Wednesday August 11, 4:09 PM
China home to world's fifth biggest air traffic volume

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SHANGHAI (AFP) - China's air traffic volume has become the world's fifth biggest and would be second only to the United States if Hong Kong, Macau and Taiwan were included, state press reported.

In the first six months of the year China handled 56 million passengers, up 39.3 percent from the same period in 2002, the Wen Hui Bao reported, citing a conference report from the International Civil Aviation Organisation.

China's aviation industry as a whole booked a 5.17 billion yuan (630 million dollar) profit in the first six months of the year on soaring demand, up 517 percent from the same period in 2002, the newspaper said.

The report did not provide year ago comparisons.

The World Tourism Organization has predicted China could be attracting more visitors than any other country in the world within the next decade.

In preparation for the influx of tourists, a giant new freight and passenger hub -- Baiyun International Airport -- was opened in southern Guangdong province earlier this month.

It is capable of handling 25 million passengers and one million tonnes of cargo a year.

In Beijing, the Capital International Airport is undergoing an expansion that when completed in 2007 will allow the airport to accommodate 60 million passengers and 1.8 million tons of cargo annually.

U.S. Airlines Like New Deal With China
By MICHELINE MAYNARD, New York Times
Published: August 15, 2004

THE nation's airlines are hailing an agreement signed last month that could lead to a five-fold increase in the number of flights between the United States and China.

The news couldn't come at a better time for the airline industry, which has seen competition skyrocket and profits plummet everywhere except the Asian market. Airlines report a strong increase in demand this year, with about 800,000 people traveling between the United States and China. Though airlines say it is difficult to estimate the percentage of business versus vacation travelers, much of the traffic is believed due to the rush of American companies to start or expand ventures in China.

This year through April, travel between the United States and Asia in general rose 24 percent versus the same four months last year, when passenger levels fell sharply with the outbreak of Sudden Acute Respiratory Syndrome and a weaker economy, according to the Commerce Department's Office of Travel and Tourism Industries.

The agreement, announced July 23, will increase the number of passenger and cargo airlines allowed to fly between China and the United States by the end of the decade to nine from four. And the number of allowable flights a week will jump to 249 from 54 by then.

Transportation Secretary Norman Y. Mineta, in announcing the agreement, said further expansion is possible. Right now, United and Northwest are the only United States passenger airlines going to China, which also is served by Federal Express and United Parcel Service. But Secretary Mineta said another passenger airline and another cargo carrier might be selected next year.

Interested airlines include American, the world's biggest, which said it planned to lobby hard to be allowed to pick up China flights. Continental Airlines also is interested in flying to China. Delta Air Lines, meanwhile, began a code-sharing arrangement with Air China in April, allowing passengers to earn Delta miles on Air China flights.

The old agreement limited American carriers to five cities in China. (Chinese carriers, which are run by the government, are allowed to fly to 12 American cities.) The new agreement places no limit on the number of cities that the carriers can serve in either country.

Given China's vast size, however, it's still likely that Americans will head for a major destination, like Beijing, Shanghai or Hong Kong, and then take domestic flights from those cities.

Of the 195 potential new flights a week, 84 can be passenger flights, while 111 would be cargo flights. The expansion means there will be plenty of flights available in 2008, when Beijing is host to the Olympic Summer Games. But airlines are not waiting until then to expand their service.

Within hours of the agreement, United and Northwest announced service on two new routes. United, which recently began flights between San Francisco and Shanghai, said it would add seven nonstop flights a week between Chicago and Shanghai. Northwest is adding daily flights between Detroit and Guangzhou, via Tokyo.

Guangzhou is the third city in China to be served by Northwest, which began flying there in 1947, when it was known as Northwest Orient. The airline serves Beijing and Hong Kong through Tokyo.

Whether the new service to China means ticket prices will fall isn't clear. Robert W. Mann Jr., an airline industry consultant in Port Washington, N.Y., said the strong demand by airlines to add flights reflects American companies' expansion in China. General Motors, for instance, is pushing to make China its second-biggest market, behind the United States.

Given that China is one of the last markets offering airlines the opportunity to charge top dollar for premium service, Mr. Mann said he expected the carriers to focus much of their attention on business travelers.

The opportunity to attract high-paying customers is a reason American Airlines is pushing hard to start flights to China. The airline estimates that 45 percent of visitors to Asian cities pay full-fare prices.

"My only regret is that we don't have a bigger Asian network," American's chief executive, Gerard J. Arpey, said in July.

But in the long term, airlines will have to set fares that can appeal to a wide variety of customers. "You can bet that travelers in China will not be willing to pay those fares," Mr. Mann said.

Increased service will mean more Americans getting a chance to experience domestic aviation in China, which can be an unpredictable experience. China is in the midst of a restructuring of its airline market. In the 1980's, 10 carriers operated in China, all under government control. Two years ago, the General Administration of Civil Aviation of China, known as C.A.A.C., said it would combine the airlines into three: Air China, China Eastern and China Southern.

