Sky really is the limit for airline industry
Air corridor congestion remains a massive hurdle to efficiency despite huge recent infrastructure spending transport
5 December 2005
South China Morning Post

AIRLINES AND THEIR passengers are becoming increasingly frustrated at flight delays at main airports as authorities struggle to meet surging travel demand despite extensive industry restructuring and having spent billions of yuan on infrastructure in the past few years.

Experts say the only way to meet the challenge will be sweeping changes to laws that restrict commercial flights over most of the country, forcing airlines to queue in narrow aerial corridors to reach the main airports.

"The main challenge facing China on the [air traffic control] front is the insufficient airspace allocated for civil aviation," said Albert Tjoeng, corporate communications manager (Asia Pacific) for the International Air Transport Association (Iata).

"Only 30 per cent of Chinese airspace is available for civil aviation. This has resulted in air traffic delays at cities in the golden triangle bounded by Beijing, Shanghai and Guangzhou, a shortage of international routes over China as well as a restrictive flight planning policy when airlines plan their flight paths."

Huge progress has been made in reforming the aviation industry on the ground in the past few years, including combining the assortment of small airlines under three main airline groups.

In 2003, the financial burden and management responsibility for 140 airports was transferred to local governments; and subsidies are about to be cut off.

However, industry experts say the shortage of air traffic corridors in busy areas is likely to dilute the benefit of those reforms.

"[The congestion] is increasing in severity. The problem is that there is often no notice of the non-availability of airspace," said a senior executive for an Asian carrier.

"If there's a problem, such as military exercises, they don't allow us to re-route.

"If they closed the east coast route and said 'everyone needs to use a different route' it wouldn't be optimal, but we could cope," he said.

"But they don't. They just make us wait. In bad weather, the entire system often breaks down."

For international services the delays to can be little more than an infrequent but costly irritation.

However, for regional carriers that rely on China for much of their revenues the congestion plays havoc with schedules, adds costs and taints reputations for reliability.

The administrative body that governs China's commercial air space, the General Administration of Civil Aviation of China (CAAC), is said to be keenly aware of the system's shortcomings and eager for reform, but faces resistance from within the security apparatus.

Iata has put proposals to the CAAC that it says would increase by three the number of international air routes over mainland air space and meet the security and economic criteria of all parties.

The CAAC is also said to be considering adopting international standards of vertical separation for aircraft flying above 28,000 feet, a move that would lead to more efficient use of existing air space.

In the Pearl River Delta, the lack of a centralised air traffic control system for the four busy international airports within a 40km circle forces airlines to spiral down to the city of their choice, wasting tonnes of fuel every year and emitting unnecessary pollutants.

"This inefficiency is costing the airlines over US$400 million per year, or about US$1 million every day," Mr Tjoeng said.

For many, with foreign carriers launching new services to China almost daily and mainland airlines expected to take delivery of more than 600 new aircraft by 2010, any changes can't come soon enough.

Airports Council International forecasts a slower expansion of aircraft movements for the next few years throughout the Asia Pacific region as carriers begin to use larger aircraft.

But even if, as forecast, the growth of global aircraft movements dips, airports will almost double the number of take-offs and landings they handle by 2020.

The Asia Pacific region will easily surpass the global growth trend, while China - where the major airports averaged a 13 per cent expansion in aircraft movements in the year to July - is expected to lead the region.

Officials realise that failure to at least ease congestion may stifle growth for wide sectors of the economy that rely on air services for their impetus.

But top airline executives are aware that history dictates any progress will be slow and intermittent.

"We saw air traffic control delays return to high levels again in October following improvements in September," Dragonair chief executive Stanley Hui Hon-chung said in this month's edition of the carrier's in-house magazine, Dragonews.

"We continue to look for ways to resolve this but, as I have said in the past, there will be no quick fix."

Branson throws down gauntlet on visa costs
Virgin to cover visa costs for mainland
7 December 2005
South China Morning Post

Virgin Atlantic Airways will pay visa costs for its mainland passengers next year to press the British government into changing its travel policies for Chinese tourists and business executives, Sir Richard Branson said yesterday.

Sir Richard, whose airline will launch flights from London to Beijing within a year to complement its daily Shanghai service, said Britain's "ridiculous" visa policy was stifling travel between China and Britain.

"It is madness that we don't behave as the rest of the EU does on [China travel visas]. The price of the visa from China to England is more than 25 per cent of the fare at present," he told the South China Morning Post yesterday.

"So for the first few months of next year, we'll pay for the Chinese visas ourselves and try to embarrass the British government into doing something about that."

Mainland citizens pay 1,020 yuan for a visa to visit Britain, while Virgin's lowest fare on the London-Shanghai route is 3,777 yuan.

Florian Preuss, the airline's general manager for Hong Kong, said British airlines were at a disadvantage in the China market compared with carriers from France and Germany, where mainland visa policies are more relaxed.

"Virgin would be able to expand infinitely faster in China if it was easier for the Chinese to travel into and through the UK," Mr Preuss said. "As long as the UK keeps those [restrictions] on, it will limit the amount of traffic that goes through the UK. If you look at Lufthansa and Air France, a lot of what they carry is [transit] traffic."

Virgin yesterday said it would double its London-Hong Kong flights to twice daily next year, a move expected to further cut ticket prices on the competitive route.

Sir Richard said Virgin's entry a year ago on to the Hong Kong-Sydney leg of the "kangaroo route" had led to a 40 per cent drop in ticket prices on the sector and had lifted passenger traffic 20 per cent. "We just can't get enough seats on the Hong Kong route, particularly now that we've started the Sydney leg," he said. "It was quite a brave decision by the Hong Kong authorities to let us on to that route but it's paid off for both of us. From Virgin's perspective, we are finally profitable on the Sydney route and we have only been going 12 months."

He said Virgin could be flying to "four or five cities" in China within five years.

Beijing, he said, would almost certainly be served with a new 370-seat A340-600. "China is just like India, it is exploding," he said.

China Eastern, Yangtze River airlines apply for cargo routes to Luxemburg
7 December 2005

BEIJING (AFX) - China Eastern Airlines Corp Ltd (SHA 600115; HK 0670; NYSE CEA) and Yangtze River Express Airlines Co Ltd have both applied to the General Administration of Civil Aviation of China (CAAC) to launch cargo service to Luxemburg, the CAAC said.

The Administration said that China Eastern, the country's third-biggest carrier, plans to use B747Fs to operate four flights per week flying out of Shenzhen.

Yangtze River Express Airlines, an all-cargo carrier wholly owned by China's Hainan Air Group, plans to operate a service out of Shanghai with three flights a week deploying B747F jets.

No further details were provided.

China Eastern says to lift stake in Wuhan airline

HONG KONG, Dec 9 (Reuters) - Shanghai-based China Eastern Airlines Corp. Ltd. , one of China's top three carriers, said on Friday that it would pay 418 million yuan ($52 million) to lift its minority stake in a central-China affiliate to near total ownership.

The carrier said it had agreed to buy 38 percent of China Eastern Airlines Wuhan Ltd. from Wuhan Municipality State-owned Assets Supervision and Administration Commission for 278 million yuan.

Shanghai Junyao Aviation Investment Co. Ltd. had also agreed to sell an 18 percent stake in the Wuhan airline to China Eastern for 140 million yuan, it said in a statement.

As a result its shareholding would rise by 56 percentage points to 96 percent.

The Wuhan company would become a subsidiary of China Eastern, which would be better able to use the resources available in the subsidiary, it said.

China Eastern expanded its fleet by 58 percent earlier this year after taking over rivals Yunnan Airlines and China Northwest Airlines amid China's ongoing consolidation of its aviation sector.

Shares of China Eastern ended at HK$1.24 on Thursday in Hong Kong, up about 11 percent in the past month. (US$1=8.08 yuan)

Eastern doubles Wuhan stake for 418m yuan
Gladys Tang
10 December 2005
Hong Kong Standard

China Eastern Airlines, one of the mainland's top three carriers, will more than double its stake in a Wuhan-based domestic airline for 418 million yuan (HK$401.36 million) to strengthen its aviation network in the Hubei provincial capital.

The Hong Kong-listed airline said it will take a 56 percent stake in China Eastern Airlines Wuhan, which will be funded by bank loans.

The stake is more than the 40 percent China Eastern had said it intended to acquire.

China Eastern hopes the purchase of the carrier will help sharpen its competitiveness, as it just rebounded to a profit in the third quarter after a first- half loss.

China Eastern's third-quarter profit was 673 million yuan, thanks to the appreciation of the yuan and continued strong demand, after a 471 million yuan loss in the first half on high jet fuel prices.

The stakes will be sold by Wuhan Municipality State-owned Assets Supervision and Administration Commission and the Shanghai Junyao Aviation Investment as part of a state-instructed industry restructure in which China Yunnan Airlines and China Northwest Airlines were merged into China Eastern. ``The agreements will both take effect in the beginning of 2006,'' China Eastern said.

After the purchase, Shanghai-based China Eastern Airlines' holding in the Wuhan airline, in which it bought a 40 percent stake for 240 million yuan three years ago, will increase to 96 percent.

The remaining 4 percent will be equally owned by Wuhan SASAC and an independent shareholder.

China Eastern Airlines Wuhan, formerly called Wuhan Airlines, was formed when China Eastern and the Junyao Group's aviation unit bought stakes in 2002.

Wuhan Airlines' net profit fell 97.7 percent from 28 million yuan in 2003 to 620,000 yuan last year, based on the mainland accounting standards.

China Eastern shares closed down 1.61 percent Friday to HK$1.22.

Meanwhile, China Southern Airlines said its passenger volume last month rose a year-on-year 50.7 percent to 3.6 million and it carried 60 percent more cargo to hit 68,930 tonnes.

China Commerce Minister: 500 More Planes Needed By 2010
11 December 2005

SHANGHAI (Dow Jones)--China will need another 500 passenger jets by 2010, and a further 2,000 by 2020, the official Xinhua News Agency reported Monday, citing Minister of Commerce Bo Xilai.

Speaking at an American Chamber of Commerce banquet Friday, Bo said trade relations between China and the U.S. are "balanced," as China has invested a huge amount of the foreign exchange earned through exports to the U.S. in U.S. bonds, while China's imports from the U.S. have been increasing.

"China's aviation market is still in its adolescence, which provides a basis for our cooperation," Bo said.

China leapfrogged the U.K. to become the U.S.'s fourth-largest export market this year, compared with ninth in 2001, Bo said.

China's massive trade surplus with the U.S. is a sore point with Washington, and Beijing frequently announces large purchases of U.S. airliners during visits to China by U.S. officials. During Bush's trip to Beijing in November, China agreed to buy 70 Boeing 737 airliners.

Bo reiterated China will protect intellectual property and called on the U.S. to broaden trade between the two countries.

-Sun Yan contributed to this story
-Edited by Andrew Bullard

Zen and the art of air transport
Mainland airlines still have a way to go to catch up on global service standards, but passengers are being patient
13 December 2005
South China Morning Post

THE GROWTH OF flight networks in China is giving frequent travellers greater flexibility in crisscrossing the country, but does this also mean better service? The service and security performances of major mainland airlines have been improving over the past few years, but customer satisfaction is still mixed at best.

"I have flown to Shanghai and Guangzhou with China Eastern and China Southern," said John McHugh, chairman of the Canada China Business Council in Beijing. "Food in business class was nothing special. There was no individual TV programme, and in the business-class lounge, well, you had some coffee and beer. The one real advantage of the business class is you have more space. But it's okay. The bottom line is, it's just about transport."

Air transport is booming, along with the rest of China's economy. Over the next 20 years, passenger air travel in the mainland is expected to grow at the rate of 7 to 8 per cent annually, about 1½ times higher than the expected global growth average.

China is the main destination for business travelling in the region, and Hong Kong executives are among the busiest travellers in this part of the world. Yet, because of the relatively short distances between China's business centres, most executives travel economy class.

"Only about 5 per cent of my corporate customers travel on business class," said Janet Hom of Plan Travel in Hong Kong.

Dragonair is clearly the airline of choice for business trips to the mainland from Hong Kong. "Most of my customers travel Dragonair," said Ms Hom. "Not just for the superior service. They also feel safer."

Dragonair was named China's best airline for the past four years by Skytrax, the world's largest annual air passenger survey. The carrier scored four stars out of a maximum five in Skytrax, while the three major carriers from the mainland - Air China, China Eastern and China Southern - scored three stars, signifying a satisfactory standard across most travel categories but possibly reflecting less consistent standards of staff service and product delivery.

Earlier this year, the Civil Aviation Administration of China (CAAC) gave the nod to a handful of private airlines, which promise greater consumer choices. However, these new airlines' operations are restricted to less travelled, less lucrative routes. Busy routes between Shanghai, Beijing and Guangzhou are still in the hands of a group of state-owned carriers.

In spite of a generally positive trend, things can still go wrong. One passenger complained of chaotic check-in, poor food, bad wine and careless service.

"Sometimes you just need to have a bit of a Zen attitude," said Dominique Perregaux, owner of the Art Statements Gallery in Central and former investment-banker with Credit Lyonnais Securities Asia.

"Otherwise, you might get quite stressed out."

HK-listed China Eastern Airlines Nov passenger traffic up 76.54 pct yr-on-yr
16 December 2005
Xinhua Financial Network (XFN)

BEIJING (XFN-ASIA) - China Eastern Airlines Corp Ltd said it carried 2.49 mln passengers in November, up 76.54 pct year-on-year.

In a statement, the Shanghai-based carrier said passenger traffic for the first 11 months rose 33.96 pct from a year earlier to 22.05 mln.

Cargo throughput rose 35.07 pct from the same period of last year to 76,860 tons for November and was up 12.11 pct at 681,130 tons for the first 11 months.

China Southern Hldrs OK Purchase Of Boeing, Airbus Planes
18 December 2005
Dow Jones

China's air travel industry is booming as more middle-class people take to the skies. Both Airbus and Boeing have predicted that within 20 years, China will become the world's No. 2 market for jetliners, after the U.S.

Guangzhou-based China Southern Airlines is one of the country's three major airlines, along with Air China Ltd. (0753.HK) and China Eastern Airlines Corp. (CEA).

China to open direct air route to Brazil next month
19 December 2005
Xinhua's China Economic Information Service

BEIJING, December 19 (CEIS) -- China will open the country's first direct air route to South America, from Beijing to Sao Paulo of Brazil, next month.

The route will be operated through code-sharing cooperation by Air China and Varig, Brazilian's national carrier. Air China will fly from Beijing to Frankfurt, while Varig will fly from Frankfurt to Sao Paulo, the largest city in Brazil.

The time of travel from Beijing to Sao Paulo will be 27 hours, including transferring. The route has been approved by Chinese and Brazilian governments and is still waiting for approval from Germany, said Cesar Yu, China's country manager of Varig.

He said China and Brazil are developing nations, with economic and trade cooperation much closer in recent years. Brazil also became the tourist destination nation for China. The new route will promote economic, cultural, tourist and sports exchanges between the two nations.

China Southern confirms 134 mln usd upgrade plan, new Beijing air terminal
21 December 2005

BEIJING (AFX) - China Southern Airlines, the country's largest airline, said it will spend more than 134 mln usd upgrading its operations, including a new international terminal at the Beijing Capital Airport.

The airline said in a statement that it plans to use this new terminal to base its recently-ordered Airbus A380 aircraft and Boeing 787 Dreamliners, scheduled for delivery in late 2007.

'The foundation of the (new Beijing operations) is crucial for China Southern's sustained development,' said Liu Shaoyong, chairman of China Southern Airlines.

China Southern Airlines currently operates its own terminal at the Beijing Capital Airport.

Liu said that he hopes the upgraded Beijing operations will tap potential business related to the 2008 OIympic Games in Beijing as well as booming air travel from the capital.

International passengers passing through Beijing last year totaled about 10 mln, topping all other airports in China, the statement said.

United Airlines to expand transport capacity between Beijing and Chicago
20 December 2005
Xinhua's China Economic Information Service

SHANGHAI, December 20 (CEIS) – United Airlines of the United States will expand the transport capacity of the Beijing-Chicago air line from early April 2006.

Boeing 747 luxury planes with more seats will take the place of Boeing 777 planes to serve in the air line.

United Airlines, the second largest airline company of the United States, now is the largest air carrier between China and the United States. As the first airline to provide no-stop direct flight service between the two countries, it now boasts the largest number of direct flights to Beijing and Shanghai.

China To Open Air Sector More, Up Invest In 06 - Xinhua
27 December 2005

BEIJING (Dow Jones)--China will continue to open up the domestic aviation sector as part of efforts to attract more investment in 2006, the official Xinhua News Agency reported Tuesday, citing the country's aviation regulator.

