, set to fly this year, will be China's first Sino-foreign
joint venture regional airline.
Early last year, China Express Airlines became China's first
private carrier focusing on regional aviation routes when it
launched its maiden flight in Guizhou Province.
Hainan Airlines signed the country's largest single order for
regional aircraft last August, buying 100 regional jets.
(China Daily August 29 2007)