Delays in China are notorious: two of every five flights within the country do not take off on time, the aviation agency says.

A group of private investors hopes to create China's first privately owned airline this year, and there is talk in aviation circles that the government may create a low-fare carrier. But that is still down the road, giving American carriers a window of opportunity to fly to a part of the world that is still ripe for exploration.

Saturday August 28, 3:06 PM
China Southern Air To Join SkyTeam Alliance; Likely In 06

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HONG KONG (Dow Jones)--China Southern Airlines Co. (ZNH), one of China's three major state-owned carriers, said it had begun exclusive discussions with the SkyTeam airline alliance with the aim of joining the group in the future.

China Southern said it "is now the first carrier in the nation set to join an airline alliance." China's airlines, with their access to a huge and rapidly growing domestic market, have been eagerly courted by such global alliances.

"As a strategic partner for the alliance, China Southern will help us provide greater access to the country and region for customers of all the SkyTeam carriers," said Yang-Ho Cho, chairman and chief executive of alliance member Korean Air Co. (003490.SE), in a statement Saturday.

Other members include Air France (AKH), Alitalia S.p.A (AZA.MI), CSA Czech Airlines (CAA.YY) and Delta Air Lines Inc. (DAL). Later this year, Continental Airlines Inc. (CAL), KLM Royal Dutch Airlines and Northwest Airlines Corp. (NWAC) are to join the group.

China Southern noted that it already has code-sharing agreements with Air France, Korean Air and Delta. Alliance membership means expanding cooperation to include joint frequent flyer programs, joint use of airport lounges and other facilities, and joint purchasing.

"China Southern Airlines will begin to adjust its extensive network in China and throughout the world to complement our new alliance members as well as enhance its operations and service levels as we look forward to official membership in SkyTeam in an appropriate time," said China Southern Vice President Li Kun in a statement.

SkyTeam said the preliminary agreement with China Southern will allow it to join once it meets the alliance's quality standards, which is likely to happen in 2006.

Wednesday September 1, 7:06 PM
China Aviation buys 630,000T Q4 jet fuel
By Felicia Loo

SINGAPORE, Sept 1 (Reuters) - China Aviation Oil , has bought via tender 630,000 tonnes of jet fuel for October to December, traders said on Wednesday, raising its total annual volume by 30.2 percent from last year.

The latest purchase puts the company's total for this year at 2.588 million tonnes, traders said. China Aviation, which supplies nearly all of China's jet fuel imports, said it bought 1.988 million tonnes in 2003.

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China's jet fuel consumption could grow about 15 percent next year from an estimated 5-6 million tonnes this year, one industry source said.

China Aviation, which also provides a third of total Chinese jet fuel consumption, will get more supply from Singapore than South Korea in the latest tender. South Korean refiners need to stockpile to meet peak demand for kerosene and diesel for winter heating, traders said.

"Supply was more from Singapore and it was a mix of cost-and-freight and free-on-board cargoes," one trader said.

South Korea was awarded about 150,000 tonnes in the tender, traders said.

The cost-and-freight premiums were $1.80-$1.90 a barrel to Singapore spot quotes for October deliveries. Prices were 60-70 cents higher at $2.50 a barrel for arrivals in November and December, they said.

Cargoes for October were at 60-70 cents a barrel above benchmark prices on a free-on-board (FOB) South Korea basis, while FOB spot premiums for loadings in November and December ranged from $1.30 to $1.60 a barrel, traders said.

"The large size of the upcoming quarter's fuel requirements is strong evidence that the commercial aviation sector in China remains robust," Chen Jiulin, the company's managing director and CEO, said in a statement on Tuesday, ahead of the tender award.

Additional spot tenders could be expected in the upcoming quarter, the company said. In the third quarter, China Aviation bought an additional 30,000 tonnes of jet fuel on top of the 630,000 tonnes bought via the quarterly tender.

"Jet fuel demand in China is on the rise," said a Singapore-based industry source, who declined to be named.

"Demand is still robust despite Beijing's efforts to cool down the economy," he added.

China Southern's passenger traffic soared 72 percent in the first six months of 2004 from a SARS-blighted 2003.

Saturday September 4, 5:26 AM
UPS, FedEx get tentative OK for new China service

WASHINGTON, Sept 3 (Reuters) - FedEx Corp. , UPS Inc. and Northwest Airlines each received tentative approval from the government on Friday for expanded all-cargo U.S.-China service.

The Transportation Department also proposed that Polar Air Cargo Inc. be granted nine weekly frequencies, which would be allocated over 2004 and 2005. FedEx and UPS would each get 12 additional weekly frequencies over the rest of this year and next, and Northwest would get six over the same period.