China will raise the number of airlines and the frequency of flights across the country to meet rising demand next year, said Yang Yuanyuan, director of the General Administration of Civil Aviation of China, according to the report.

China will encourage new companies to focus on freight transport and branch airlines, Yang said. The report didn't clarify whether Yang was referring to regional airlines.

Yang also said some airports in western China, including those in the cities of Chengdu, Xian and Urumchi, would be upgraded and turned into regional aviation hubs next year.

The government's stance signals China will let more Sino-foreign joint ventures, as well as local private companies, into the aviation sector, Xinhua said, citing sources at a national aviation conference where Yang spoke.

The report didn't say what the regulator would do to promote investment in the aviation industry.

Monday, China's aviation regulator said China's total air traffic will grow 13% in 2006 to 29.5 billion freight ton-kilometers, according to a statement on its Web site. One ton-kilometer is one ton of freight transported one kilometer.

The number of passengers will rise 15% next year to 159 million, the statement also said.

For the first 11 months of 2005, China's air traffic totaled 23.7 billion freight ton-kilometers, up 11.4% from the same period last year, while the number of passengers rose 12.7% to 126.76 million, the statement said.

In the January-November period, China's aviation sector posted profit of CNY5.82 billion, the statement said, without specifying whether it was referring to operating, pretax or net profit.

China's aviation sector logged a profit of CNY8.69 billion in 2004, the Beijing Morning Post reported earlier in the year, citing the regulator.

Pudong to double capacity by 2015 as throughput soars
Shanghai plans to expand two terminals after traveller volume rises 15pc to 41m
2 January 2006
South China Morning Post

Passenger volume at Shanghai's two airports last year grew by more than 15 per cent and the bigger of the two will more than double existing capacity by 2015, the Shanghai Airport Authority (SAA) announced at the weekend.

Officials at the airport authority told a news conference that Pudong and Hongqiao airports handled 41.4 million passengers last year, an increase of 15.3 per cent over 2004 and 2.2 million tonnes of air freight, up 13.9 per cent.

Built in 1999 on the shore of the East China Sea, Pudong International Airport is the larger of the two, handling 23.6 million passengers last year, up from 21 million, and 1.85 million tonnes of freight, up from 1.6 million.

The officials said that Pudong ranked ninth or 10th among the world's 1,450 airports last year in terms of freight volume, up from 13th in 2004.

The airport's rapid growth is a major challenge to Hong Kong, Inchon in South Korea, Singapore and other Asian airports that are competing fiercely for passengers and freight to be the region's main hub.

"The city's two airports have been overburdened in meeting the rapidly growing demand in passengers and cargo," said Wu Nianzu, SAA chairman.

"We will adjust the facilities at both to meet demand."

For this year, the officials forecast a 13 per cent increase in both passengers and freight.

A total of 65 airlines fly in and out of Shanghai with eight added last year and the city is linked to 181 destinations.

Pudong is the second-largest mainland airport after Capital Airport in Beijing, which handled 40.7 million passengers last year.

The SAA has ambitious plans to transform Pudong into one of the biggest travel hubs in the Asia-Pacific region, with 30 per cent to 40 per cent of passengers transferring to other flights, up from 5 per cent now. It currently has one terminal and two runways.

On December 16, the SAA announced plans to double passenger and cargo volume by 2015 with construction of a second terminal with a 480,000 square metre floor area compared with 278,000 sqm for the existing terminal and three new runways.

Preparatory work is under way on the site, chosen on empty land next to the ocean to allow for easy expansion.

Longer-term plans call for construction of two more terminals with a target of 60 million passengers and 4.2 million tonnes of cargo in 2015.

Passengers complain about the long distance from the city centre to Pudong airport, which takes about an hour by bus or taxi.

The alternative is a Mag-Lev (magnetic levitation) express train - it takes seven minutes to reach a suburban station on the city's No2 subway line, leaving travellers with a further journey.

The failure to build a rail line from the airport into the city centre, as in Hong Kong, was a major design mistake.

The city government says it will extend the No2 subway line to Pudong airport by 2010.

Shanghai Airlines to Increase Fleet by 57 Planes

SHANGHAI, Jan 2 Asia Pulse - Shanghai Airlines Co. Ltd will add 57 more planes to its current fleet in the forth coming five years, according to Zhou Chi, chairman of the board with the air carrier.

Founded on Dec. 30, 1985, Shanghai Airlines Co. Ltd., China's first licensed local air company, began its air service with five second-hand Boeing 707 planes. It now has 43 planes and is operating 150 air routes, including 10 international ones.

"Our company will see a faster growth in both passenger and cargo transport with new opportunities created by Shanghai's drive to build into an air service center from 2006 to 2010," said Zhou.

He disclosed that the air carrier would also diversify its scope of business by expanding into logistics, tourism and hotel industry during the same period.

(XIC)

China to make building large aircraft a priority

BEIJING, Jan 6 (AFP) - China intends to make the manufacturing of large commercial airplanes a top priority from 2010, the nation's defense industry announced Friday.

The Commission of Science, Technology and Industry for Defense (COSTIND), which is responsible China's defense technology, said the aerospace industry will focus on the issue during the five-year period beginning 2010.

"The priority for the airline industry (during the period) will be on trunk liners, with research and production to begin at the appropriate time," a press release on the COSTIND website said after its chiefs met this week.

COSTIND also has a strong influence over civilian industries that contribute to the nation's defense.

No other details were provided on the type of airliner being considered or specific timing.

China has long considered building a large 150-200 seat commercial aircraft, rather than continuing to rely on Boeing of the United States and Europe's Airbus.

Industry officials last year urged the central government to approve the building of such planes before the country's demand for them peaked over the next two decades.

"If China does not roll out its own trunk-liner by 2020, then the country will not succeed in 2030 or 2040 so it is really a rush," Liu Daxiang, a senior official with the state-owned China Aviation Industry Corporation I, said last June.

With 120 million people traveling by air in 2004, China is now the third biggest aviation market in the world after the United States and Europe.

The 150-200 seat aircraft fits China's economic and geographic criteria, previous state press reports have said.

Such aircraft would be ideal to fly between each of the key economic powerhouses -- the Bohai region in the northeast, the Yangtze Delta surrounding Shanghai in the east and the Pearl River Delta, home to Guangzhou and Hong Kong -- which are more than 1,000 kilometers (625 miles) apart, the reports said.

China's Top Airlines Eye Cheaper Jet Fuel Imports -Report
8 January 2006

BEIJING (Dow Jones)--China's top three airlines plan to appeal to the government to eliminate the tariff on jet fuel imports in a bid to reduce their operating costs, the 21st Century Herald reported Sunday.

Air China Ltd. (0753.HK), China Eastern Airlines Corp. (CEA) and China Southern Airlines Co. (ZNH) are drafting a request to submit to the State Council, China's cabinet, the report said.

The airlines will also ask for a reduction in the value-added tax for jet fuel imports and sales, said the report.

China's jet fuel import tariff is currently 9% and the value-added tax for jet fuel imports and sales is 17%, according to the report.

China's airlines are suffering from soaring fuel prices and high tariffs.

Domestic jet fuel prices rose 25% in 2005, pushing the three airlines' costs up by CNY7 billion ($875 million), said the report.

Jet fuel costs currently account for 40% of airlines' overall costs from 25% in 2004, according to the report.

The General Administration of Civil Aviation of China raised the government-set jet fuel price from CNY4,824/ton to CNY5,133/ton Dec. 31, said the report.

The carriers will also 'urge the government to reform the jet fuel supply mechanism and demand jet fuel import rights of their own,' said the report.

Currently, airlines buy jet fuel mainly from state-owned China Aviation Oil Holding Co. at a price set by the government, the report said.

S. China Province opens eight international air routes in 2005
9 January 2006
Xinhua's China Economic Information Service

HAIKOU, January 9 (CEIS) -- China's southernmost Hainan Province increased eight international air routes in the past year, the provincial government sources said here on January 8.

The eight international air routes are opened by seven foreign airline companies including Asiana Airlines and Malaysia Airlines, making the international air routes of the province rising to 51.

Statistics from the provincial government show that Hainan saw 3, 479 international flights during the first 11 months last year, 31.60 percent more than the same period in 2004.

As China's first province to open up part of the aviation rights to overseas airlines, Hainan has attracted 14 foreign air companies since July 2003, opening 28 international air routes linking the island province with the world.

N. China city opens five int'l air routes
9 January 2006
Xinhua's China Economic Information Service

TAIYUAN, January 9 (CEIS) --- People in North China's Shanxi Province will travel more easily to foreign destinations as five international air routes were opened here on January 6.

With an airliner leaving the provincial capital of Taiyuan on January 6 for Frankfurt in Germany, Shanxi was for the first time linked with foreign countries by air routes.

The five routes, operated by Beijing-based Air China, link Taiyuan with Frankfurt, Paris, London, New York and San Francisco with a brief stop in Beijing.

Shanxi is China's major coal production base and a popular tourist destination, boasting two sites that are included in UNESCO World Heritage list.

China's budget carrier Lucky Air to launch maiden flight before end of month
9 January 2006

BEIJING (AFX) - Hainan Airlines (SHA 600221; SHB 900945), in which US-financier George Soros holds an indirect stake, said its subsidiary Lucky Air Co Ltd is expected to launch its maiden flight before the end of January.

In a report on its website, Hainan Airlines cited Lucky Air chief executive Ma Guohua as saying the newly formed carrier will become 'a real budget carrier operating regional routes at low cost'.

China's fourth-largest airline Hainan Airlines owns a 67.95 pct stake in Lucky Air, which is based in Dali Airport in the southern province of Yunnan.

George Soros holds an indirect stake in Hainan Air through his investment vehicle American Aviation.

Lucky Air has received approval to lease three B737s from Hainan Airlines' unit Shanxi Airlines for its operations.

Air China December Passengers Up 19% On Year, Cargo +17%
10 January 2006

HONG KONG (Dow Jones)--China's flag carrier Air China Ltd. (0753.HK) said Tuesday it carried 19% more passengers in December than in the same month a year earlier, accelerating from a 14% rise in the previous month.

The Beijing-based airline said it transported 2.2 million passengers in December, with domestic traffic accounting for 81% of the total. Its cargo traffic rose 17% to 69,832 tons.

For the year as a whole, Air China carried 13% more passengers to 27.7 million, from 24.5 million in all of 2004. The airline also shipped 10% more cargo to 732,817 tons, from 665,252 tons.

The airline's passenger load factor, a measure of how much of its available seats were filled, rose to 69.7% in December, from 67.5% in the same month in 2004.

Danish union against SAS using Chinese staff cheap

COPENHAGEN, Jan 11 (Reuters) - A Danish union is threatening Scandinavian airline SAS with a strike unless it drops plans to employ Chinese cabin crew on routes to China with much lower pay and conditions than it offers its current staff.

Cabin Union Denmark (CUD) fears that the recruitment by SAS of 35 Chinese flight attendants could prompt the cost-cutting airline to hire staff for lower wages on other routes as well.

"Since spring 2005, we have repeatedly told SAS this is unacceptable and they are in an extreme risk of a strike if they do this," Verner Lundtoft Jensen, head of the CUD, told Reuters.

The union says it is not against SAS employing Chinese workers but wants to ensure they are included in union agreements and do not undercut current staff.

Hiring Chinese cabin staff, including uniforms, hotels and education, costs SAS around 10,000 Danish crowns ($1,618) per person per month, a fifth of what the airline would have to pay for a Dane, the CUD said.

"Here we have a state owned company like SAS and they are importing workers from China. That is OK, but they have to accept that they have to work under the Danish collective agreement", Lundtoft Jensen said.

The Swedish government owns 21.4 percent of SAS shares and Denmark and Norway hold 14.3 percent each.

CUD has taken the case to a lower arbitration court. Proceedings will begin in January.

If a deal is not reached by March 1, when the CUD is due to renegotiate its collective agreement with SAS, it may strike.

"A strike could come very soon after that. But we hope it will not go that far," he said.

SAS has been hard hit by competition from low-cost airlines and higher fuel costs, although it has forecast a return to profit in 2005 after four years of losses.

It has pushed through a 14 billion Swedish crown package of cost cuts and plans to trim expenses by another 2 billion in 2006-2007 through productivity gains, particularly among pilots and cabin staff, and by simplifying its business model and sales methods.

SAS declined to comment on the salary levels for Chinese staff but spokesman Jens Langergaard said he thought they were "very good by Chinese standards".

The airline hired the Chinese staff because "our customers have requested mandarin-speaking cabin attendants. We have recruited them locally and they will be paid according to local agreements," Langergaard said.

The Chinese employees are currently in Denmark for training.

SAS already has local cabin crew in Japan and Thailand, with the agreement of the union.

HAECO eyes Baiyun facility

Hong Kong Aircraft Engineering Co, the maintenance company controlled by Swire Pacific and Cathay Pacific, is in talks to open a new aircraft maintenance center at Guangzhou's gleaming Baiyun International Airport, a source close to the airport said.

Alman Loong
Hong Kong Standard
Monday, January 16, 2006

Hong Kong Aircraft Engineering Co, the maintenance company controlled by Swire Pacific and Cathay Pacific, is in talks to open a new aircraft maintenance center at Guangzhou's gleaming Baiyun International Airport, a source close to the airport said.

With the mainland's rapidly expanding aviation market attracting growing investment in the highly competitive jet maintenance sector, HAECO managing director Chan Ping- kit visited Baiyun last week for negotiations with the airport management about the plan, the source said.

But he stopped short of confirming the new center will become a reality.

"I visited Baiyun Airport and there is a lot of business opportunity," Chan said, adding that the company has not made a final decision.

The center will be HAECO's second mainland maintenance facility.

It owns 55 percent of Taikoo (Xiamen) Aircraft Engineering Co, which opened in Xiamen in 1996.

The new project should have a major client when Federal Express, the US courier and logistics company, moves its Asia Pacific hub to Baiyun from the Philippines in 2008, replacing its existing hub.

TAECO chief operation officer John Chi said last month that HAECO would set up a second maintenance center in southern China and has already signed a letter of intent.

Chan indicated that the company was not yet ready to reveal its plans.

"We hope to finish the expansion plan in TAECO and then make a decision [on the new facility] before the end of the year," he said.

TAECO plans to open a sixth hangar to handle a growing volume of business, which mainly involves maintenance and modification of Boeing 747, 757 and 737 aircraft.

China's domestic airlines are rapidly expanding their fleets to meet a surge in demand that will make the mainland the world's second-largest aviation market after the United States within the next two decades, according to an Airbus forecast.

As a result, the mainland's maintenance, repair and overhaul market is expected to be worth US$2.5 billion (HK$19.5 billion) by 2014, AeroStrategy Management Consulting estimates.

Three mainland airlines are already in partnerships with foreign investors to capture the business. One such partnership is Guangzhou Aircraft Maintenance Engineering Co.

Based near Baiyun Airport, Gameco is a joint venture between Hutchison Whampoa and China Southern Airlines, and is one of the mainland's leading heavy aircraft maintenance companies, providing repair and servicing for more than 240 flights a day at the airport.

Gameco has invested more than 900 million yuan (HK$866.16 million) to build a four-bay widebody hangar, including a paint shop at Baiyun Airport.

The other major player is Aircraft Maintenance & Engineering Corp, co- owned by Deutsche Lufthansa and Air China.

SAS To Meet Unions For Talks On Chinese Staff Tuesday
16 January 2006

STOCKHOLM (Dow Jones)--SAS Scandinavian Airlines Denmark, the Danish unit of SAS AB (SAS.SK), will meet with the Danish cabin crew union CAU Tuesday to discuss a complaint from the union regarding the employment of 35 Chinese cabin crew, it said Monday.

The union's complaint regards the employment by SAS of Chinese staff outside of a collective agreement comparable with the Danish one.

CAU's head of cabin personnel, Verner Lundtoft Jensen, said that if the Chinese employees are accepted without an agreement, there would be a situation in the longterm where staff under collective agreements risk losing their jobs to those without them.

"We think this is just the beginning," he said.

He added that if an agreement can't be reached with SAS Tuesday the union will try to get the case tested in the Danish courts.

Jens Langergaard, press officer of SAS Scandinavian Airlines Denmark, said the Chinese cabin crew's work will be based in Shanghai, hence it is the airline's opinion they should be hired according to Chinese regulations.

He added that this is the way the company has worked with employees from several other countries.

Lufthansa sees more China flights - paper

FRANKFURT, Jan 16 (Reuters) - Deutsche Lufthansa wants to accelerate its growth in China this year, its chief executive told Germany's Handelsblatt newspaper.

In the future, the airline expects 52 direct flights to Shanghai, Beijing, Hong Kong and Guangzhou, CEO Wolfgang Mayrhuber told the newspaper.

In 2005, the newspaper said, the airline offered 43 connections between Germany and China.

