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The nation's skies will see another two Chinese private airlines shortly, as private investors hold high expectations for the world's fastest growing aviation market.
The two airlines, each with 80 million yuan (US$9.9 million) in registered capital, are currently awaiting final government approval before starting operations, according to the website of the General Administration of Civil Aviation of China (CAAC).
Once approved, one of the airlines will operate regional passenger and cargo flights between Shijiazhuang, a three-hour drive from Beijing, and nearby cities. The other airline will fly routes from Kunming, Southwest China's Yunnan Province, to other cities.
"The double-digit annual growth rate of China's aviation market is attractive to many investors," said Liu Weimin, director of the Aviation Laws Research Centre under the Civil Aviation Management Institute of China.
Since March this year, three private airlines Tianjin-based Okay Airways, Shanghai-based Spring Airlines and Chengdu-based United Eagle have started flying.
CAAC, the nation's aviation watchdog, in June approved another two private carriers.
One of the two new comers, East Star Airlines is based in Wuhan of Central China's Hubei Province and is owned by Lan Shili, China's 70th richest man according Forbes Global's latest rich list. The airline is expected to start flying in May next year.
The other of the two newcomers Junyao Group, a dairy, real estate and retailing giant in East China's Zhejiang Province, plans to operate regional flights from Shanghai.
At least five more private investors are also mulling over entering China's commercial aviation market, industry sources have revealed.
"Private airlines could become a active part of China's aviation industry providing consumers with more choices," Liu said.
Spring Airlines was the first Chinese airline to try lowering ticket prices by simplifying services.
But Liu said that despite offering budget prices to lure customers, it will still take time for China's private airlines to really "take off."
Guo Dongmou, an aviation analyst at China Merchants Securities, shares this view. "The prospects are good, but it is hard to see real profits in short term," Guo said.
"A major challenge is how to control costs."
About 80 percent of the total costs of a private airline come from aircraft leasing or purchasing fees, maintenance and repair costs, and most importantly, jet fuel. Aviation fuel accounts for about 40 percent of airlines' total costs.
"Those costs are not in the control of private airlines," Guo said.
Another problem for the airlines is the shortage of qualified pilots, analysts said.
China's booming aviation industry is taking off faster than the country can train pilots.
Although the CAAC is drafting a policy to allow airlines to recruit foreign pilots, their salaries are usually higher than that of domestic flyers, which could increase private airlines' burden further, Guo said.
(China Daily December 9, 2005)
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