The new service, an unprecedented expansion of air cargo rights, was created by the U.S.-China aviation agreement signed by both nations this summer. Expanded passenger service to United Airlines and Northwest was awarded in July.

Final approval for the all-cargo service is expected soon after an 11-day comment period expires, the Transportation Department said.

Wednesday September 8, 1:23 PM
China Southern Air Unit Leases 23 A320s To Boost Fleet

HONG KONG (Dow Jones)--China Southern Airlines Northern Co., a unit of China Southern Air Holding Co., will lease 23 A320 series planes
to replace its aging MD-82 and MD-90 aircraft, Airbus (ABI.YY) said Wednesday.

China Southern Air Holding is the parent of Hong Kong-listed China Southern Airlines Co. (ZNH).

Shenyang-based China Southern Airlines Northern will lease the aircraft from International
Lease Finance Corporation, the wholly owned airplane leasing unit of American International
Group Inc. (AIG).

Financial details of the deal weren't disclosed.

China Southern Airlines Northern has already taken delivery of four A319s this year. It will
receive another seven A319s in 2005. The remaining 12 planes will be either A319s or A320s,
of which six will be delivered in 2006 and the remaining six in 2007. The company's current
Airbus fleet includes eight A321s and six A300-600s.

The new Airbus planes will help cut the airline's training and maintenance costs, said Zhou
Yongqian, vice president of China Southern Air Holding Co. Zhou is also president of China
Southern Airlines Northern.

China Southern Air Holding was in 2002 handed ownership of two other state-owned airlines, China Northern Airlines and Xinjiang Airlines, as
part of a government reorganization of the airline business. The two other airlines now operate their flights under China Southern codes.

Airbus said its A320 Family - composed of the A318, A319, A320 and A321 - is the leading single-aisle aircraft family, with around 3,200 planes
sold to over 120 customers and operators worldwide.

Friday September 10, 9:48 AM
HK PRESS: Air China May Sell Shrs To Deutsche Lufthansa

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HONG KONG (Dow Jones)--Air China may sell a 10% stake to Deutsche Lufthansa AG's (LHA.XE) Lufthansa German Airlines ahead of the Chinese carrier's upcoming stock market debut, the local Chinese-language newspaper Sing Tao Daily reports.

Air China plans to list shares in Hong Kong, by next month at the earliest, the report says. The airline hopes to sell an around 28% stake in an initial public offering that will raise between US$500 million and US$800 million.

The proceeds will be used to buy new aircraft: Air China plans to buy 14 medium-size planes in the second half, 15 in 2005, and 10 more in 2006, the report added.

The report also said Lufthansa German Airlines hasn't decided whether to buy a stake in Air China as the Chinese company said it won't pay dividends in the coming few years. Air China will also invite Hong Kong tycoons like Cheung Kong Group's Li Ka-shing to invest in the company, the report said.

Friday September 10, 6:39 PM
China Southern to lease 23 Airbus A320 jets

China Southern, the country's largest air carrier, will lease 23 Airbus A320 passenger jets to replace its aging fleet of McDonnell Douglas planes, the airline announced Friday.

The planes, four of which have been delivered already, will be operated by the carrier's China Southern Airlines Northern Co. subsidiary, which already operates 16 Airbus jets, the company said in a statement.

The jets, powered by V2500 engines made by International Aircraft Engines, will be leased from International Lease Finance Corp., the company said.

The move marks another victory in the European consortium's campaign to chip away at American rival Boeing's long-standing dominance of the Chinese market. McDonnell Douglas Corp. was acquired by Chicago-based Boeing Co.

"As one of the earliest Airbus operators in China, we have been satisfied with our cooperation with Airbus," Zhou Yongqian, vice president of China Southern Air Holding Co., was quoted as saying.

"The introduction of new Airbus aircraft on a large scale will rationalize our fleet, reduce training and maintenance costs and increase passenger comfort," Zhou said.

Friday September 17, 5:31 AM
World Airways to offer service in China, Germany

NEW YORK, Sept 16 (Reuters) - World Airways Inc. said on Thursday it would begin operating freighter aircraft between Germany and China for a unit of Lufthansa Cargo Charter, its first long-term agreement with Lufthansa Cargo.

The announcement came six days after the company said it would share a U.S. Air Force airlift contract worth almost $1 billion.

Shares of World Airways rose to $4.51 from their Nasdaq close at $3.93.

The Peachtree City, Georgia-based cargo carrier said it would provide international cargo service between Nuremberg, Germany, and Xian, China. The service will begin in October 2004 and continue through December 2005. The service is worth about $23 million for the term of the agreements, the company said.

Spanair looks to open up China routes

129 words
17 September 2004
Airline Industry Information
English
(c) 2004 M2 Communications, Ltd. All Rights Reserved.

Spanair is hoping to introduce two weekly direct flights to China with the option of a third in the future.