The number of China passengers should increase by about a quarter this year, up from an increase of 18 percent in 2005.

"China is an extremely important market for us," Mayrhuber said.

China Eastern sees 2005 profit down 50-plus pct

SHANGHAI, Jan 19 (Reuters) - China Eastern Airlines Corp. Ltd., one of China's top three airlines, said on Thursday it expects its net profit for 2005 to be down more than 50 percent from 2004, amid high fuel costs.

China Eastern previously reported a net loss of 471.4 million yuan ($58 million) in the first half of the year, but swung back to a 673.2 million yuan profit in the third quarter.

But it said November and December were slow months for the airline due to seasonal patterns, according to an announcement in the official Shanghai Securities News.

It also blamed high oil prices for the expected big decline in profit.

Wednesday January 18, 7:51 PM
China Southern Air Dec Passengers Up 63% To 3.40 Million

HONG KONG (Dow Jones)--China Southern Airlines Co. (ZNH) said Wednesday it carried 63% more passengers in December 2005 than a year earlier.

The Guangzhou-based airline carried 3.40 million passengers in the month, up from 2.08 million in December 2004. It also carried 49% more cargo, to 71,440 tons from 48,000 tons.

The airline didn't comment on the figures, which were posted on its Web site.

For all of 2005, China Southern had 44.12 million passengers, up 56% from 28.21 million in 2004. Cargo shipments rose 42% to 774,550 tons from 545,130 tons.

The surge in the airline's annual passenger figures followed the completion of its acquisition of Shenyang-based Northern Airlines Co., and Urumqi-based Xinjiang Airlines Co. in December 2004.

In 2005, China Southern's load factor - the number of available seats filled on its flights - rose slightly to 70.1% from 69.2% the previous year.

China Southern is one of China's three major airlines, along with China Eastern Airlines Ltd. (CEA) and Air China Ltd. (0753.HK).

High jet-fuel prices slashed 2005 earnings, China Eastern warns
20 January 2006
Hong Kong Standard

China Eastern Airlines, the country's third-largest carrier, has warned that high jet fuel prices have cut its 2005 profit by more than half from a year earlier, while some analysts expect the carrier to report a net loss.

However, the profit warning barely moved the airline's share price, as investors already expected Chinese airlines to report poor earnings. The stock edged up 0.8 percent on the Hong Kong stock exchange Thursday to HK$1.26.

``Our current 2005 net profit forecast for China Eastern stands at 10 million yuan [HK$9.63 million], but it is likely that the carrier will report a net loss,'' said BOC International analyst Julia Tang, who assigned ``underperform'' calls on China Eastern's Hong Kong-listed Hshares and Shanghai-listed A shares.

VC Brokerage expects China Eastern will report a net loss of 165 million yuan (HK$158.4 million) in 2005. China Eastern's full-year results are due in April.

Chinese airlines' earnings have been crimped by the rising fuel price, their largest single cost, as jet kerosene traded in Singapore rose 49 percent in 2005. China raised the price of jet fuel four times last year, tracking an increase on international markets.

Shanghai-based China Eastern posted a loss of 475 million yuan in the first half, while Guangzhou-based China Southern Airlines dipped into a net loss of 964 million yuan. Beijing-based Air China, which runs more international routes than the two, managed to achieve a net profit of 591 million yuan in the first half, although it was a 25 percent plunge from the year-earlier period.

The higher fuel cost was partly eased by a one-off gain from the revaluation of Chinese currency on July 21 last year, which boosted the yuan's value by 2.1 percent against the US dollar. Chinese airlines borrowed US dollar to settle aircraft purchases, so a stronger yuan would lead to a book gain. The exchange gain helped China Eastern report a 263 million yuan profit under Chinese accounting standards for the nine months ended September 2005, which was a 67 percent drop from the year-earlier period.

Excluding the one-off gain from the yuan revaluation, China Eastern would have booked a net loss of 150 million yuan for the first nine months, Tang said.

China Southern Airlines: May Post Loss For 2005
19 January 2006

SHANGHAI (Dow Jones)--China Southern Airlines Co. (ZNH) warned Friday it may post a loss for 2005 due to surging fuel costs and intensifying competition from domestic rivals.

"Crude prices were hovering at high levels in 2005. That pushed up the prices of jet fuels and our operational cost," the company said in a statement posted on the official China Securities Journal.

"Fiercer competition from domestic carriers also capped our profitability," it added.

The company offered no details on its financial performance over the past year.

Under current regulations, listed companies in China have to disclose their 2005 financial results by the end of April.

China's Spring Airlines links with Malaysia's AirAsia

SHANGHAI, Jan 19, 2006 (AFP) - Spring Airlines, a privately owned carrier aiming to tap China's budget travel market, has partnered with pioneering Malaysian low-cost carrier AirAsia, state press reported Thursday.

"The airline has started cooperation with Air Asia to develop new routes and projects," the Shanghai Daily quoted Wang Zhenghua, chairman of Spring, as saying.

Spring will operate three round-trip flights from Shanghai and Jinan cities to Xiamen city in China's southeast, where AirAsia operates flights to Southeast Asia, Wang said.

"We hope to use Xiamen as a transfer hub and open more flights from major provincial cities that don't have direct links to Southeast Asia," Wang said.

Shanghai-based Spring, owned by one of China's largest travel agencies, operates three Airbus A320s but unlike AsiaAir, it has yet to turn a profit and has been losing 250,000 dollars a month since its maiden flight in July.

Wang hopes the tie-up with AirAsia, which dominates the crowded Southeast Asian low-cost sector, could help Spring break even by this April.

Only last year, Okay Airways, the country's first budget airline, said prohibitive costs were forcing it to overhaul its budget business operating model.

Tight government restrictions over landing fees and tightly-controlled jet fuel make it particularly tough for discount airlines to make money in China.

Brazil's Embraer Sells 5 Jets To China Eastern Airlines
19 January 2006

SAO PAULO (Dow Jones)--Brazilian aircraft manufacturer Empresa Brasileira de Aeronautica SA (ERJ), or Embraer, announced the sale of five 50-sets jets ERJ-145 to China Eastern Airlines Wuhan Ltd. (600115.SH), the company said in a statement late Wednesday.

Embraer said it will deliver the aircraft between Nov., 2006 and June, 2007 . The jet-maker said the sale was made through its Chinese joint venture, Harbin Embraer Aircraft Industry Co. Ltd.

Harbin Embraer, which has 188 workers producing the ERJ-145 model jet in China, is a joint venture between Embraer and two units of China Aviation Industry Corporation II.

In the fourth quarter of 2005, Embraer delivered 40 aircraft to customers, ending the year with a total of 141 jets delivered.

The firm said it expects to deliver a total of 145 aircraft in 2006 and 150 in 2007.

China Eastern Airlines projects over 10 percent growth rate in 2006- 2010
24 January 2006
Xinhua's China Economic Information Service

BEIJING, January 24 (CEIS) - China Eastern Airlines (NYSE: CEA, HK: 0607, SH: 600115) projects an average annual growth rate of not less than 10 percent in the 2006-2010 period, according to sources with the company.

The airline expects to realize a total traffic volume of 7.2 billion tons/ kilometer, generate net profits of 200 million yuan and transport 35 million passengers and one million tons of cargos in 2006, up 14.39 percent, 10.51 percent and 15.27 percent year on year respectively.

In the period, the company will build an air routes network with Shanghai, the largest city and financial center in China, as the center.

In 2005, the airline realized a total traffic volume of 6.29 billion tons/ kilometer and carried 31.672 million passengers and 867, 000 tons of cargos, up 197 percent, 181 percent and 200 percent respectively compared with that in 2000.

By 2010, it is expected to realize a total traffic volume of 12.5 billion tons/kilometer, generate operating turnover of more than 50 billion yuan and transport 60.7 million passengers and 2.1 million tons of cargos.

China Eastern Aims for 50% Shanghai Market Share

BEIJING, Jan 24 Asia Pulse - China Eastern Airlines (NYSE:CEA, SEHK:0607, SSX:600115) is aiming to garner a 50 per cent share of the Shanghai market, according to a company source.

The airline will introduce an Airbus A330-300 in 2006, the first of its kind in the mainland of China and open several international air routes including a service from Shanghai to Frankfurt.

By the end of 2005, the company had owned nearly 200 aircraft, of which the majority are Airbuses and Boeings.

The airline is expected to buy 40 more aircraft in the coming two years. By 2010, it will have more than 320 airplanes providing nearly 55,000 seats, a 12.8 per cent yearly growth compared with that at the end of 2005.

The company realized total traffic volume of 6.29 billion ton kilometres and transported 31.672 million passengers and 867,000 tons of cargo in 2005, up 197 per cent, 181 per cent and 200 per cent respectively compared with that in 2000.

FedEx to pay $400 mln for Chinese express business

HONG KONG, Jan 24 (Reuters) - Top global air express shipper FedEx said on Tuesday it is paying $400 million to buy out its Chinese partner's express delivery business in a move that boosts its presence in the export powerhouse.

FedEx said in a statement it would buy Tianjin Datian W. Group Co. Ltd.'s (DTW) 50 percent stake in their existing joint venture, and take over DTW's domestic express network.

"China is changing the world's economic landscape," said Frederick W. Smith, FedEx's chairman, president and chief executive officer.

"This strategic investment in the long-term growth of China will broaden and deepen our relationship by improving access to important markets."

FedEx will establish its first transport hub in China by about 2008 -- its largest outside the United States.

The U.S. giant has joined rivals United Parcel Service Inc. and Deutsche Post's DHL Express in a rush to expand in the air cargo market of China, the world's manufacturing workshop and third biggest trading country.

FedEx partnered with DTW in 1999. The Chinese firm operates a domestic express network from about 90 locations, the U.S. firm said in a statement.

Joke lands extra blow to airline's woes
28 January 2006
South China Morning Post

When you are down, you are down. The share prices of China Southern, once a favourite airline play among Hong Kong investors, have been in a steady decline. And for last year, it is expected to post steep losses after a year of plenty in 2004.

Now, an anonymous group of pranksters, presumably customers with way too much time on their hands while waiting for delayed flights on the mainland, have taken the trouble to register a website under the name www.china-southern.com .

Oh dear! The single photo posted online carries this caption: "Is this check-in opening soon? Maybe {hellip}"

For more official information, readers are advised to visit the airline's real website at www.cs-air.com .

Jardine Aviation eyes mainland market Air services company to form 1b yuan venture with Air China
4 February 2006
South China Morning Post

Jardine Aviation Services is to set up a one billion yuan 15-year joint venture with Air China to provide ground-handling services at Beijing airport, according to sources.

The air services firm, which accounts for 25 per cent of ground-handling services at Chek Lap Kok, would become the first Hong Kong company to tap into the lucrative business in the mainland.

Ground handling at mainland airports is currently operated by either the airport operators or the airlines. Beijing Capital Airport, for example, has two providers - Air China Ground Service Department and Beijing Airport Ground Service, which control the market 65 per cent and 35 per cent, respectively.

Beijing Capital Airport handled 342,000 flights last year, surpassing Hong Kong's 263,000 movements over the same period. Air traffic in Beijing was up 12 per cent from the previous year. The number of passengers using Beijing airport last year was 41 million, an increase of 17 per cent.

"This trend by mainland airport operators to desert ground-handling services is providing level ground for the players," said an industry source, who added that the role of airports should be confined to landlord and administrator.

According to the sources, Jardine Aviation and Air China's application for a joint venture had been cleared by the General Administration for Civil Aviation of China but was awaiting approval from the National Development and Reform Commission.

Jardine Aviation is fighting to get an equity stake in the joint venture of as much as 49 per cent.

An Air China spokeswoman said there was already a strong co-operative relationship between the two companies, given that Jardine Aviation was providing ground-handling services for Air China in Hong Kong.

Jardine has been involved in Hong Kong aviation since 1946 when it began providing sales agency and customised ground-handling services to airline customers.

Jardine Aviation is a joint venture between Jardine Matheson Group and China National Aviation Corp, formed in 1988.

Ground-handling services include passenger services - such as check-in, baggage services and ticketing services - as well as flight operations and cargo control.

KLM to start direct service between Amsterdam and China's Chengdu
5 February 2006

SHANGHAI (AFX) - Royal Dutch Airlines (KLM) will start a direct service on May 28 between Chengdu, the capital of China's Sichuan Province, and Amsterdam, the Shanghai Daily reported.

The twice weekly service will be the first direct link between Sichuan and Europe. KLM, which has merged with Air France, will serve the route with two Boeing 777-200 aircraft.

Shenzhen Airlines To More Than Quadruple Fleet Over 9 Yrs
8 February 2006

SHANGHAI (Dow Jones)--Shenzhen Airlines Co. said it plans to more than quadruple the size of its fleet over nine years, a target that underscores expectations the robust growth of air travel in China will continue.

The unlisted Chinese carrier based in the southern city of Shenzhen, near Hong Kong, aims to grow its fleet to 60-70 aircraft in three years, to 100 aircraft in six years, and to 160 aircraft in nine years, from 33 aircraft now, according to a statement dated Tuesday.

Shenzhen Airlines said in the statement it agreed to lease three Airbus A320 aircraft from Royal Bank of Scotland Group PLC (RBS.LN) as part of its expansion plan. The statement didn't mention financial details of the deal. An executive at RBS Aviation Capital in Asia declined to comment on the airline's statement.

The carrier would procure the other new aircraft by leasing and purchase, an official in the airline's corporate culture department said Wednesday, without elaborating. Shenzhen Airlines will use the new aircraft on both domestic and international routes, the official said.

The airline's international routes include Shenzhen-Seoul and Shenzhen-Kuala Lumpur, and it plans to soon launch a service from Shenzhen to Ho Chi Minh City, said the official.

The airline's expansion plan comes as more and more Chinese have the means to take to the skies instead of enduring what are sometimes days-long train journeys, and as an increasing number of Chinese tourists opt for overseas destinations.

Some of the world's largest aircraft makers have already flagged the Chinese market's potential. Airbus said it (ABI.YY) foresees China buying more passenger airplanes than any other country except the U.S over the next 20 years, while Boeing Co. (BA) forecast Chinese purchases of 2,612 planes in the next two decades.

Shenzhen Airlines said in the statement its core revenue rose 14% last year to CNY4.30 billion as it carried 5.73 million passengers, up 19%. The statement didn't provide year-earlier figures.

China's three biggest airlines in terms of traffic are Beiing-based Air China Ltd. (0753.HK), China Southern Airlines Co. (ZNH) of Guangzhou, and Shanghai-based China Eastern Airlines Corp. (CEA).

Shenzhen Airlines, along with others such as Shandong Airlines Co. (200152.SZ) and Shanghai Airlines Co. (600591.SH), are smaller than the three leaders.

In January, Shenzhen Airlines said Export-Import Bank of China agreed to extend it a US$1.5 billion credit line in part to import aircraft.

Air China holds a 25% stake in Shenzhen Airlines, while Hui Run Investments is the airline's majority shareholder with a 55% stake in the company, Shenzhen Airlines said in January.

Air China seeks major listing in Shanghai

SHANGHAI, Feb 10, 2006 (AFP) - Flag carrier Air China said Friday it had applied to list 2.7 billion shares on the Shanghai stock exchange to finance the purchase of aircraft.

The airline, which is listed on the Hong Kong and London bourses, said it would seek Chinese market regulators' approval for a yuan-denominated A share issue equivalent to nearly 29 percent of its existing issued share capital.

The notice to the Hong Kong exchange did not say how much the company wanted to raise but net proceeds from the listing will be used to finance a previously announced purchase of 45 aircraft.

The money will also be spent on improving facilities at its Beijing base.

Air China chairman Li Jiaxiang said the company expects to pay no more than 5.68 billion dollars for all of the aircraft, while the development of the Beijing facility will cost about 600 million yuan (74 million dollars).

"The company believes the A share issue will establish a new financing platform for the company and will broaden the company's access to different securities markets," Li said.

Shareholder approval will be sought at a meeting on March 28.

Direct flights to Tel-Aviv double to twice weekly
10 February 2006
Xinhua's China Economic Information Service

BEIJING, February 10 (CEIS) -- EL AL Israel Airlines will start operating another weekly flight from Beijing to Tel Aviv starting from March 26, 2006.

The company decided to expand and improve its service in order to meet the needs of business travelers and the increased volume of tourists from both China and Israel.

The President of the EL AL Israel Airlines, Haim Romano said, traffic from China to Israel has increased steadily over the last few years, with the rise in the number of official delegations, businessmen, and additional commercial and tourist activities. Due to customer demand, EL AL made a strategic decision to double the frequency and add another weekly flight starting next month.

"Adding the flight between Beijing and Tel Aviv is within the framework of EL AL Israel Airlines to develop Chinese tourism to Israel,” said Romano.

