China's skies have long been the monopoly of a group of state-owned airlines, almost all of which sprang out of the old Civil Aviation Administration of China. But earlier this year, CAAC gave the nod to private airlines which promise greater consumer choice, industry deregulation, and efficiency across the board. For the private airlines, the loosening of restrictions means access to the world's fastest growing aviation sector in which passenger air travel is expected to grow by an average of 7-8% annually over the next two decades, compared to the global average of about 4.8%. Last year, China's aviation industry rang in a collective US$1.07 billion profit, nearly equivalent to its profit of the last 10 years combined. To date, CAAC has approved seven private airlines, and three of them, Okay, Spring and United Eagle, have since launched their maiden fiights.
Bumpy ride ahead?
While Beijing has loosened the grip on its aviation monopoly, private carriers do not yet have full clearance to take to the skies. Ok Airways is allowed to fly only one route, United Eagle, two and Spring, four – and not the most lucrative ones at that. Since its first flight in March, Ok has been losing money, company spokesman Li Weimin told the China Economic Review. Li said the airline was struggling to survive among the state-owned airlines group, whose longevity is virtually guaranteed by government support, preferential policies and a monopoly on popular routes, such as those between the coastal cities. Ok, however, may just fare ok, particularly if its alliance with Korean Air gains some traction. In September, Korean Air, the largest carrier of airfreight on international routes, signed a preliminary agreement to buy a stake in the Chinese airline. The two carriers plan to operate a cargo joint venture that will carry freight around China and overseas, leveraging Korean Air's network, according to Korean press.
For Spring Airlines, China's first discount carrier, results from its first month of operation showed some promise. Spring said it had sold 97.8% of its seats – versus the average 68% for domestic airlines – after it began its flights in July, just a week after receiving final government approval. Below are the three Chinese domestic private airlines that have begun operating, plus a new entry from Hong Kong that is aiming at the mainland market. Expect the list to lengthen over the next year.
The first private airline company in China, Ok made its maiden flight on March 11, 2005. Based in Beijing, it currently offers two routes: Tianjin to Kunming with a stopover in Changsha, and Tianjin to Zhangjiajie in Hunan province. Ok has leased two Boeing 737-900 aircrafts from Korean Air with initial plans to expand to six planes.
United Eagle Airlines
Chengdu-based United Eagle Airlines flew its maiden flight on July 26, 2005. It has leased an Airbus A320-200 to operate its two routes: Chengdu to Shenzhen and Chengdu to Hangzhou with a stopover in Changsha.
Shanghai-based Spring Airlines flew its first flight in July, 2005. Owned by Shanghai Spring International Travel Service, the carrier now has four routes: Shanghai to Yantai, Mianyang in Sichuan province, Nanchang and Guilin. The airline is operating all routes with one Airbus A320-200 jet, leased from GPA Leasing in Ireland.
Hong Kong Express
A Hong Kong-based airline targeting business travelers, flew its first route on September 8, 2005, with four daily round trips to Guangzhou and three daily flights to Hangzhou. The airline currently has a leased 76-seat Embraer 170 aircraft, and plans to lease a total of four of the twinjets.