The Spanish airline has been canvassing for political support for the flights from Barcelona's El Prat airport to Beijing and Shanghai, with Spain keen to capitalise on the Chinese tourist market and cement its place as the world's second most popular tourist destination.

China has recently signed a Authorised Destination Status accord with the European Union, allowing Chinese tourists to travel to 22 EU countries on visas. Fellow Spanish airlines Iberia and Air Europa have also voiced interest in the routes to Beijing and Shanghai, reports EUBusiness.

Comments on this story may be sent to aii.feedback@m2.com

Thursday September 23, 4:34 AM
Continential Airlines applies for two China routes

SAN FRANCISCO, Sept 22 (Reuters) - Continental Airlines said on Wednesday it had applied for permission with the U.S. Department of Transportation to operate two routes of flights into fast-growing China.

The New York-based airline said that it is seeking permission to start service to Beijing in 2005 and to Shanghai in 2006 from Newark Liberty International Airport in New Jersey.

South China Morning Post
September 23, 2004
SECTION: Business; Pg. 3

UPS adding China routes Sino-US air pact opens way to connect mainland with company's global hubs
Russell Barling

United Parcel Service (UPS) is to begin three new round-the-world services linking Asian manufacturers with key western trading partners as the company looks to capitalise on the new rights it won in July's Sino-US air services agreement (ASA).

On Tuesday, it launched a service connecting its hubs in Louisville, Kentucky; Cologne, Germany; Dubai, Taipei and the Philippines, and awaits approval from the US Department of Transport to start global route networks serving Shanghai and Guangzhou.

"We are seeing the results of our firm advocacy of open skies and free trade," said UPS international president David Abney. "The breakthrough that came with the US-China aviation agreement was very encouraging."

Next month it will also launch a thrice-weekly intra-Asia flight - connecting Hong Kong, Singapore and the Philippines - to bring semi-finished goods made in Southeast Asia for assembly in the booming manufacturing centres around the Pearl and Yangtze river deltas.

"We are seeing increased connectivity between the markets of Southeast Asia and China," said Ken Torok, UPS president for Asia Pacific. "There is an increasing volume of parts and components coming up to China from where the finished products are exported."

For the past five years semiconductors, computer peripherals, and radio and telecommunications equipment have been China's top three air-cargo imports, according to consultancy Merge Global.

This month the US Department of Transport provisionally granted UPS permission to add six flights to Shanghai, which it can launch as soon as final approval is received, probably within two weeks.

It also was given the right to begin serving Guangzhou six times a week from March 25.

UPS yesterday applied for three of the 12 new flights between China and the US that will be available from March 25, 2006, but Mr Abney declined to say which mainland market those flights would target.

According to its application to the Department of Transport, the carrier intends to serve the Shanghai market via Osaka, Japan.

The global services through Shanghai and Guangzhou were made possible by the surprisingly liberal Sino-US agreement, which Mr Torok said was prompting other countries to revisit their own ASAs.

"It is putting pressure on the other agreements here in Asia," he said. "Japan has always been a challenge for us. But we are now optimistic that the Sino -US deal could be a catalyst for them to re-evaluate their aviation regime ."

UPS said its China export volume grew a comparative 70 per cent in the three months to August.

Monday September 27, 12:59 AM
Germany's Lufthansa to boost flights to Asia

BERLIN (AFP) - German flag carrier Lufthansa plans to boost by 50 percent its flights to China by 2007, company chairman Wolfgang Mayrhuber said.

Already the European airline with the most connections between Europe and China, Lufthansa wants to increase its number of weekly flights there to around 60, he told the Frankfurter Allgemeine Sonntagszeitung.

Mayrhuber also said India was being targeted and that his company plans to raise the number of passenger flights there by about 60 percent and lift the number of freight links by 70 percent.

"Our Asian business will grow altogether by at least 15 percent" by 2007, he said.

The number of passengers travelling in Asia with Lufthansa grew by 27 percent in the first eight months of the year compared to the same period in 2003 as fears decreased about the respiratory lung illness SARS.



Copyright 2004 South China Morning Post Ltd.
September 24, 2004

FedEx may make Guangzhou part of its Asian hub; US cargo carrier applies for six weekly frequencies to increase China presence
Russell Barling

Federal Express (FedEx) yesterday applied to begin daily services to Guangzhou in 2006 as part of the third tranche of extra frequencies won by United States carriers in the latest air services agreement (ASA) with the mainland.

The flights hinge on approval from the US Department of Transport (DoT) but the move indicates the US cargo carrier's intention to build its business at Guangzhou with an eye to making the airport one half of a dual-hub strategy in the Asia-Pacific region.

Its Asia-Pacific president, David Cunningham, said: "We have applied yesterday as part of the 2006 entitlement for six weekly frequencies over Guangzhou."