Israel is a very attractive new destination for the Chinese market, combining rich and ancient culture, unique historical sites, excellent resorts and modern facilities for tourists. The accessibility from Israel to other countries will allow Chinese tourists to combine trips to Israel with side-trips to Italy, Egypt or Turkey.

China has given Israel “Approved Destination Status” for group tourists.

"We expect that the final agreement between the governments of China and Israel will be complete in the near future to allow Chinese travel agencies to offer tour packages to Israel," said Romano.

Passengers up but profits down for China's airlines in 2006

SHANGHAI, Feb 8, 2006 (AFP) - China's airlines are enjoying fast-rising passenger numbers but analysts say many may struggle to turn a profit this year due to increasing competition and oil-driven rising operational costs.

Passenger throughput is expected to rise 15 percent in 2006 to 159 million and cargo volumes are forecast to expand 10 percent to 3.36 million tonnes, according to the General Administration of Civil Aviation of China.

But analysts believe rising jet fuel prices -- with the price of crude oil still above 60 dollars a barrel -- will wipe out most airlines' gains.

"It is very unlikely that oil prices will decrease significantly in 2006 so carriers are expected to face even tougher operating pressures," China Securities analyst Li Lei said.

Fuel prices in China soared 25 percent last year to reach 5,133 yuan (637 dollars) per tonne at the start of 2006.

Two of China's major airlines -- China Southern and China Eastern -- have already warned of operating losses of over 50 percent in 2005 and analysts said a near-term reversal of fortune was unlikely.

Only flag carrier Air China is expected to buck the trend when it and the other big three airlines report full-year results in April.

Air China, which posted profits of 600 million yuan for the first half of 2005 on the back of its more extensive and lucrative international network, is expected to see an improved figure in the second half, Air China spokesman Wang Kai said.

For all Chinese airlines the burden of fuel costs is not going away soon.

Jet fuel on average accounts for 40 percent of Chinese costs compared with around 24 percent for airlines worldwide, according to the International Air Transport Association (IATA).

Airlines in China, which have to pay a premium to buy jet fuel at a set price from state-owned China Aviation Oil Holding Co. (CAOHC), have lobbied for the scrapping of price controls.

Regulators have signaled that CAOHC's monopoly may soon end but how much competition and the benefits this may bring is uncertain.

"I question whether opening the market will lead to a decline in the jet fuel price in the short-term," said Guotai Junan Securities analyst Jim Lam.

"CAOHC has essentially dominated the market and has many ground facilities and oil supplying facilities under its control ... new companies in the market will still need to cooperate with CAOHC," Lam said.

Regulators last year allowed airlines to raise surcharges by 20-80 yuan per passenger on domestic routes but it has not been enought to offset losses.

As part of the government's bid to improve the profitability of China's secondary airports, landing fees are expected to rise in the first half of 2006, a move that will squeeze earnings further.

"On average, for the three major carriers -- Air China, China Southern, China Eastern -- each one will have more than 400 million yuan in extra costs from landing charges," Lam said.

Adding to spiralling costs, China also plans to unify landing fees on international routes by cutting charges paid by foreign carriers by 20 to 30 percent and raising fees for domestic airlines by 15 percent.

Meawhile, growing competition from budget and regional airlines that can now fly routes previously off-limits will be good for the market but also means erording margins.

While some of these small carriers may not pose a huge threat to Air China and the others, stronger regional carriers like Hainan Airlines and Shandong Airlines do, Lam said.

For China's big airlines, it is not all gloom and doom, however, as what is already the world's third biggest aviation market is expected to continue expanding in line with the nation's economic growth.

"The thing in China's favor is that it's growing rapidly and has a strong economy which is creating new travel opportunities," said Center for Asia Pacific Aviation (CAPA) analyst Derek Sadubin.

"There is still a fair bit of growth in the market to look forward to but there is so much capacity coming in with orders at record levels and it will continue to be a very competitive place."

Nation's carriers face rough landing over plan to lift fees
10 February 2006
South China Morning Post

China's proposals to ramp up the profitability of its second-tier airports could not have come at a worse time for the country's airlines, many of which are struggling to cope with higher fuel costs under a regulatory regime that restricts their ability to generate more revenue.

The General Administration for Civil Aviation of China (CAAC), the industry's governing body on the mainland, has been circulating a consultation paper which proposes to raise airport user charges for domestic flights next year by an average of 15 per cent.

If passed into law, the proposal could increase individual operating costs for China's main carriers by "several hundred million" yuan per year, a senior executive from one of the mainland's Big Three airlines told Below Deck yesterday.

Given that two of those carriers - China Southern and China Eastern - have issued guidance to the market that their earnings for last year will fall at least 50 per cent despite enjoying robust growth in passenger ticket sales, the proposals are being viewed darkly in airline quarters.

All of China's airlines struggled last year to deflect a 45 per cent increase in the average cost of jet fuel, handcuffed as they were by state restrictions on how much they charge for domestic passenger fares, surcharges or even how much they can hedge their fuel bills.

The regulator's logic is simple and twofold: 85 per cent of China's airports are losing money because their user fees are set too low to recover the operating costs of running the facility; essentially any airport handling fewer than five million passengers a year is running at a deficit - and the regulator knows that has to stop.

Moreover, China has emerging obligations under its agreement with the World Trade Organisation not to discriminate between foreign and domestic airlines and that extends to airport user fees.

At present, when Cathay Pacific or any foreign airline lands a 400-seat B747 at a Category 1 airport such as Shanghai, the fee is about $33,000; Air China or one of its cohorts pays about $13,000 for any flight headed for an international destination.

Foreign carriers also pay a 25 per cent penalty for landing at airports between 11pm and 6am and a further 10 per cent for landing anytime runway lights are needed.

Landing fees are just one of many charges waiting for airlines at China's airports but they are by far the largest not applied on a per capita basis. The CAAC aims to bring those fees more in line without damaging the airports' revenue streams. To do that, it would like to cut the overall penalty on foreign carriers by 20 per cent while boosting levies on domestic carriers on international flights - Hong Kong and Macau included - by 70 per cent.

Other than mainland carriers - which say user charges in China account for about 14 per cent of their operating costs - the proposals will have the biggest impact on airports with the least international flights.

It is estimated that airports such as Hangzhou Xiaoshan, which handles about 85 per cent domestic traffic, would enjoy at least a healthy single-digit rise in annual revenues, filling the coffers of its shareholders such as Hong Kong's airport authority.

According to mainland media reports, the aviation administration was hoping to bring the consultation process to a close and publish its decision by the end of last month. But with so much at stake for both airports and airlines, the carriers now say a decision may not be reached until the middle of the year.

Whatever decision is reached will be set in stone for the industry's next five-year plan, which begins in March. If the proposal is passed as written, operating costs for Chinese carriers will rise on both international and domestic flights.

And with little ability to boost revenue or recover those costs elsewhere, it can be a long five years on the mainland.

Air China to hire foreign captains amid industry pilot shortage

BEIJING, Feb 14, 2006 (AFP) - China's flagship airline is looking to hire foreign captains amid a shortage of qualified domestic pilots in the nation's fast-expanding aviation industry, state press said Tuesday.

"Currently, we are short of at least 40 captains so we will try to recruit foreign pilots," Li Huxiao, a senior staff member of Air China, told the China Daily.

The main reason foreign pilots need to be hired is because the demand for new services is growing faster than China's capacity to train pilots, Li said.

"Air China has planned to introduce 20 to 30 airplanes within this year but the exact number will depend on the supply of aircrew members, particularly the pilots," Li said.

"Currently, we are short of at least 40 captains."

Major Chinese airliners employ some 11,000 pilots to fly 770 planes, a ratio that is inadequate to cope with rising demand for air travel, said the report, citing industry experts.

China needs 1,200 to 1,600 new pilots a year but its major commercial flight training institute can only produce some 600 pilots a year, it said.

Further complicating the issue is China's ongoing deregulation of the aviation industry which has seen the start of several private airlines which are seeking to attract pilots away from the major airlines, the newspaper said.

In December alone, 10 pilots from China Eastern Airlines' Jiangsu branch resigned, apparently to take up offers from private carriers, it said.

The report did not say from which countries the foreign pilots would be recruited.

United seeks Guangzhou flights to US
Alman Loong
15 February 2006
Hong Kong Standard

United Airlines, which already operates two nonstop routes from China to the United States, could soon carry Guangzhou passengers nonstop to San Francisco if the carrier wins rights to the route in Sino-US air talks that may be held as early as this spring.

United believes there will be increased liberalization in air links between the two countries and indicated it was interested in starting flights between Guangzhou and the US, although the airline's executives Tuesday would not predict the outcome of the negotiations. Talks will be held sometime this year but how much more liberalization will occur ``is hard to predict,'' said Andrew Stephen, United's general manager (Hong Kong). ``We are looking for more opportunities both with passengers and cargoes.''

Sino-US air services negotiations are due to be held between April and June, a source said.

United is one of three US carriers operating nonstop to China under a 2004 agreement that has more than doubled airline traffic between the two countries and helped to turn China into a cargo hub for Asia.

Under the 2004 deal, the number of passenger and cargo flights is to increase to 249 a week by 2007 from 54 in 2004 and allows five new carriers from each country to fly US-mainland routes.

``US airlines have been strongly pushing the China government to negotiate rights as they are fully using existing capacity,'' the source said.

United operates daily services from Beijing to Chicago and from Shanghai to San Francisco. Northwest Airlines links Shanghai to Detroit, while Continental Airlines flies between Beijing and New York.

On the mainland side, Air China operates a daily flight from Beijing to New York and San Francisco, China Eastern links Shanghai to Los Angeles and China Southern flies daily from Guangzhou also to Los Angeles.

``US airlines have fully utilized the existing capacity after the 2004 agreement but our company has not,'' said Rao Xinyu, head of investor relations at Air China. Air China has not yet received notice of new negotiations from the General Administration of Civil Aviation of China, he said.

China Eastern Airlines' passenger services to Los Angeles are doing very well, investor relations officer Chow Sun said. Business travel was booming and the airline would like to expand passenger services to the United States in the next round of talks.

The company plans to add New York as a destination and hopes to increase flight frequency.

Stephen, who declined to give details of his company's performance in China last year, said United had no plans to relaunch nonstop flights between Hong Kong and New York, which were halted in 2003 after the SARS outbreak.

The company's passenger load factor on Hong Kong-US flights was ``healthy'' in the past year, he said without giving details.

There were also no plans by the airline to launch either passengers or cargo services to Macau, he said, in spite of growing traffic volumes at the former enclave.

Passenger volumes at Macau airport surged 26 percent to 4.2 million last year, boosted by the city's booming casino business.

Chinese regulators begin to feel the weight of air cargo
17 February 2006
South China Morning Post

Quite when it happened is unclear, but at some point in the past five years, the mainland's aviation regulators warmed to the vital role the transport of trade by air plays in stimulating or maintaining a vibrant economy.

The first signs of a Great Leap Forward, if you will, came in 2004 when the General Administration for Civil Aviation of China (CAAC) threw caution to the wind and set a timetable to open the mainland skies to the likes of United Parcel Service and Federal Express.

The mainland's incumbent carriers were nowhere near ready to defend their patches against such well-heeled and aggressive operators. But with mainland airlines focused on the passenger side of the business, the CAAC clearly felt the health of the economy took precedence over defending what was at the time the most undervalued sector of the country's aviation industry.

That is no longer the case.

As the mainland enters its 11th five-year plan this year, the CAAC expects the volume of air cargo on the country to grow at a compound annual rate of 12 per cent for the period - against 13.6 per cent for the past five years - or about 25 per cent faster than forecasts for the country's gross domestic product expansion.

The growth numbers - for air cargo anyway - will be achieved from a small base: cargo and mail volumes grew a comparative 89.2 per cent last year to 3.04 million tonnes in all of the mainland, just shy of the amount of air trade handled out at the airport.

But the CAAC's new attitude towards air freight and the role it plays in maintaining a robust economy will be music to the ears of many Asian airlines, which have long been keenly focused on what goes in the belly of their aircraft.

"In the past, we paid too much attention to the passenger sector and not enough attention to cargo," Fang Liu, a director of international affairs for the CAAC, told delegates at the biannual Airfreight Asia conference in Shanghai yesterday. "That constrained the economy and specifically the logistics industry. We now recognise how important cargo is to our domestic economy. The 11th five-year plan calls for us to continue to liberalise {hellip} it is a very important transition period for China's air cargo industry."

For the carriers, the upside is huge. International consultants from Frost and Sullivan estimate the value of goods moving through the mainland's myriad and multimodal supply chains last year to have reached US$4.6 trillion, up 30 per cent.

A market that size can tend to blind people to the fact that the mainland's air cargo industry is only just emerging from its infancy. Airlines are not playing as big a role in moving the goods as they - or the CAAC, for that matter - would like.

Nevertheless, Hong Kong's carriers are already positioning themselves for the day their rights to fly to the mainland are expanded: Hong Kong Dragon Airlines has five new 747 freighters joining its fleet in the next three years; Cathay Pacific Airways last month signalled its intention to be the world's biggest scheduled freight carrier, replete with a new dedicated cargo terminal at Chek Lap Kok.

Aircraft manufacturers such as Boeing and Airbus - whose bank accounts grew fat when the mainland spent US$11 billion on aircraft last year - will be further heartened by the CAAC's emerging respect for air cargo: of the 130 aircraft the mainland bought, none were freighters.

China to expand airports in new Olympic travel plan

BEIJING, Feb 17, 2006 (AFP) - China's aviation authorities have issued a plan for the 2008 Beijing Olympics that includes expanding 14 airports, opening more air corridors and using more e-ticketing, state press said Friday.

Work at Beijing airport on a third terminal building and a third runway is already underway. However the Beijing News said the new plan envisaged the expansion work finishing this year, earlier than previous targets of 2007.

Once complete, the airport will be able to handle annually 60 million passengers, 1.8 million tons of cargo and 500,000 flights, the paper said. The number of parking slots for planes will be expanded to 180.

Beijing airport's annual capacity is currently about 35 million passengers.

Aside from the ongoing upgrades at the Beijing airport, the Qingdao airport in eastern Shandong province, where the Olympic boating competition will be held, is also to be expanded and renovated, the Beijing News reported.

Twelve of the 14 other airports that will serve as back-ups to Beijing and Qingdao in case of emergency or weather-related problems will also be expanded or refurbished.

In an effort to accommodate increased air travel from Europe during the Games, authorities are also considering opening up more air corridors along the nation's northern border with Mongolia, the paper said.

The plan further calls for more modern ticketing methods, with electronic ticketing to be increased from 10 percent of all tickets sold currently to 50 percent by the time of the Games, it added.

The Civil Aviation Administration of China, the country's aviation authority, approved the new plan on Thursday, the paper said, without giving details of the costs.

China air traffic to double by 2010 but profits remain low: govt

BEIJING, Feb 14, 2006 (AFP) - China's booming aviation sector is expected to see air traffic double in the next five years although profit margins will remain tight, the government said Tuesday.

Passenger numbers, as well as cargo and mail traffic, will double by 2010 from last year, General Administration of Civil Aviation of China vice minister Gao Feng told reporters.

He said the nation's air industry transported 138 million passengers and 3.035 million tons of freight and mail in 2005.

This represented a 105 percent increase in passenger traffic and an 89 percent rise in freight and mail volumes from 2000 levels.

Gao said, however, that despite growth in the aviation sector's total revenues to 170 billion yuan (21.1 billion dollars) at the end of 2005, profits in the past five years only amounted to 10 billion yuan.

Total fixed asset investment across the sector amounted to 94.7 billion yuan over the past five years, he said.

"It is difficult to have high profitability in an industry where the investment is so big," Gao said.

Despite the sector's huge jump in passenger numbers, Air China is the country's only major airline expected to have turned a profit in 2005.

Two of China's other major airlines -- China Southern and China Eastern -- have already warned of a sharp losses when full-year results are announced in April.

Recent moves to begin liberalising the sector have led to a number of smaller airlines taking to the skies, shaking up an industry that for years did not have to deal with fierce competition.

However China's airlines are still largely beholden to a jet fuel monopoly and price controls.

Jet fuel on average accounts for 40 percent of Chinese costs compared with around 24 percent for airlines worldwide, the International Air Transport Association has said previously.

Although profits might not be huge, Gao said China will need to continue investing heavily in planes and pilots, and that he was comfortable with "slight overcapacity" in the industry.

"Every year during the next five years, we will introduce over 100 planes which means we will need over 1,000 pilots (annually)," Gao said.

His comments came as the China Daily reported that Air China is looking to hire foreign captains and other pilots to meet staff shortages.

"Currently, we are short of at least 40 captains so we will try to recruit foreign pilots," Li Huxiao, a senior Air China staff member, told the newspaper.

