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Home >> Business
UPDATED: 16:49, March 11, 2005
Private airline maiden flight jolting state-own monopoly
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Friday's maiden flight of China's first privately run airline, Okay Airways, is rocking the monopoly of the state-owned airlines.

A 737-900 plane leased from the Republic of Korea by the company took off Friday from its base at Binhai International Airport in Tianjin Municipality near Beijing.

Carrying a total of 76 passengers, including dozens of journalists, the liner will fly to Kunming, capital of southwest China's Yunnan Province, via Changsha, capital of central China's Hunan Province.

According to Han Jing, a company executive, Okay mainly engages in air cargo and passenger charter services, express services and ground distribution.

China's aviation industry has grown faster than the economy as a whole. But the civil aviation industry was blocked from private investment during the past half of century. The liberalization of the sector is part of China's effort to promote private economy's development.

A regulation was recently issued by the State Council, China's Cabinet, permitting private capital in the telecom, transportation and energy and airline industries.

Okay, granted a permit by the General Administration of Civil Aviation of China (CAAC) last Friday, is not the only company trying to take advantage of the eased entry to China's rapidly expanding aviation industry.

Three other operators include United Eagle Airlines in the southwestern city of Chengdu, Spring International Airlines in the eastern city of Shanghai and Huaxia Airlines in China's west.

It is difficult to predict how much private capital the government plans to allow into the industry. But, it would face "a blast shock wave" as more and more private airlines emerge, said Guo Lihong, an economist with the development research center under the State Council.

"Compared with the state-owned companies, they have not burdens in debts but flexible mechanism in cost control and management," Guo said.

While many state-owned airlines fight to maintain their dominance, others, including Hainan Airlines, welcome the new competitors.

"The introduction of private capital can help open up the civil aviation market more effectively," noted the sources.

"Okay is trying to help optimize the pattern of airline services in China via low-cost operation and coverage of margin from the state-owned enterprises, "said Liu Jieyin, president of Okay Airways.

Liu said the challenge they are facing is to lower operation costs. For the consideration, Okay selected Binhai International Airport as the base for its lower landing fees. The company runs small routes off of main hubs, which are mainly held by the state-owned giants.

Private airlines strive to provide cheaper airline service, said Liu. However, private airlines have a long way to go before owning the existing blocks despite the new liberalization regulations, said Zhou Liqun, president of the Economics College under Tianjin-based Nankai University.

He gave examples of import tariff on liners, landing fees and fuel prices, nearly 80 percent of the total operation cost remains uncontrollable for the private airlines.

Liu admitted a true low-cost airline can't exist with China's current policies, but may emerge within three or five years.

Civil aviation authorities say they will continue to loosen existing limits on the use of private capital for airlines and use resources according to market demand.

The CAAC also promised to allow equal entry for state-owned enterprises, private businesses and foreign capital into an enlarged sector which may cover air cargo, passenger charter services and airport construction for civil aviation.

Source: Xinhua

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