Only 12 new frequencies will be awarded to US cargo carriers in 2006 and the DoT received requests for 20 new flights from incumbent airlines yesterday.

One new US airline will also enter the market, with four carriers battling it out for the honour.

By early next month, FedEx is expected to have 12 new weekly flights to the mainland finalised under the ASA's first two allocations of rights, which it will use to increase its presence in the Shanghai and Shenzhen markets.

Both round-the-world services will call at Shanghai, with the eastbound service transiting in Shenzhen on five of the six days a week.

According to the DoT, more than 148,000 tonnes of cargo was exported from China to the US by air last year, 65 per cent of which moved from Shanghai.

FedEx yesterday said its China export volumes grew 52 per cent year on year in the three months to last month, driving international express sales up 25 per cent.

Global sales grew 23 per cent for the quarter, to US$ 6.98 billion, with net profit soaring 158 per cent to $ 330 million.

"It was a great quarter," Mr Cunningham said, "one which continued our string of successes."

FedEx has been evaluating where to establish its future Asia-Pacific hubs for the past year and Mr Cunningham yesterday said the decision remained up in the air.

Earlier this year it signed a two-year extension to 2010 of a lease at its existing hub in Subic Bay, the Philippines. FedEx also signed a deal for the first right of refusal on a 42 hectare plot of land at neighbouring Diosdado Macapagal International Airport, the former Clark Air Force Base.

In December, it signed a framework agreement with the Guangzhou Baiyun Airport Authority to pursue "joint initiatives", widely interpreted as an interim step toward setting up an express handling centre at the city's new airport.

Mr Cunningham yesterday said the hub decision probably would be made within nine months, with the plan in place in about four years just as the new ASA grants the flexibility for US carriers to operate cargo hubs on the mainland.

"The part of ASA which allows you to have open skies becomes effective in 2007. The intent is to have the new hub operational by 2008 to 2010," Mr Cunningham said.

"We are hoping to make the decision on the hubs - whether it's Subic-Guangzhou or Clark-Guangzhou - by next summer," he said. "We need to build into it because from our hub we connect 19 major markets. With the 2006 application we are starting that process."

Qatar Airways Expands Chinese Operation With New Route

DOHA, Qatar, Sept 30 Asia Pulse - Qatar Airways is expanding its Chinese operation, with the addition of Beijing as the latest destination.

One year after the launch of scheduled flights to Shanghai, Qatar Airways is adding its second gateway in China, one of the world's fastest developing economies.

From November 25, three return flights a week will operate non-stop between Doha, the capital of the State of Qatar, and Beijing, capital of the People's Republic of China.

The route will be operated with a wide-body Airbus A330-200 in a two-class configuration - 12 Business and 226 Economy.

Beijing is China's political, economical, cultural and educational center, as well as the country's most important center for international trade and communications.

Qatar Airways Chief Executive Officer, Akbar Al Baker said China was an economic powerhouse that would revolutionize global trade and industry in the years to come.

"Ever since the launch of our Shanghai flights last year, the route has proved very popular and it was only natural for us to extend our Five Star service to business and leisure travelers by introducing Beijing as our second destination in China," he said.

"Flying between the capitals of Doha and Beijing will also enhance cultural links between the two cities."

The route is also aimed at attracting passengers from feeder markets such as Europe and the rest of the Middle East and Africa via Doha.

Beijing becomes Qatar Airways' 9th destination in the Far East, which already includes Shanghai, Seoul, Bangkok, Singapore, Cebu, Manila, Jakarta and Kuala Lumpur.

Beijing is to host the next Olympic Games in 2008.

ASIA PULSE

Copyright 2004 South China Morning Post Ltd.
October 4, 2004

Air China gets 69pc stake in CNAC
Bei Hu

Stock market-bound Air China, the mainland's flagship carrier, will hold 69 per cent of Hong Kong-listed China National Aviation Company (CNAC).

China National Aviation Corporation (CNACG) has transferred its stake in CNAC as a capital contribution to the joint stock holding company set up last month to be Air China's listing vehicle, CNAC announced through the stock exchange yesterday.

Sources said the injection was done to give Air China's proposed US$ 500 million to $ 600 million international initial public offering later this or next year a more attractive valuation.

A provider of aviation-related services such as airline operations, airport ground handling and logistics, CNAC owns 43 per cent of Hong Kong Dragon Airlines among others.

In exchange for the equity interest in CNAC, CNACG has become a 22.5 per cent shareholder in Air China, which has a registered capital of 6.5 billion yuan.

China National Aviation Holding (CNAH) will own the rest of Air China, whose assets include a fleet of 136 aircraft serving 69 domestic and 34 international destinations.

The restructuring has established Air China as the principal passenger and air cargo transport unit of CNAH, which the central government created in 2002 in an effort to consolidate the fragmented mainland civil aviation industry into three airline groups.