"Air China has planned to introduce 20 to 30 airplanes within this year but the exact number will depend on the supply of aircrew members, particularly the pilots."

Although China needs more than 1,000 new pilots a year, its major commercial flight training institute can only produce some 600 pilots a year, the China Daily said.

1st map on birds around airport drawn
17 February 2006
China Daily

A map of the bird situation around Shuangliu International Airport in Chengdu, capital of Southwest China's Sichuan Province, has been completed.

The map is the first of its kind in China, showing the detailed ecological situation of birds around the airport, according to a report of the Beijing-based China Surveying and Mapping News.

Shuangliu International Airport is an aviation transport hub in Southwest China. As the ecological environment of the airport has improved in recent years, many insects and birds have been attracted to the area.

Sichuan Airport Authority Ltd entrusted the Survey and Design Institute of Architecture of Southwest China to conduct a survey on the bird distribution within a radius of 10 kilometers around the airport.

The map shows the kinds of the birds and their length, weight, route of migration, flying height, habits and rank of danger to the airplanes. A database for the birds has also been set up to help protect the airplanes from the interference of flying birds.

Many ornithologists have taken part in drawing the map. And the survey shows that there are more than 60 kinds of birds living around the airport, according to the newspaper.

Statistics show that approximate 10,000 accidents of birds hitting planes are reported around the world every year. Bird strikes have become one of the most hazardous threats to aviation.

Germany's Fraport in talks to buy 49 pct of China regional airport - report
16 February 2006

SHANGHAI (AFX) - Fraport AG, owner and operator of Frankfurt Airport, is in talks to purchase 49 pct of Xi'an Xianyang international airport, the Shanghai Securities News reported, citing Michael Kunz, Fraport's chief representative for China.

The talks between the two parties are at an advanced stage, and negotiations are now focusing on the deal's details, he said.

However, Yuan Chunguang, an official from Shanxi provincial airport management group, told the newspaper only that Fraport is one of the parties are interested in investing in the airport.

'Two or three strategic investors' may eventually join the purchase, Yuan said.

Yang Ou, another official from the local airport management group, told the newspaper that companies that have expressed interest include Shanghai Hongqiao airport, Shanghai Pudong airport, China Eastern Airlines, Shanghai Airlines, Guangzhou Baiyun airport, China Southern Airlines, and Air China.

Xianyang airport does not have many international flights so foreign airlines may not be viable strategic investors, Tang said.

Yang added the final decision will be made by the end of this year.

The local airport currently does not have plans for an IPO, as it reported a net loss for 2004 and 2005.

Last year, Fraport bought a 25 pct stake in Ningbo's Lishe airport in eastern China.

From the Los Angeles Times:
_________________________________________
In China, Low-Fare Flying Is Seriously No-Frills
Spring Airlines, one of several cut-rate Chinese carriers, charges as little as $12.50 a flight. But rules favor the upstarts' state-owned rivals.
By Don Lee
Times Staff Writer

February 19, 2006

SHANGHAI — Spring Airlines gives new meaning to low-fare, no-frills flying.

For a one-way ticket from Shanghai to Qingdao, about the distance from Los Angeles to San Francisco, it charges as little as $12.50. You won't get a bag of peanuts on the plane, but 50 cents will get you a pickled duck wing.

And don't plan on packing anything heavy. Passengers are allowed to check bags weighing a total of 33 pounds, about a third of the limit set by most U.S. carriers.

Traveling on Spring makes Southwest Airlines, AirTran Airways and other U.S. budget brands seem like luxury carriers.

Since its debut in July, Spring has flown more than 200,000 travelers to 11 Chinese cities on its three, bright-green Airbus jets. The Shanghai-based airline hopes to have 50 planes in five years.

Private, low-cost carriers like Spring have been sprouting in China and across Asia amid fast-rising incomes and a boom in leisure travel. Companies such as Singapore-based Valuair and Malaysia's Air Asia are taking on traditional carriers and making air travel accessible to tens of millions of people.

Nowhere is the opportunity as great as in China. Experts say fewer than 1% of the nation's 1.3 billion people have stepped foot on a plane. Most travel long distance on trains that often are smelly and crowded.

Spring wants to make air travel routine in China.

For some routes, "we're cheaper than the bus or the hard seats on the train," said Spring's chairman, Wang Zhenghua, 61.

The airline has won some converts.

Zhou Jianxin, a 25-year-old recent college graduate, took Spring's flight from Shanghai to Qingdao last month to go home for the Chinese New Year holiday. It was his first time on a plane. He was so excited that he got to the airport three hours before the scheduled departure, only to face a two-hour delay.

Zhou asked for a window seat and frequently peered outside.

"It was so cool," the stocky man with a soldier's haircut said. "It was like riding a roller coaster when the plane was accelerating and taking off."

For years Zhou had gone by train from Shanghai to his home in Shandong Province. As a student, he paid half price, about $6 for a hard seat. But it was a long 24-hour ride. When he flew last month, he didn't get the best fare because of the holiday season. He paid $65 for a one-way ticket. But that was still 50% cheaper than the lowest fare available on other carriers.

"It will be great if Spring Airlines keeps offering cheap tickets," he said. "I don't want to take the train anymore."

Whether Spring Air and its no-frills counterparts can succeed is another story.

In the U.S., aviation deregulation gave rise to budget airlines. In China, where the air-travel market is in its infancy, the rules are more restrictive and tend to favor three state-owned carriers that control more than 90% of flights.

Wang, Spring's chairman, has pored over books on Southwest Airlines' strategy and management, and he'd like nothing more than to duplicate its success.

"To be the Southwest Airlines of China, you can say that," he said.

But it has been a turbulent ride for Wang and his airline.

Few in China's aviation industry are happy to see the arrival of a budget flier. Not travel agents or other middlemen whom Spring would cut out with its online ticket sales. And certainly not the dominant, state-owned carriers that have had it their way for years.

Shortly after Spring's launch, they complained to China's aviation authorities that the upstart carrier had set prices so low that they were in violation of government price controls. That forced Wang to package some flights with hotels to give customers discounted tickets.

Some of Spring's rivals lashed out even harder, halting long-running charter flights for Spring International Travel Services, the tourism company that Wang started 25 years ago, which is supplying $10 million in capital to launch Spring Airlines.

So far, the airline has been running at 95% of capacity, compared with 73% for the industry overall. But Spring also has had some start-up pains.

Its first flight from Shanghai to Wenzhou was scheduled to leave on a November morning. But the Airbus A320 never made it off the ground. The night before, maintenance crews spotted a crack in one of the windows on the used aircraft. With no other aircraft to use for a quick substitution, Spring Airlines canceled the flight, booked passengers on another carrier and covered the full-price fare of $95 a seat for a 50-minute flight.

The move was costly, but Spring gained some goodwill.

Bao Xiuming, a Wenzhou area resident, read about the incident in the paper and decided Spring was worth a try. He travels to Shanghai two or three times a month for his textile and home appliance businesses.

On a January afternoon, Bao, 48, boarded a Spring plane in Wenzhou for Shanghai. Every seat was taken. Four flight attendants passed out the lone frill: a 13-ounce bottle of water for each customer.

It was a white-knuckled, 45-minute flight. The plane was tossed up and down and seemed to be pushed sideways. The cabin was hushed.

Upon touching down at Shanghai's Hongqiao International Airport, some passengers stood up to get out before the plane came to a complete stop. Bao said he had never been on such a bumpy flight. Still, he was thrilled to pocket the savings.

"I'll probably fly more because it's so cheap," he said.

Spring is targeting businesspeople like Bao. But in today's China, Wang doesn't have the ability to adopt Southwest's model.

The Dallas-based airline reduced hefty airport landing and gate costs by setting up in secondary airports. But China hardly has any such airports. In fact, there are just 140 airports in China, compared with more than 5,700 in the U.S., said Li Yanhua, assistant professor at Civil Aviation University of China.

Spring can't operate on lower labor costs, either. Wang says there is a shortage of pilots in China, so he has had to pay more than the industry average salary of $1,250 a month.

Jet fuel and other material costs are controlled by the central government, which started allowing private airlines to operate only about a year ago.

Li estimates that 80% of an airline's cost in China is beyond the company's control. Nor can Spring count on the government's support on issues involving ticket prices and flight routes. Li says China's aviation authorities have tended to favor the state-owned carriers such as Air China and Chinese Eastern, both of which declined to comment.

Flying each of its airplanes frequently and filling most of their seats won't be enough for Spring to survive, according to analysts, who say it will have to expand its fleet to 20 or more planes. That may take five years, Wang says, and it's unclear how long the airline or its related company can continue to absorb losses. Spring International Travel Services, of which Wang is also chairman, operates 15,000 travel agencies in China and turned a handsome profit of $8.5 million in 2004. But Spring Airlines has been losing on average about $150,000 a month since August.

Some industry executives say China is simply not ready for a budget carrier.

Lan Shili, one of China's richest entrepreneurs, who plans to launch a private airline in May, says Chinese air travelers are mainly businesspeople or government officials who consider flying a luxury. They don't want to be shortchanged on things such as drinks on board, he said.

"As a customer, it doesn't feel good," Lan said, adding that his new company, Wuhan-based East Star Airlines, would aim to offer high-quality service at a competitive price.

Wang agrees that a budget airline may have arrived too soon for Chinese consumers.

At the moment, about 40% of his customers are buying their tickets online. The rest are booking them at travel agencies.

"Many don't trust e-tickets," says Wang Zhicheng, marketing manager at Jinjiang Travel in Shanghai. "They worry about paying for something without getting anything in their hands."

Spring's Wang expects the share of online purchases to grow and hopes Spring's customers will start printing their own tickets.

Until then, Wang is cutting costs where he can. On board, employees have been told to gently discourage passengers from bringing meals to eat onboard or from sharing food with others, to reduce cleanup time.

At Spring's headquarters near Hongqiao Airport, Wang moved out of his large private suite and into a 125-square-foot office that he shares with another executive.

"All the experts and insiders say a budget airline won't succeed in China," Wang said. "But if Western companies can manage it, why can't the Chinese?"

China Regulator Extends Airline Jet Fuel Surcharge
19 February 2006
Copyright (c) 2006, Dow Jones & Company, Inc.

The fuel surcharge for flights covering a distance of less than 800 kilometers is CNY20 ($2.47) per passenger, while the surcharge for flights of more than 800 kilometers will be CNY40 per passenger.

This is the second time that China is extending its jet fuel surcharges on domestic routes to offset high fuel costs.

In June 2005, China allowed all local carriers to impose fuel surcharges on domestic routes between Aug. 1 and Dec. 31, 2005.

In November 2005, China extended the timeframe to March 31, 2006.

-Renya Peng contributed to the story

HK Haeco To Form Hangar Venture At Guangzhou Airport
22 February 2006

HONG KONG (Dow Jones)--Engineering services company Hong Kong Aircraft Engineering Co. (0044.HK), also known as Haeco, said Wednesday it plans to build a hangar facility at Guangzhou airport in southern China to meet rising demand for aircraft maintenance.

Haeco said in a statement it signed a letter of intent with Guangdong Airport Management Corp. and Taikoo (Xiamen) Aircraft Engineering Co. to establish a joint venture to build the facility at Guangzhou's Baiyun International Airport.

The venture, in which Haeco will have a majority stake, plans to finish a feasibility study by September, the statement said.

The project is expected to cost US$50 million, according to initial estimates, said Haeco.

The new hangar facility 'will increase our productivity and enhance our services to satisfy our customers' increasing demand for aircraft maintenance as they plan for long term business developments in China,' said Chan Ping Kit, deputy chairman and chief executive officer of Haeco.

Haeco, which is 27% owned by Cathay Pacific Airways Ltd. (0293.HK) and 32% by Cathay's parent, Swire Pacific Ltd. (0019.HK), provides maintenance services to airports in Hong Kong and the mainland.

Haeco is building a second hangar at Hong Kong International Airport which is expected to come into operation by the end of 2006.

China airlines Lunar New Year passengers up 18.4 pct yr-on-yr
23 February 2006

BEIJING (AFX) - Domestic airlines in China carried 17.6 mln passengers during the Lunar New Year holiday period, which runs from Jan 14 to yesterday, up 18.4 pct year-on-year, the General Administration of Civil Aviation of China (CAAC) said.

The administration said in a statement that the number of flights by mainland carriers totalled 149,172, up 10.6 pct from a year ago.

The average load factor for flights to 52 major cities across the country was 70.2 pct, four percentage points up from a year earlier, said the CAAC.

Flight cancellation sparks confrontation between passengers and Chinese airline staff
24 February 2006

SHANGHAI, China (AP) - Police in Shanghai were called to break up a fight between passengers and staff of a new budget airline that was prompted by a flight cancellation, newspaper reports and an airline spokesman said Friday.

Spring Airlines had offered passengers either refunds or seats on a later Spring flight, after canceling its 7:40 a.m. flight to the southern coastal city of Xiamen on Thursday due to mechanical problems, said spokesman Zhang Lei.

However, some passengers demanded additional monetary compensation as well and arguments led to passengers screaming obscenities, throwing luggage at airline staff and grabbing at least one worker by the collar, the Oriental Morning Post and other newspapers said.

Police were called in and passengers who opted to board the later flight taken to a hotel to wait, they said. No arrests or serious injuries were reported.

Zhang said Spring's low ticket prices don't include compensation for canceled flights that other Chinese airlines frequently offer, or assistance transferring to other company's flights.

"Our no-frills service has been approved by the government's General Administration of Civil Aviation," Zhang said.

Disputes over ticketing and service are growing along with China's fast expanding aviation market. Passenger numbers doubled in the past five years and are set to double again by 2010, prompting regulators' warnings that it was straining the country's ability to maintain safety and train enough pilots.

Spring launched China's first low-budget flights last year, based on business models pioneered by European carriers Ryanair and EasyJet.

The airline offers tickets at prices several times below competitors, intending to make a profit through high frequency use of its three-plane fleet and by cutting out extras such as in-flight meals.

Official: China to spend US$17.4 billion on airport infrastructure
28 February 2006

HONG KONG (AP) - China will spend 140 billion Chinese yuan (US$17.4 billion; euro14.7 billion) over the next five years to expand its airport infrastructure to meet a forecast 14 percent annual growth in domestic air traffic, a civil aviation official said Tuesday.

That is sharply higher than the 120 billion yuan (US$14.9 billion; euro12.6 billion) the government spent on airport infrastructure in the fifteen years from 1990 to 2005.

"By 2010, the mainland will have about 186 airports, up from 142 currently," said Gao Hongfeng, vice-minister of the Civil Aviation Administration of China, or CAAC. Several existing airports will also be expanded to ease the pressure on capacity from rising traffic, he said at an aviation conference in Hong Kong.

Gao also said China's fleet of commercial aircraft will grow to 1,580 by 2010, up from 863 currently, before reaching a total of about 4,000 aircraft by 2020.

The government will continue to expand the country's three largest airports -- Beijing, Shanghai and Guangzhou -- to help them maintain their role as China's main international air transport hubs for passengers and cargo, he said.

Other airports slated for expansion include those in Shenzhen, Chengdu, Haikou, Hangzhou and Xian, he said.

China's aggressive aviation development plans come as air traffic continues to grow at double-digit rates. In 2005, Chinese airlines carried 138 million passengers, up 15.5 percent from the previous year, and 3.1 million metric tons (3.4 million short tons) of cargo, up 13.8 percent.

The CAAC said it expects passenger and cargo traffic to grow at an average of 14 percent a year until 2010, with growth then slowing to 11 percent annually in the period 2011-2020.

Gao said China is considering to establish a more open and free air transport network with ASEAN countries, which include Cambodia, Indonesia, Laos, Malaysia, Myanmar, Thailand, the Philippines, Singapore, Brunei and Vietnam.

great news, can't wait to see the Beijing New terminal!

13.5b yuan earmarked for phase II of Baiyun
Guangzhou airport aims to handle 40m passengers and 2m tonnes of cargo
2 March 2006
South China Morning Post

Guangzhou will spend 13.5 billion yuan in the next five years to speed up construction of phase II of Baiyun International Airport to enable it to meet its goal of becoming an international passenger and logistics hub, a senior airport official said.

Xian Weixiong, the party secretary of the airport management company, told a news conference that phase II included an international passenger terminal, a third runway that could accommodate the Airbus A380 and a FedEx complex, which was scheduled to be operational in 2008.

"We hope to open 50 new international routes, raise passenger handling by 15 per cent and cargo handling by 30 per cent," Mr Xian said.

"We expect to handle between 38 and 40 million passengers and 2 million tonnes of cargo."

By 2009, the airport, which is only a 30-minute drive from central Guangzhou, will have a subway link.

The airport had targeted opening 44 international flight routes by last year but only managed to start five new routes since it began operations in 2004, taking the total so far to 27.

The old Baiyun airport had worked closely with Hong Kong's airport, serving as a transit hub for international passengers flying to mainland destinations via Hong Kong, which still did not serve many mainland destinations. Mainlanders going overseas tended to fly out of Hong Kong.

Mr Xian said both airports could still complement each other but must put people first in their development plans, which meant making it convenient for air travellers.

"In Guangzhou they have to travel far away to catch a flight, and in Hong Kong they have to go very far away to catch a flight. That's not putting people first," Mr Xian said.

On other plans for better integration with Hong Kong, he said the train journey between Guangzhou and Kowloon would only take one hour by 2010 when a second track was completed.

Mr Xian said it had taken 10 years to build a mass transportation system that some cities had taken 100 years to accomplish.

The plan had received the central government's approval, Mr Xian said.

Only 59km of the system have been built so far. Work will continue on seven lines and, by the end of the year, 116km will have been completed.

The government has prepaid loans taken to build its first two subway lines and was making available 5 billion yuan annually to complete the construction.

Finnair adds flights to China to meet demand

HELSINKI, March 3 (Reuters) - Finland's national carrier Finnair will add flight frequencies between Helsinki and Hong Kong, Guangzhou and Shanghai to meet growing demand, the airline said on Friday.

"The addition of flights to and from our Chinese destinations is a natural part of our Asian strategy and demand is strong," Petteri Kostermaa, head of Finnair's network strategies, said in a statement.

The airline said it would introduce non-stop flights to Hong Kong from mid-May, flying the route three times a week until July, and four times a week thereafter until October. From July, Finnair will also step up its flights to Shanghai to seven times a week from a current five, while weekly flights to Guangzhou will increase to four from the current three.

The launch of an extensive Asian route network has helped Finnair's earnings since 2000, and since then it has reported a loss only for 2003, despite a global slump hitting many of its peers.

Asian traffic generated 20 percent of group sales in 2005, growing 21 percent year-on-year, while European traffic accounted for around half of the group's turnover, growing 11 percent versus 2004.

US airline seeks Shanghai first
4 March 2006
Hong Kong Standard

Continental Airlines, which last year broke a two-decade grip held by two US rivals on nonstop Beijing-to-New York flights, aims to become the first carrier to offer passengers direct Shanghai-to- New York travel, starting next year.

Continental will fly Boeing 777 planes on the route if it receives approval for the flights from Chinese authorities, Mark Erwin, president of the company's Asia-Pacific division, said Friday in Hong Kong.

The direct link between booming Shanghai and the United States will challenge state-owned China Eastern Airlines, which flies passengers nonstop from its home base to Los Angeles.

Airlines are scheduling more direct routes between China and the United States, under a 2004 agreement between the countries, to benefit from the mainland's booming economy, which is growing at an annual rate of about 10 percent.

United Airlines has applied to run daily nonstop flights between Guangzhou and San Francisco, challenging China Southern, which flies to Los Angeles.

American Airlines has applied to fly daily nonstop services between Shanghai and Chicago.

Continental, the world's sixth- largest carrier, last June launched daily nonstop services between Beijing and New York, breaking the 20-year market duopoly of United and Northwest Airlines.

Erwin said the route's load factor had reached the company's target but declined to give details.

China and the United States signed a landmark air transport liberalization pact in 2004 that allows weekly flights between the two countries to increase nearly fivefold, from a limit of 54 weekly roundtrip flights to 249 at the end of six years.

The two countries are to renew bilateral air transport discussions this year after a break in 2005.

To celebrate the fifth anniversary of its nonstop Hong Kong-New York service, Continental Airlines is launching a special fare promotion for economy- class roundtrip tickets between Hong Kong and any US destination at HK$5,900. The special fares are valid for travel until May 15.

Shanghai Airlines starts using foreign pilots

BEIJING, March 12, 2006 (AFP) - Shanghai Airlines has started hiring foreign pilots to make up for a looming manpower shortage as air transport booms, state media reported Sunday.

The carrier has so far signed contracts with eight foreigners from nations such as the United States and Sweden to fly its MD-11 cargo planes, the Xinhua news agency said.

In recent years, Shanghai Airlines has seen annual growth rates of 30 percent and has been struggling to man its cockpits.

It takes eight to ten years for the company to train a pilot so it is seen as more efficient to hire experienced foreign pilots, according to Xinhua.

Shanghai Airlines' woes also affect other carriers.

Earlier this year flagship carrier Air China said it was planning an overseas recruitment drive since a lack of trained pilots was preventing it from expanding.

China's commercial airlines currently employ about 11,000 pilots but experts have warned the number needs to increase fast.

The Civil Aviation Flight University of China, the nation's major training school for commercial airline pilots, graduates a maximum of 600 pilots a year.

But based on the delivery of new aircraft, industry experts have estimated that China currently needs up to 1,600 new pilots every year.

China Southern Airlines reports 4.2 percent increase in February passenger figures
13 March 2006

HONG KONG (AP) - China Southern Airlines Co., one of China's three biggest carriers, said Monday it carried 3.43 million passengers in February, up 4.2 percent from the same month last year.

The airline, based in the southern Chinese city of Guangzhou, reported a 21 percent increase in cargo volume to 48,820 metric tons from the same period last year.

The airline didn't give last year's figures for comparison or elaborate on its latest figures, posted on its Web site Monday.

China Southern's passenger load factor -- the number of available seats filled on its flights -- rose to 72.1 percent last month, from 70.4 percent in February 2005.

Air China reports 12 percent rise in February passenger traffic
14 March 2006

HONG KONG (AP) - Chinese flag carrier Air China Ltd. said Tuesday it recorded a 12 percent on-year rise in passenger traffic in February, down from an 18 percent expansion in January.

The Beijing-based carrier carried 2.15 million passengers last month, down from 2.22 million in January. Cargo traffic rose 26 percent on-year to 53,551 metric tons, compared with 62,512 tons a month earlier. No year-earlier figures were available.

The airline, listed in Hong Kong's stock exchange, didn't elaborate on its latest traffic figures, posted on its Web site Tuesday.

Air China's passenger load factor -- the number of available seats filled on its flights -- rose 0.1 percentage points on-year to 72.2 percent, while its cargo load factor rose 6.7 percentage points to 53.6 percent.

In January, the passenger load factor was 69.5 percent, while the cargo load factor was 51.1 percent.

Rolls-Royce wins 600-mln-dlr deal with China Southern Airlines

LONDON, March 15, 2006 (AFP) - The British aerospace giant Rolls-Royce announced on Wednesday that it would supply China Southern Airlines with jet engines in a deal worth 600.0 million dollars (499.0 million euros).

China Southern has ordered Rolls-Royce Trent 700 engines to power its new fleet of 10 Airbus A330 jets, Rolls said in an official statement. The order also includes a 10-year maintenance and support package.

The carrier, which is based in Guangzhou, southern China, already has four Trent-powered A330s in service, and will take delivery of the new batch of aircraft in 2007 and 2008.

"The Trent 700 is the most powerful engine available on the A330 and its high thrust performance, combined with low cost of ownership, gives us significant operational flexibility and commercial benefits," said China Southern's chairman Liu Shaoyong in a joint statement.

Rolls' civil aerospace chief commercial officer Charles Cuddington added:

"Today's announcement enhances the Trent family's position in the fast-growing Chinese market and underlines the Trent 700's position as the most popular engine for A330 operators."

China Natl Aviation Hldg 05 Pretax Pft CNY2.56B - Source
20 March 2006

BEIJING (Dow Jones)--China's three big aviation groups either posted a large drop in profits or wider losses in 2005, an official at the General Administration of Civil Aviation of China said Tuesday.

China National Aviation Holding Co. posted pretax profit of CNY2.56 billion last year, down 15% from CNY3 billion in 2004, an official at the CAAC told Dow Jones Newswires. The official declined to be named.

China Eastern Air Holding Co.'s pretax profit last year was CNY173 million, down 87% from CNY1.3 billion in 2004, said the official.

China Southern Air Holding Co. had a pretax loss of CNY726 million, widening from the CNY3.47 million loss in 2004, the source said. [ 21-03-06 0035GMT ]

The three groups, which account for 80% of the aviation industry's total assets, were formed in 2002 after a government restructuring of the industry.

China National Aviation Holding owns 66% of Air China Ltd. (0753.HK), China Eastern Air Holding holds 62% of China Eastern Airlines Corp. (CEA) and China Southern Air Holding has a 65% stake in China Southern Airlines Co. (ZNH), according to the listed companies' 2004 annual reports.

Last year, airlines grappled with higher fuel prices and increased competition.

China's jet fuel prices surged 25% in 2005, and airline companies were often selling tickets at prices lower than the cost to grab market share.

Air China, China Eastern Airlines and China Southern Airlines are China's biggest airlines by transportation volume.

China Eastern Airlines said in January it expects its unaudited net profit in 2005 to be down more than 50% from a year earlier. The company posted net profit of CNY536.34 million in 2004.

China Southern Airlines also warned it may post a loss for 2005 due to surging fuel costs and intensifying competition from domestic rivals.

The three airlines have yet to release their 2005 annual report.

Listed companies in China are required to disclose their 2005 financial results by the end of April.

United Air, Shanghai Air Enter Code-Share Pact
21 March 2006
Dow Jones Newswires

UAL Corp.'s (UAUA) United Airlines and Shanghai Airlines Co. signed a code-share agreement that expands international destination options and frequent-flyer opportunities for customers of both carriers.

The Chicago-based carrier said the 11 code-share flights covered by the deal, pending U.S. government approval, are scheduled to begin on May 15.

As part of the deal, customers from both airlines will be able to accrue and redeem frequent flyer miles and enjoy airport lounges supported by the carriers.

Air China to borrow US$750m for aircraft
Tim LeeMaster
24 March 2006
Hong Kong Standard

Air China is seeking a US$750 million (HK$5.85 billion) loan to finance the purchase of 14 aircraft in the largest deal ever by a Chinese carrier, according to sources familiar with the transaction.

This is part of a total of US$1.5 billion that all three mainland air carriers are seeking to pay for new aircraft.

HSBC France will coordinate the two-part 10-year Air China loan since it will utilize a French tax lease, a method of financing that can reduce a company's taxable income, cutting the air carrier's cost of funding by more than half, bankers said.

Singapore's DBS Group will arrange a US$550 million portion of the loan while the remaining US$200 million will be arranged by a consortium of China's four largest banks: Bank of China, Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China.

Air China, the mainland's biggest overseas carrier, plans to spend US$881 million to buy six long-range midsized Airbus A330-200s, five A319-100s and three Boeing 737-700s, both smaller planes for domestic and regional routes. Air China should get cheaper pricing on the loan than the current China Southern deal, which also uses a French lease, since it is considered a better credit risk, people familiar with the two deals said.

China Southern, the mainland's largest carrier by fleet size, is expected to pay about 30 to 40 basis points over the London interbank offered rate on a smaller US$400 million loan that will finance the purchase of 13 aircraft, market sources said. Without a French lease the carrier could expect to pay about 80 basis points _ or 0.8 _ over Libor for the loan. A mandate is expected soon with BNP Paribas, Calyon Corporate and Investment Bank, Societe Generale and HSBC France favored.

China Eastern Airlines, the smallest of China's big three air carriers, is seeking a US$374 million loan to buy 11 planes. The company has mandated Societe Generale and Calyon on the 10-year loan. CEA will pick up six Boeing 737-700s at US$40 million each, three Airbus 319-100s at US$38.6 million apiece and another two Airbus 321-200s at a cost of US$55 million each.

The total bill for China Eastern is about US$465 million, sources said. Airlines typically finance 80 percent of aircraft purchases with loans. Delivery of the aircraft to China Eastern is scheduled to end in October.

To keep pace with rising passenger and cargo volume, China's airlines will buy 90 new planes a year through 2025, French-based Airbus said, while US- based rival Boeing sees them buying 115 new aircraft a year.

China's struggling Okay Airways joins with emerging rival in "strategic partnership"
By ELAINE KURTENBACH
28 March 2006

SHANGHAI, China (AP) - Two of China's newest airlines, private carriers Okay Airways and the Junyao Group, say they have agreed to share personnel, routes, marketing and management expertise as they struggle for footing in the intensely competitive, fast-growing market.

The airlines are still working out financial details of their "strategic partnership," said a spokesman for Okay Airways, who gave only his surname, Gang.

"We are going to cooperate in developing our civil aviation businesses, including introducing new aircraft models, personnel exchanges, sales and marketing," Gang said.

China's airline industry is dominated by state-run carriers, although aviation authorities have approved at least three private airlines -- including Okay and Junyao -- to begin operations, with another seven reportedly planned.

Money-losing Okay, which is based in the northern city of Tianjin, east of Beijing, began passenger services in March 2005 using one Boeing 737-900 leased from Korean Air Co., South Korea's largest passenger airline.

A spokesman for Shanghai-based Junyao Group, Wang Zhong, said his company expected to hold a controlling stake in its partnership with Okay.

"Okay will focus on freight and we will focus on passenger transport," Wang said. He said Junyao expected its new airline, called Dongbu Kuaixian, which translates roughly as "Oriental Express," to begin operations in the latter half of this year.

Reports in the state media said Junyao had registered the name "Phoenix" for its new passenger airline, but Wang said he could not confirm that.

"I'm sure our partnership will strengthen our position in the civil aviation sector," Wang said.

Junyao Group, a dairy, real estate and retailing conglomerate based in eastern China's Zhejiang Province, plans to operate regional flights from Shanghai. Since 1991 it has run charter flights between the Zhejiang city of Wenzhou, on China's southeastern coast, and the south-central city of Changsha.

State media reports said Junyao expected its alliance with Okay to help it gain a foothold in northern China.

Last month, a report said Okay expected to reach agreement soon with Korean Air on selling a stake of up to 49 percent. At the time, Korean Air's president, Lee Jong-hee, warned that the talks with Okay might collapse.

Gang said he could not comment on the status of those talks.

China's airlines carried 138 million passengers and more than 3 million tons of cargo and mail traffic in 2005, about double the amount of traffic five years earlier. China's Civil Aviation authority expects those figures to double again by 2010.

Beijing, Shanghai, Guangzhou Airports OK'd For A380 Jets
29 March 2006

BEIJING (Dow Jones)--China's aviation regulator has designated the main airports in Beijing, Shanghai and Guangzhou as the first in China to accommodate the new Airbus (ABI.YY) A380 superjumbo jet, a regulatory official said Wednesday.

The double-decker A380 will become the world's biggest commercial passenger plane when it enters service, scheduled for the end of the year.

Beijing Capital International Airport, Shanghai's Pudong International Airport and Guangzhou New Baiyun International Airport in southern Guangdong province, will be the main airports initially for the A380, an official at the planning division of the General Administration of Civil Aviation of China said.

Local media reported Wednesday the three airports would be ready for the A380 before 2008.

Nine other airports, including Shanghai's Hong Qiao International Airport and those in Tianjin, Taiyuan, Hohhot, Nanjing, Hangzhou, Wuhan, Guilin, and Shenzhen, will be prepared for accommodating the A380, according to the report.

Singapore Airlines Ltd. (S55.SG), the launch customer for the aircraft, is expected to receive two A380s at the end of this year.

Major Chinese carrier China Southern Airlines Co. (ZNH) has said it plans to spend more than $134 million on an international terminal at Beijing Capital International Airport, where it will base its A380s, expected to be delivered starting late 2007.

The A380 can be designed to carry up to 853 passengers and 20 crew, although most A380 buyers that have announced seating plans said they will have 480 to 550 seats.

Virgin Atlantic Agrees Codeshare Deal With Air China
31 March 2006
Edited Press Release

LONDON (Dow Jones)--Virgin Atlantic Airways said Friday that it has agreed a new reciprocal codeshare deal with Air China (CA) to enable its passengers to enjoy codeshare connections between the services of the two carriers.

Effective on flights from July 1, the agreement with Air China means that Virgin Atlantic passengers will be able to purchase flights between London Heathrow and Beijing, complimenting Virgin Atlantic's daily flights into Shanghai.

Air China will codeshare on Virgin Atlantic's daily services between London Heathrow and Shanghai.

Tickets will be on sale from April 15, the airline said.

China's Hainan Air sells stake in planned carrier

BEIJING, April 2 (Reuters) - Hainan Airlines , the fourth-largest Chinese carrier, has agreed to sell an 11 to 18 percent stake in its proposed Grand China Air expansion for up to $100 million, Xinhua news agency reported on Sunday.

The buyer, Pan-American Aviation Holdings Ltd., would become the second-largest investor in Grand China Air, an airline that rapidly growing Hainan Airlines Co. Ltd. and its state parent, HNA Group, intend to form by absorbing three subsidiaries.