CNAH encompasses Air China, CNAC and China Southwest Airlines.

Air China has obtained a waiver from the Hong Kong Securities and Futures Commission from making a mandatory cash offer under the takeover code for the CNAC shares it does own, the listed company said in the statement.

CNAC is 31 per cent owned by public investors.

Japanese airlines bank on China growth
Winning double seen in business ties and mainland tourists, writes Julian Ryall

25 September 2004
South China Morning Post

Chinese airlines may be in for a bumpy ride on their routes to Japan as Japanese carriers look to tap into a market that they all agree has huge potential.

With China's economy booming and more and more Japanese companies setting up subsidiaries or alliances across the water, Japan Airlines and All Nippon Airways are expanding their networks and setting up travel agencies for Chinese tourists wanting to come in the opposite direction.

"From three years ago, when Tokyo's Narita Airport added a new runway, both JAL and ANA increased the frequency of their flights to China, but those flights were very badly hit by the Sars outbreak," said Osuku Itazaki, a transport industry analyst for Credit Suisse First Boston in Tokyo.

"Even now they are operating at only 50 per cent of capacity and while that level may not be profitable at the moment, both companies are expecting rapid growth again in the future," he said.

Including code-sharing arrangements, JAL operates 218 flights a week on 27 routes to 13 cities in China, as well as Hong Kong. The next route is due to link the new Chubu International Airport, near Nagoya in central Japan, with Guangzhou in February, according to Kenichi Ando, assistant public relations manager.

"We expect more passengers and revenue from our China routes because it is such a large market and JAL is working closely with the Japanese government on the Visit Japan campaign," Mr Ando said.

The new Chubu-Guangzhou route, however, is designed to meet an anticipated surge in demand after Toyota Motor sets up a joint venture to produce vehicles in the city.

JAL already code-shared its China operations with China Eastern Airlines and China Southern Airlines because it did not have sufficient aircraft to meet demand on all the routes, Mr Ando said, describing the arrangement as a win-win situation that gives both sides access to new passengers and new sources of revenue.

The airline was also expanding its chain of travel agencies across China, he said.

"We are continuing our research into the China market and in a few years we would like to provide new services if the situation permits," Mr Ando said.

ANA is similarly optimistic, more than doubling the number of China flights to 112 a week, including 21 to Hong Kong, from three years ago, according to Rob Henderson, assistant public relations manager.

"China is a vast potential market for us as it has a huge population and even if only a fraction of those people want to come to Japan, that's still a very big market," Mr Henderson said.

"And if you factor in all the Japanese companies investing in the coastal zone, that's an awful lot of business passengers and freight going backwards and forwards between the two countries.

"But it's a lot more than that for ANA. China is a very important neighbour and there are a great number of cultural ties. ANA president Yoji Ohashi was born in China and remembers as a child the kindness of the Chinese people, so we have a long and happy relationship with the country."

And while more flights will undoubtedly be good news for tourists and business people, other airlines are keeping a close eye on the situation.

"We have 80 flights to five Japanese cities a week from Hong Kong and we are very competitive on our routes, but we will closely monitor this situation," said May Lam, a spokeswoman for Cathay Pacific Airways.

"We are always looking to strengthen our network of existing routes and add more frequency and more destinations.

"And while it's true that the environment is becoming more and more competitive, we are up for that competition."

The investment that Japan's airlines are making now may not reap returns for up to five years, according to Mr Itazaki. However, by that time, the number of Chinese visitors to Japan is expected to have risen dramatically.

"The China route looks like it will be a very profitable one for airlines and if they can take advantage of passenger and freight numbers then business will be good on those routes," he said.

Monday October 11, 1:37 PM
China Southern to Begin Daily China-Australia Flights

SYDNEY, Oct 11 Asia Pulse - To meet the growing demand for leisure and business travel between China and Australia, China Southern Airlines, China's largest airline, has announced that it will increase its Boeing 777 service between Australia to China from four flights per week to a daily service, starting from December 2, 2004.

Effective November 5th, China Southern will add a fifth weekly Boeing 777-200 flight from Sydney to Guangzhou, departing every Friday morning.

This will increase to a daily Sydney service starting December 2 for the remainder of the northern summer schedule period, which ends March 26, 2005.

The airline's Thursday and Sunday services from Australia will continue to originate in Melbourne, then via Sydney to Guangzhou.

The new schedule will provide extra capacity between Australia and China during the peak Christmas/New Year and Chinese New Year periods.

Business travel between Australia and China is growing strongly and China is becoming increasingly popular with Australian tourists, with significant growth occurring in both package holiday programs and independent leisure travel.

ASIA PULSE

China Southern mulls flying on 3 routes to Delhi

New Delhi , Oct. 11

THE Chinese airline, China Southern, is examining the possibility of operating flights to India. The President and Senior Pilot, China Southern Holding, Mr Li Jian, told presspersons that the airline would like to operate on three routes from China to Delhi.