The stake would cost a minimum of $60 million under a framework agreement that Hainan Airlines and Pan-American signed on Saturday, the news agency said. It gave no background on Pan-American.

"We are planning to raise about 5 billion yuan ($600 million) and get Grand China Air listed on the Hong Kong Stock Exchange," HNA Group Chairman Chen Feng was quoted as saying.

Pan-American's capital would be in place by the end of 2006, said the president of that company, Bharat Bhise.

Hainan Airlines is part owned by global financier George Soros. Xinhua said the Soros Foundation and the Hainan provincial government had respectively invested $25 million dollars and 1.5 billion yuan ($190 million) in Grand China Air.

($1=8.023 yuan)

China Eastern to start flying to Frankfurt from June 30 - Xinhua
3 April 2006

BEIJING (AFX) - China Eastern Airlines Corp will start flying to Frankfurt from June 30, the official Xinhua news agency reported.

The Shanghai-based carrier will use Airbus A340-600 aircraft for the route, which it will fly five times a week, Xinhua said.

China Eastern plans to open over 20 new routes this summer and autumn, the news agency said, adding that the airline aims to increase its number of flights by 15 pct during the period.

China Eastern operates more than 400 international and domestic routes, Xinhua added.

I also heard that China Southern's Xinjiang Airlines subsidiary are starting flights to Tehran, Asghabad (and Seoul-Incheon) from Urumqi...cool! CZ will now be flying to ALL central asian commercial capitals: Almaty, Bishkek, Tashkent, Dushanbe, Ashghabad, Baku, Tehran.

I really want to see them expand to Kansai and Nagoya next.

I also heard that China Southern's Xinjiang Airlines subsidiary are starting flights to Tehran, Asghabad (and Seoul-Incheon) from Urumqi...cool! CZ will now be flying to ALL central asian commercial capitals: Almaty, Bishkek, Tashkent, Dushanbe, Ashghabad, Baku, Tehran.

I really want to see them expand to Kansai and Nagoya next.
China Southern Xinjiang Starts Urumqi-Tehran Charter Flights Mar 18, 2006
27 March 2006
China News Digest

China Southern Xinjiang Co, a regional subsidiary of major Chinese airline China Southern, started on March 18, 2006 flights between Urumqi, capital of Xinjiang region, western China, and Iranian capital Tehran, it was reported on March 27, 2006.

The flights will be carried out on a charter basis. The 3,390-km route between Urumqi and Tehran will be serviced by a Boeing 757 aircraft. The travel time will be four-and-a-half hours.

China Southern Xinjiang is based in Urumqi. Apart from flights within Xinjiang and in China, the airline has so far launched charter flights to Japan and South Korea and regular flights to Europe, Central Asia, South Asia and the Middle East.

(Editor's note: China Southern Xinjiang had 26 aircraft in its fleet as of November 5, 2005, the China News Digest reported on November 11, 2006. Four of the planes were added to the airline's fleet in 2005, including a Boeing 737-700 added in November 2005. With the November addition, China Southern Xinjiang's passenger capacity exceeded 4,000 seats.

The air travel market in Xinjiang is characterised by clearly cut busy and low seasons. During the busy season between July and September 2005, China Southern Xinjiang was offering more than 10,000 seats daily, as some of its planes were making several flights a day.)

http://www.xjnews.com.cn
http://www.aiidatapro.com

China service expands as American Airlines flies non-stop from Chicago
3 April 2006
USA Today

U.S. airline competition for China has heated up.

Fort Worth-based American Airlines on Sunday began flying daily Chicago-Shanghai flights, marking the first service ever to China by the world's largest carrier.

American's daily 14-hour, non-stop flight creates direct competition with United Airlines' 2-year-old service on the route, and underscores the frenzy among big U.S. carriers to exploit China's explosive economic growth.

With India, China is one of the world's fastest-growing destinations for corporate travelers who tend to pay higher fares. The number of passengers flying between the USA and China grew 20% last year, vs. 2004.

"This is what the airlines have been looking for (for) decades -- double-digit growth for the foreseeable future," says Mo Garfinkle, a consultant who's been working on China service since 1992 for several airlines, including Continental. "It's the market everybody wants to be in." How U.S. carriers are trying to get a China foothold:

*Forming alliances. American and United have formed partnerships with Chinese carriers to give passengers more options to connect once they land in China. United teamed with Shanghai Airlines last month; American teamed with China Eastern.

*Chasing rights. U.S. carriers, including American and United, are lining up to compete for the right to fly seven new weekly round-trip flights starting next March. The U.S. will award the rights under a 2004 pact with China aimed at expanding service. Garfinkle expects "a dogfight."

Atlanta-based Delta is lobbying for rights to enter the China market, says Sametta Barnett, Delta's government affairs director.

She says "there is a gaping hole in the Southeast" when it comes to China service. A Delta customer outside Atlanta must now connect twice to reach China.

*Investments. Even Phoenix-based Mesa Air Group -- which flies small jets in the USA under contract for US Airways, United and Delta -- is eyeing China. CEO Jonathan Ornstein says it's considering a minority stake in a venture that would fly regional jets among China's second-tier cities.

As for its new Chicago-Shanghai competition with United, Athar Khan, director of American's Asia Pacific unit, says that there's plenty of passengers for everyone.

American expects to have full flights -- 245-seat Boeing 777s -- thanks to interest from companies such as Dell, Motorola, IBM, Nortel and General Electric.

"There's so much market stimulation right now that we don't have to worry about cutting into each others' passengers," Khan says. "It's an exploding market."

HAHA TODAY AA IN SHANGHAI ！

Korean Airlines to Have 50 Lines to China

2006-04-03 15:48:52 Xinhua

Korean Airlines plans to increase the number of air routes to China to 50 within five years, a company official has said.
Deputy General Manager of the Korean Airlines' Shanghai branch C. S. Kim made the remarks at the World Travel Fair 2006 which opened here Thursday.

The Chinese market has contributed to the smooth development of the company, which reported a 15.6-percent year-on-year increase in business in China last year, said Kim.

Korean Airlines began flying to China in 1989 and currently has 30 routes to 21 Chinese cities and up to 126 flights in a week. It makes 70 flights weekly between Shanghai and the Republic of Korea, with an average occupancy of 78 percent.

The company will open its first new air routes to Guangzhou and Shenzhen in south China's Guangdong Province, Kim said.

The Korean Airlines with a fleet of 118 aircraft is one of the top 20 airline companies in the world, flying 400 flights to 90 cities in 31 countries daily.

Saturday April 8, 2:12 AM
Star Alliance to welcome Shanghai Airways to expanding group

ZURICH (AFP) - The 16-member Star Alliance of airlines is in talks with other companies to plug the gaps in its near-global network, with Shanghai Airways of China set to come onboard, senior officials said.

"We continue to discuss the advantages of the alliance with other carriers where we have what we call 'white spots', or parts of the globe where there are opportunities to improve service, such as China, India and Russia," Jaan Albrecht, the chief executive of Star Alliance, told reporters.

Albrecht, speaking at a ceremony here to welcome the alliance's latest member, Swiss International Air Lines, did not identify the carriers involved or give details of the status of negotiations.

"Don't expect us to make an announcement here and now. But believe me, we are weeks away from an announcement, not months," Albrecht said.

Vasing Kittikul, executive vice president of Thai Airways International -- one of the five founding companies of the Star Alliance -- later told AFP that the Chinese company Shanghai Airways was set to join.

"Shanghai Airways will be one of the airlines to fill up the white spots," Visang said, declining to give details of talks with companies in other regions.

Thai Airways already works closely with the Chinese carrier, as well as the Beijing-based Air China, Visang said.

"I'm going to visit Shanghai Airways at the end of this month to talk about domestic flights in China," he added.

The Star Alliance was founded in 1997 by Thai Airways, Lufthansa of Germany, Air Canada, Scandinavian Airlines and the US carrier United Airlines.

It has gradually expanded over the past decade to include Air New Zealand, All Nippon Airways of Japan, Asiana of South Korea, Austrian Airlines, BMI of Britain, LOT Polish Airlines, Singapore Airlines, Spain's Spanair, TAP Portugal, US Airways and Varig of Brazil.

After Swiss International Air Lines' official accession, South African Airways is also set to join on April 10.

Albrecht said that the alliance is pushing ahead with efforts to put members together in a single terminal at airports to smooth the movement of passengers between connecting flights.

"In some airports where a change of terminals is needed, that time can run upwards of two hours. By locating in the same terminal, the minimum time can be as little as 35 minutes for some flights," Albrecht said.

The alliance has also worked to forge links between members' ticketing systems in an effort to ease online sales.

"With our business solution in place we are far ahead of any alliance competitor," said Albrecht.

He also said that the alliance is looking for ways to distribute tickets without having to pay third parties, such as travel agents.

"This costs some 2.0 billion dollars a year for our members alone," he said, adding that shifting away from traditional distribution channels could save airlines up to 80 percent.

China service expands as American Airlines flies non-stop from Chicago
<snip>


That's great news. American Airlines is my favorite airline.

Airline sued for turning away badly injured girl
8 April 2006
South China Morning Post

Hainan Airlines is being sued for 1 million yuan after refusing to allow an injured girl to board a plane and fly for medical treatment, a decision the family says forced doctors to later amputate her right foot.

Pi Yajun was in a car in Jiayuguan , Gansu , on January 15 when the vehicle crashed and the foot was crushed, said Zhang Qihuai , a lawyer from the Beijing Lanpeng Law Firm, who is handling the case.

Within hours, the family bought two tickets for a Hainan Airlines one-hour flight to Lanzhou for urgent surgery scheduled for that day.

One ticket was for Yajun and the other for an accompanying medic, but airline staff refused to allow them to board, breaching the ticket contract, Mr Zhang said.

"By the time the airlines have sold the tickets, they have automatically entered into a contract with the passengers," he said.

Hainan Airlines refused to comment on the case yesterday, but in a statement in February denied any wrongdoing.

It pointed to air-traffic regulations that banned its 32-seat Dornier 328 from transporting stretcher-ridden patients.

Mr Zhang said both Yajun and the medic had written clearance from the hospital to fly. The carrier could have been more flexible, purely on humanitarian grounds, he said.

The girl was ferried more than 500km by ambulance to the Affiliated Hospital of the Lanzhou Military Area Command, but by the time she arrived the following morning it was too late to do anything but amputate the foot.

Mr Zhang said the family decided to go ahead with the lawsuit after Hainan Airlines turned down a settlement offer.

The family wanted 950,000 yuan to cover the medical costs and legal fees, and to compensate them for the psychological trauma.

The incident triggered an outpouring of public sympathy towards Yajun, who is recovering in Beijing and trying to catch up on her studies.

The incident also sparked an intense debate over the reputations of mainland airlines and how the carriers should respond in emergencies.

Mainland law experts have also criticised air-traffic regulations for their lack of flexibility and called for a revamp.

From the Wall street journal online:

China Opens Swath of Airspace
In Boon to Carriers
By BRUCE STANLEY
April 10, 2006

After six years of talks, China has agreed to open a corridor through its tightly restricted airspace that may save airlines a total of $30 million a year in fuel costs and trim an average of half an hour off flight times between China and Europe, according to the International Air Transport Association, the main trade group for the world's airlines.

The savings, while not huge, nevertheless could be significant given the blow that high fuel prices have dealt airlines. Moreover, creation of the route is the first of several steps the IATA wants Chinese authorities to make to unclog the country's sparse network of air corridors and prevent lengthening delays in flights to and from China's biggest cities.

The need to ease restrictions on China's airspace has gained urgency, the association says, because of the profusion of foreign airlines flying to the country and the rapid growth of China's own carriers.

More Chinese are flying than ever before, as restrictions on travel are loosened and as the nation's middle class expands. To meet China's booming demand for air travel, the government's current five-year economic plan calls for Chinese airlines to acquire about 650 new jetliners by the end of 2010, a 75% expansion in their combined fleets. An anticipated deluge of visitors to the 2008 Olympic Games in Beijing would add pressure on China's already-congested air routes.

The new route opens officially Thursday and will create a shortcut for airlines flying between Europe and the Chinese cities of Shanghai, Guangzhou and Hong Kong, and between Europe and Manila, Philippines.

Initially, 110 flights a week may benefit from the new route, which will shave half an hour from a trip that normally lasts 12 to 13 hours, the IATA said. Carriers likely to benefit include Air France-KLM, British Airways, Cathay Pacific Airways, Lufthansa, FedEx Corp. and United Parcel Service Inc.

Although Chinese aviation authorities generally support the liberalization the IATA has sought, China's armed forces, which have ultimate control of the country's airspace, have been more reluctant. They perceive foreign airlines as a possible threat to national security and prohibit them from flying over military bases and other sensitive installations.

Only 30% of China's airspace is open to civil aviation, making China one of the world's most restricted countries. Airlines flying over Chinese territory must follow rigid and often meandering routes replete with doglegs and 90-degree turns, which means that flights take longer and burn more fuel than if they followed a straighter line.

The Chinese "are kind of in a league of their own" in terms of airspace restrictions, said David Behrens, the IATA's director of safety, operations and infrastructure in the Asia-Pacific region. For example, in Australia and many other countries, jetliners can divert from their planned flight paths to detour around a thunderstorm. Chinese air-traffic controllers are much less flexible, and a severe storm can temporarily halt flights along a route over China, Mr. Behrens said in an interview.


Although military control of airspace isn't unusual elsewhere, armed forces in most other countries have cooperated more readily with the IATA to improve access to airspace, Mr. Behrens said. India, Pakistan and Iran took two years to approve new air routes, while in China, a wait of four to six years "is not uncommon," he said.

Mr. Behrens welcomed approval of the new route across western China as a sign of a more accommodating approach. "China as a whole is realizing that things are changing rapidly, and that's going to require changes in airspace," Mr. Behrens said.

An official at China's Air Traffic Management Bureau declined to comment on the agreement or on prospects for expanded access.

http://img240.imageshack.us/img240/5130/newpath2pl.th.gif (http://img240.imageshack.us/my.php?image=newpath2pl.gif)

China Eastern Airlines Swings To Net Loss In 2005
10 April 2006

HONG KONG (Dow Jones)--China Eastern Airlines Co. (CEA) said Monday it swung to a net loss of CNY467.3 million in 2005, as rising fuel costs ate into profits.

Net profit for 2004 was CNY320.7 million.

The airline's revenue last year was CNY27.45 billion, up from CNY21.39 billion in 2004.

It didn't recommend a final dividend. The company declared a final dividend of CNY0.02 in 2004.

China Eastern, one of China's three major state carriers, didn't elaborate on its results in a statement to the Hong Kong stock exchange. However, analysts said the airlines' profitability was hurt because of a 30% rise in jet fuel costs in 2005.

But the impact of high fuel prices was likely partly offset by a CNY548 million non-cash gain on U.S. dollar-denominated debt after the 2% revaluation of the Chinese yuan last year.

China airline to sell off 20 percent to foreign carrier, after going into red

SHANGHAI, April 11, 2006 (AFP) - China Eastern Airlines said Tuesday it was in talks to sell off a 20-percent stake to a foreign carrier, after announcing that higher fuel and other operating costs forced it into the red last year.

Company president Li Fenghua said the group had been in negotiations for six months on the sale of the stake to an unidentified foreign carrier.

"I expect to sign an agreement by the end of this year, the sooner the better," Li told a press conference in Shanghai, adding he hoped to raise three to four billion yuan (375 to 500 million dollars) from the sale.

His comments came after the company, one of China's three biggest airlines, reported a net loss of 467.31 million yuan last year due to higher aviation fuel and other operational costs, a sharp turnaround from 2004.

The Shanghai-based company posted a profit of 320.7 million yuan in 2004, based on the international accounting standards reported to the Hong Kong stock exchange.

"Global crude prices have stayed at high levels since 2004, raising the cost to the world's aviation sector and our company as well," the airline said in its results statement.

China Eastern recorded overall operating losses of 2.3 million yuan last year, compared with operational gains of 1.49 billion yuan in 2004.

The steep losses were significantly worse than the 50 percent fall in profits forecast by the group, and analysts said before Li's announcement that the results would likely force the airline to seek refinancing.

"With a heavy capex (capital expenditure) burden ahead of it, an already overstretched balance sheet and fuel prices staying high, China Eastern's financial position is looking increasingly precarious," Merrill Lynch said in a research note.

"We think some form of refinancing looks increasingly necessary."

Alan Lam, aviation analyst with Guotai Junan Securities, said the carrier's results were better under Chinese accounting standards but the operational costs were much higher than forecast.

China Eastern's costs for 2005 were surprisingly high, even taking into account high international jet fuel prices, Lam said.

"Their cost control ability is worse than expected," he said.

Total operational costs surged 40.6 percent year-on-year in 2005 to 22.68 billion yuan, under Chinese accounting standards.