The three routes being examined for launching flights include Kashgar and Delhi apart from connecting Beijing to the Indian Capital. "This time we are in India to study the situation. We plan to make another trip here to firm up air links between India and China," Mr Li Jian, said on the sidelines of a luncheon meeting organised by CII.

Meanwhile, another Chinese airline, China Eastern is to increase the frequency of weekly flights between India and China from the present two to three from November this year.

http://www.thehindubusinessline.com/2004/10/12/stories/2004101200670300.htm

(Press release)


Tokyo September 8: Japan Airlines (JAL) and Hainan Airlines (HU) today announced plans to launch a new twice-weekly code share flight between Kansai International Airport, Osaka and Haikou, Hainan Island, from October 31.

In November last year JAL and Hainan Airlines opened daily connection flights between Beijing and Hainan Airlines' destinations of Chengdu, Chongqing and Xi'an, for the benefit of JAL passengers flying to and from these cities from Tokyo, Osaka and Nagoya via the Chinese capital. This service, the "West China Express" offers connecting passengers smooth transfers, including the use of lounges.

Hainan Airlines will inaugurate service from Kansai to Haikou from September 16 and the code share agreement with JAL will become effective from October 31. The additional, new code share agreement between JAL and Hainan Airlines provides further Japan-China route enhancement for JAL and its customers. The addition of Haikou to JAL's Japan-China network increases the number of cities served in China to 13. Including the new code share flights with Hainan Airlines, JAL will offer a total of 234 flights a week, more than any other airline operating between Japan and China.

http://www.cn.jal.com/cgi/en/contents/835/

Hainan Airlines is China's 4th largest airline after China Southern, China Eastern and Air China, it's also the most profitable airline in Mainland China.

Posted: 11 October 2004 2235 hrs

ST Aerospace, China Eastern Airlines in aircraft repair tie-up

By Chan Hwa Loon, Channel NewsAsia

Singapore Technologies Aerospace and China Eastern Airlines are setting up a US$98 million, or S$167 million aircraft repair facility in Shanghai. The joint venture called Shanghai Technologies Aerospace Company or Starco will start operations in the 4th quarter of this year.

ST Aerospace owns 49 percent of Starco, while China Eastern Airlines owns 51 percent.

But ST Aerospace will operate and manage Starco, which will initially provide maintenance and modification services for both Boeing and Airbus aircraft from its facility at Shanghai's Hongqiao International Airport. - CNA

Tuesday October 12, 3:15 PM
China Planning to Build Airport at Shangri-La

BEIJING, Oct 12 Asia Pulse - China is planning to build a high altitude airport, the nation's second highest, close to the famed Shangri-La region in the Himalayas which will allow the outside world easier access to the picturesque area.

The airport is scheduled to be build in Garze, China's second Tibetan-dominated area in a bid to improve its link with other part of the country and overseas.

Rao Sidan, head of the Garze Tibetan Prefecture of Sichuan Province, southwest China, said the planned airport, or Kangding Airport, will be 38 km from the county seat of Kangding County with an altitude of 4,200 meters.

The airport will be the second highest after Bamda Airport in Tibet Autonomous Region, which stands at about 4,300 meters in the Qinghai-Tibet Plateau, he said.

Total expenditure for the airport is estimated at nearly US$100 million, Xinhua news agency quoted the official as saying.

Rao said the planned airport will boost local social and economic development of the prefecture after its completion as the region is trying to attract tourists from other parts of the country and overseas.

The airport is important for the hilly prefecture because it is difficult to reach the area by road.

Located in Hengduan mountainous region in eastern part of Qinghai-Tibetan Plateau, Garze is rich in tourism resources.

The region has been the core of the ecological tourism zone known as Great Shangri-La promoted at home and abroad by Sichuan and neighbouring Yunnan Province and Tibet Autonomous Region.

(PTI)

Published October 12, 2004

China Eastern to pay US$3.4b for 20 Airbus planes

(HONG KONG) China Eastern Airlines Corp, the nation's third-largest carrier, said it has valued the 20 Airbus planes ordered on Oct 10 from the French manufacturer at US$3.4 billion, in its biggest aircraft purchase since 2002.

Each A330-300 plane will be fitted with Trent 772B engines made by Rolls-Royce Group and delivered between 2006 and 2008, China Eastern said. Each plane costs between US$163 million and US$170 million, the airline said in a statement to the Shanghai exchange.

Each A330-300 plane carries a catalogue price of US$167 million, before discounts. The aircraft has as many as 335 seats and can fly a maximum distance of 10,186 km. The A330-300 planes will replace the A310 and A300 aircraft in its fleet, on domestic and international routes, said China's Eastern's spokesman Luo Zhuping.