Jet fuel costs were up a hefty 68.4 percent to 8.89 billion yuan, while airport landing fees rose 29.2 percent to 3.72 billion yuan.

Under mainland standards, China Eastern reported a net profit of 60.47 million yuan in 2005 against 536.34 million in 2004, with sales up to 26.23 billion yuan against 19.89 billion a year earlier.

China Eastern did not provide an earnings forecast for 2006 but warned that ongoing liberalization of the domestic market would mean "intensified competition" against overseas carriers.

Despite its poor performance, the airline said it expected to expand its fleet by 27 aircraft this year, including three Airbus A330-200s and seven A330-300s, as well as seven Boeing B737-700s.

In a separate statement to the Shanghai stock exchange, China Eastern said it has signed a 937 million dollar deal to purchase 16 Boeing 737 planes, which will be delivered between 2009 and 2010.

The fleet order, part of a 70-jet contract that had been announced in November, will be funded by bank loans.

good

China Beijing Airport 2005 Net Profit CNY908.5 Million
12 April 2006

HONG KONG (Dow Jones)--Beijing Capital Airport Co. (0694.HK), which operates the airport in China's capital, said Wednesday its 2005 net profit rose 21% from the previous year.

Net profit for the year ended Dec. 31 rose to CNY908.5 million from CNY749.4 million in 2004. Revenue fell to CNY3.09 billion from CNY3.13 billion.

The company recommended a final dividend of CNY0.083 per share, up from CNY0.065 in 2004.

Beijing Airport didn't elaborate on its results in a brief statement to the Hong Kong stock exchange, but it is scheduled to issue a statement late Wednesday.

U.S. says China can greatly cut airline fuel use

BEIJING, April 12 (Reuters) - China could greatly improve its airlines' fuel efficiency by learning from the U.S. experience in introducing more flexible air traffic management, a senior U.S. aviation official said on Wednesday.

Robert Sturgell, deputy administrator of the U.S. Federal Aviation Administration, outlined initiatives that had saved U.S. airlines millions of dollars in fuel bills, including introducing greater flexibility between civil and military airspace.

He also cited satellite navigation systems that allowed for more direct routes and an air traffic management system that permitted more high-altitude flights as advances from which China could benefit.

Sturgell's remarks, given at a news conference, followed meetings with Chinese aviation officials on Tuesday, during which he encouraged them to explore innovations in air traffic management that could effect great fuel savings.

The U.S. Department of Transportation had set a goal of cutting the fuel burnt in each kilometre (mile) of flight by 1 percent a year through to 2009, which would save U.S. airlines around $2 billion in annual fuel costs, Sturgell said.

And an important factor to reaching that goal would come from greater flexibility in the allocation of airspace between civil and military use, he said, even in the United States, where more than 80 percent of airspace is for civil use.

"The U.S. government made a decision years ago to allocate the largest share of total U.S. airspace for civil aviation use," Sturgell said.

China makes much less of its airspace available for civil use, but it has begun to open up further.

The International Air Transport Association, the global industry's club, said on Monday China would this week open new routes through its airspace that would cut flying time between Europe and the big cities on its eastern seaboard by half an hour.

The association said the routes to be opened on April 13 could initially benefit 110 flights a week and save airlines millions of dollars in fuel bills.

The association, which had been negotiating with Beijing on the new routes for over five years, says that only 30 percent of China's airspace has been open to civil aviation.

Beijing Capital Intl Sees Strong Rise In 06 Traffic
12 April 2006

HONG KONG (Dow Jones)--Beijing Capital International Airport Co. (0694.HK) said Thursday it expects a strong increase in air traffic volume at Beijing airport on stable economic growth and a relaxation of controls on aircraft movements.

The company, which operates the Beijing Capital International Airport, expects higher throughput capacity by the end of this year when the reconstruction of facilities at the airport is completed, it said in a statement.

It will also benefit from an increase in aircraft movements, after China in February lifted a ban on flights after midnight. Planes are now allowed to take off and land up till two o'clock in the morning.

'All these favorable factors will contribute to higher air traffic volume at the Beijing Airport,' its chairman Wang Zhanbin said in a statement, without elaborating.

In the first quarter of 2006, passenger throughput reached 10.44 million, up 20% from the year-earlier period. Freight throughput was 202,280 metric tons, up 19% on year.

Beijing Capital handled 41 million passengers last year, up from 34.9 million in the year-earlier period.

Freight throughput rose 17% to 782,066 tons from 668,690 tons.

The company posted after Wednesday's close a net profit of CNY908.51 million for the year ended Dec. 2005, up 21% from CNY749.45 million in the year-earlier period, despite a decline in revenue.

Revenue for the period fell to CNY3.09 billion from CNY3.13 billion, as non-aeronautical operations offset stronger aeronautical revenues, which include passenger charges, aircraft movement fees and airport fees.

Non-aeronautical operations include shop rentals, restaurants and advertising.

The third phase of the airport's expansion, which is under construction, is proceeding according to schedule, the company said.

Chinese police investigate apparent suicide aboard airplane
13 April 2006

SHANGHAI, China (AP) - A man found dead in an aircraft lavatory during a flight to the southwestern Chinese city of Kunming is believed to have committed suicide, police said Thursday.

The man was discovered Tuesday as the China Southern Airlines flight from the western city of Chongqing was nearing Kunming, according to a police statement published by a local newspaper, the Chuncheng Evening News.

Staff at the airline refused comment, referring questions to police. Police also refused comment, saying that apart from the statement no more information could be released.

The statement said that the 43-year-old man from Chongqing committed suicide. The report also said that he had purchased four flight insurance policies, worth a total of 1.6 million yuan (US$200,000), but that because police ruled he committed suicide the insurers would not pay.

A report in the state-run newspaper Shanghai Daily said the man apparently had slit his throat, but it did not say how. The only thing found in the lavatory with the man was an electric shaver, it said.

Airliners, fuel supplier suspend talks on jet fuel prices without reaching agreement
14 April 2006
Xinhua's China Economic Information Service

BEIJING, April 14 (CEIS) – Four Chinese airlines and monopolizing jet fuel supplier, China Aviation Oil (CAO), have left their negotiation table without reaching any agreement on lowering jet fuel prices.

The two sides began talks on April 1, when the government inaugurated a new pricing system which allows airliners to negotiate with CAO on fuel price within a deviation range of 8 percent over CAO’s set profit margin of 480 yuan/ton.

The airline side, comprising Air China, China Southern Airlines ( NYSE: ANH), China Eastern Airlines (NYSE: CEA) and Shanghai Airlines, requested CAO to lower the price by 8 percent, citing their lean profit margins and the slump aviation market.

CAO, however, refused to make any stepback on the price and on the contrary, it said the price should be higher.

In spite of the absence of agreements on fuel prices, industry observers say the two sides will eventually reach agreements since that is a set direction. And the April negotiations, though unsuccessful, have set a good beginning for the liberation of jet fuel prices.

Jet fuel pricing reform is regarded as a spearhead to an overall oil product pricing reform by the Chinese government. All traces show that such a reform is accelerating as energy supply becomes an increasingly worrisome problem for the country as a whole.

With a galloping economy, China’s jet fuel demand will rise to 15- 17 million tons by 2010, 61.3-82.8 percent higher than 2005’s 9.3 million tons. Since international oil prices are generally predicted to stay high for years to come, domestic jet fuel prices are unlikely to drop considerably as well, which will force Chinese air companies to increase fuel efficiency to lower cost, rather than reply on the government for favorable policies to cover the fuel-caused losses.

Air China to buy 20 planes/yr for next few yrs-exec

BEIJING, April 15 (Reuters) - Air China Ltd. plans to buy at least 20 aircraft a year in the next few years, its chairman told Reuters on Saturday, to expand its fleet and retire ageing planes.

The airline agreed this month to buy 20 planes from Boeing Co. , as part of a wider Chinese deal to purchase 80 Boeing 737 single-aisle planes.

The planes would be delivered from 2008, Li said on the sidelines of a meeting with visiting officials from Taiwan's opposition Kuomintang party.

Boeing and European rival Airbus, a unit of EADS , are competing for orders from China, where rising wealth and an increasingly mobile population mean passenger traffic is growing more than 10 percent a year.

Li said opening tourism ties with Taiwan could boost revenues for airlines on both sides of the Taiwan Strait by 50 billion yuan ($6 billion) a year, with an estimated 8 million people a year expected to take advantage of easier access. (US$1=8.014 yuan)

China Eastern Airlines March passengers at 2.9 mln, up 101.05 pct yr-on-yr
17 April 2006

BEIJING (AFX) - China Eastern Airlines Corp Ltd said it carried 2.9 mln passengers in March, up 101.05 pct year-on-year.

In the first three months of the year, total passengers carried rose 97.6 pct year-on-year to 8.02 mln, the Shanghai-based carrier said.

China Eastern carried around 2.37 mln passengers on domestic flights in March, up 135.8 pct from a year earlier.

It carried 351,080 passengers on international routes, up 40.75 pct, while passengers flying to Hong Kong and Macau fell 2.87 pct to 185,530.

The carrier added that for March, its passenger load factor was 70.93 pct, up 6.95 percentage points year-on-year.

For the first three months of the year, the passenger load factor was 69.96 pct, up 7.43 percentage points.

The company said its March cargo throughput rose 34.98 pct year-on-year to 82,520 tons. The total for Jan-March stood at 201,860 tons, up 26.7 pct from the same period last year.

China Eastern's cargo load factor in March rose 0.96 percentage points to 56.78 pct.

In the first three months of the year, the airline said its cargo load factor was 52.29 pct, up 0.05 percentage points.

China Southern to start regular flights to NKorea: report

BEIJING, April 17, 2006 (AFP) - China Southern Airlines, one of the nation's three largest carriers, will start a new route to the North Korean capital Pyongyang, Chinese state media said Monday.

The carrier will kick off the new route on April 26, making two-way flights on Mondays, Wednesdays and Fridays from Beijing, the Xinhua news agency reported, citing unnamed executives with the company.

The flights will run until October 30, the agency said. It was unclear if there were plans to repeat the schedule next year.

The carrier expects to use either Boeing 737-800s or 737-300s for the route, Xinhua said.

It cited what it called "incomplete statistics" showing that 240,000 Chinese visited North Korea last year.

A U.S. made Boeing 737 in North Korea? I've gotta see this. This is cool.

I would love to visit North Korea but sadly I think it's very hard for a U.S. citizen like me to obtain a visa and fulfill the other requirements for visiting North Korea.

Air China Says Net Profit Rose 0.9 Pct.
18 April 2006

HONG KONG (AP) - Air China Ltd., the Chinese flag carrier, said Tuesday its 2005 net profit rose 0.9 percent from the previous year, partly boosted by an increase in passengers and cargo that helped offset higher fuel prices.

The firm declared a dividend for the first time since its listing.

The company's net profit for the year ended Dec. 31 was 2.41 billion yuan ($300.8 million), up from 2.39 billion yuan in the previous year. That was sharply higher than the average estimate of 1.58 billion yuan ($197.2 million) of 15 analysts polled by Thomson Financial.

The company's revenue rose to 38.29 billion yuan ($4.77 billion) from 33.52 billion yuan.

Chairman Li Jiaxing said in a statement that "2005 was an extremely difficult year for the global aviation industry. As with other carriers, the rising cost of jet fuel was a major challenge for us. Despite this, we remained the most profitable airline among the major carriers in China."

Li said the airline used computerized flight planning systems and improved flight route planning to minimize flying distances and save fuel.

Air China, which listed in Hong Kong in December 2004, declared a final dividend of 0.02383 yuan (.0029 U.S. cents) a share. It didn't propose a final dividend for the previous year.

Air China's profit growth came as a stark contrast to its rival, China Eastern Airlines Ltd., which recently posted a net loss of 467.3 million yuan ($58.3 million) for the full year that ended Dec. 31, 2005. China Eastern blamed a 64-percent rise in fuel costs.

Analysts said Air China enjoys a cost advantage over its rivals as more than half of its flights are international, so it can buy jet fuel from global markets at lower prices.

Shanghai-based China Eastern and Air China's other main rival, China Southern Airlines Ltd., derive most of their revenue from domestic traffic rather than international.

Chinese airlines have no choice but to buy fuel for domestic flights from dominant state-run China Aviation Oil Holding Co. at prices set by the Singapore-listed fuel provider.

The Chinese government last month raised domestically produced jet fuel prices by 3 percent to 6 percent, a move that will raise airline costs slightly.

Beijing-based Air China is on an expansion path to tap rising demand stemming from increasing business activities in China and Olympic Games in 2008.

The airline carried 27.69 million passengers in 2005, up 13 percent from 24.5 million passengers in 2004.

The airline, which operates a fleet of 180 aircraft, earlier agreed to buy 10 new Boeing 737 aircraft.

China Southern Airlines reports net loss of US$230.9 million in 2005
19 April 2006

HONG KONG (AP) - China Southern Airlines Co., one of China's three biggest carriers, on Wednesday reported a 2005 net loss of 1.85 billion yuan (US$230.9 million, €187.4 million), widening from a 48 million yuan loss in 2004.

Revenue during the period rose to 38.29 billion yuan (US$4.77 billion, €3.88 billion) from 23.97 billion yuan.

The airline, based in the southern city of Guangzhou, didn't elaborate on its results in its brief statement to the Hong Kong stock exchange. The company has scheduled a news conference on Thursday.

China Southern said earlier it expected to report a loss for 2005, as higher jet fuel prices substantially increased its operating costs.

"In addition, the competition in the Chinese domestic aviation transportation industry has intensified, making it difficult for the company to raise its yield," the airline said in January.

China Southern Airlines is 50.3 percent-owned by China Southern Group, and is one of China's biggest carriers along with China Eastern Airlines Corp. and Air China Ltd.

China Southern Airlines says it may get rid of old planes, buy new ones
20 April 2006

HONG KONG (AP) - Loss-making China Southern Airlines Co., one of China's three biggest carriers, said Thursday it may dispose of some of its assets, including old planes, to help offset rising costs, but will also expand its fleet in the next two years.

"For those assets which no longer have any contribution (to our earnings), they will be gradually phased out," chairman Liu Shaoyong said.

Liu was speaking at a briefing on the company's earnings after the Guangzhou-based carrier reported Wednesday a net loss for a third consecutive year.

The company, China's largest airline by revenue, said its net loss in 2005 was 1.85 billion Chinese yuan (US$231 million; €187.3 million), up from a loss of 48 million yuan in the previous year, due to higher jet fuel prices and fierce competition among domestic airlines.

China Southern's Hong Kong-listed shares finished 5.6 percent lower Thursday at HK$2.10.

Speaking on the sidelines of the earnings briefing, Xu Jiebo, a company director, said China Southern plans to sell 11 Boeing MD-82 aircraft this year that ceased operating in 2005.

"Hopefully, they will fetch some 100 million yuan (US$12.5 million; €10.1 million)," he said.

The Boeing MD-82 is an older model that has a high level of fuel consumption.

Xu said the company plans to spend 21 billion yuan (US$2.6 billion; €2.1 billion) in 2006 and 2007 on fleet expansion.

He said China Southern will increase its fleet by 15 percent this year to 299 aircraft, from 261 at the end of 2005, and will have a total of 330 aircraft by the end of 2007.

Liu said the company is inclined to finance the fleet expansion with U.S. dollar-denominated loans.

In late 2004, China Southern bought China Northern Airlines and Xinjiang Airlines from its parent for 16.91 billion yuan.

"Operating synergies of the integration couldn't be realized in such a short time," the company said in a statement Thursday.

During 2005, China Southern carried 44.12 million passengers, 56.4 percent more than in the previous year, and 775,000 metric tons (852,500 short tons) of cargo and mail, up 42.2 percent.

It would be really cool if China was able to build some fuel efficient MD-90's since they have the McDonnell Douglas factories.

China Shandong Air 1Q Losses CNY64.5 Mln Vs CNY61.5 Mln
25 April 2006

SHANGHAI (Dow Jones)--China's Shandong Airlines Co. (200152.SZ) Wednesday said its first-quarter losses widened from a year earlier on seasonal declines in passenger and cargo traffic.

The company said it expects to return to profit in the second quarter because of increased passenger demand and cost controls, but didn't give a specific forecast.

The airline posted a first-quarter net loss of CNY64.5 million, widening from CNY61.5 million a year earlier. Revenue rose to CNY828.6 million, from CNY509.4 million.

Shandong Airlines mainly flies domestic routes from eastern Shandong province to other destinations in China.

It carried 1.17 million passengers and 11,900 metric tons of mail in the first quarter, the company said, without giving year-earlier figures for comparison.

Shandong Airlines has Hong Kong dollar-denominated B-shares listed on the Shenzhen Stock Exchange.

-Rose Yu contributed to this story