Like its larger competitors, Air China and China Southern Airlines Co, China Eastern is expanding its fleet as air traffic expands in the country. China is the world's largest potential aviation market, where air travel is expected to expand 8.1 per cent over the next two decades.

China Eastern said it will use bank loans to finance the purchases, which are subject to government approval. The airline did not disclose the routes on which it will use the new aircraft. Shanghai-based China Eastern operated 100 airplanes by the end of June, according to its annual report.

China Eastern and Air China gave Airbus firm orders on Oct 9 for 26 aircraft. Air China, the country's closely held international carrier, did not disclose the price for the six planes it is buying.

China Eastern's last aircraft purchase was in 2002, when the Shanghai-based carrier paid US$800 million for 20 Airbus A320 planes, said the airline's spokesman Luo. The A320 planes, with a single aisle that carries up to 150 passengers, is used for flying short distances of up to 3,000 nautical miles.

China Southern Airlines Co, the nation's biggest carrier, said in April it will pay US$1.3 billion to buy 21 airplanes from Airbus, including 15 A320-200 models and six A319-100 planes. - Bloomberg

Bitter lesson on fuel hedging for carriers
Karen Teo, Hong Kong Standard
October 15, 2004

Most major international airlines hedge 30-50 per cent of their fuel costs which have continued to climb in recent years.

For years, most big airlines have used futures to protect themselves against sudden surges in the price of jet fuel, their second biggest cost after labour. Not so for China's rapidly expanding passenger airlines, whose top managers have preferred to take a chance oil prices will remain stable, rather than pay the cost of buying protection in the futures markets.

This year's run-up in crude oil costs to more than US$53 (HK$413.40) a barrel has taught them a costly lesson and is forcing reluctant managers to begin hedging their bets.

Two of China's biggest airlines - China Southern and China Eastern - say they have hedged only about 10 per cent of their fuel costs so far this year. By contrast, most international carriers hedge anywhere from 30-50 per cent, and some go far higher.

Australia's Qantas, for instance, has locked in 70 per cent of its fuel costs at US$32 a barrel through next June. Even so, its fuel costs have jumped to 21 per cent of total outlays from just 13 per cent last year.

Hong Kong's Dragonair has locked in 30-50 per cent of its fuel cost for this year at US$30-US$40 per barrel.

Chinese carriers, by leaving themselves much more exposed to soaring crude prices, find they are spending 25-27 per cent of their total outlay on fuel, compared to about 15 per cent for most international carriers.

Analysts say most airlines have not hedged enough this year, since few expected oil prices to remain at current levels for this long.

But the Chinese carriers are more vulnerable than most, and that is making managers rethink their former dislike of hedging. China Eastern executives involved in fuel purchasing realise that insufficient hedging is one of the principal reasons its fuel expenses are so high, and they've been using this argument to press management to drop its objections to running hedges.

"As we are listed, management and shareholders are concerned over [the costs of] excessive hedging,'' says a source from China Eastern. "We only started since the end of last year.''


"Technically, we do not have a licence to hedge but we have been doing so in the OTC market since there are no government regulations there,'' says the China Eastern source. As a result, the company now plans to hedge at least 15 per cent of its fuel needs for next year, up from about 10 per cent now.

China Southern fuel managers ran into similar objections to hedging from top executives. "We only started hedging in August when oil prices were already very high,'' says a fuel management source at the company.

Hedging alone, of course, can't make up for all the increase and fuel costs, which has driven airlines world-wide to pass it on to passengers via fuel surcharges.

Air China Confident About Next Year's IPO Prospects
William Dennis
12 October 2004
Aviation Daily, Volume 358, Number 8

Air China is confident it will attract investors for its planned Initial Public Offering next year, and a senior official of the Air China group, Li Jiaxing, said the IPO should reach its US$500 million target.

"We have prepared for the IPO and with market conditions good and the airline performing well, it will go ahead as planned. We are confident that foreign investors would be attracted as well," Li said.

He also dismissed press reports that foreign investors would shy away from investing in Air China due to the government's interference in the airline's day-to-day operations.

The Chinese national flag carrier postponed the IPO three times --- in 2001 because of the airline's poor financial state, in 2002 due to poor market conditions and last year because of the downturn in the travel industry.

To prepare for the IPO, Air China has set up a joint stock company with share capital of CNY6.5 billion (US$785 million), and the government's 69% stake in China National Aviation Corp (CNAC) -- valued at HK$3.27 billion (US$420 million) -- has been transferred to Air China to boost the airline's standing.

CNAC, which is listed on the Hong Kong Stock Exchange, controls Hong Kong-based regional carrier Dragon Air and Air Macau.

Air China hired China International Capital Corp. and Merrill Lynch to manage the IPO, whose proceeds would be used to pay for new aircraft, including the Airbus A380, underpinning Air China's domestic and international expansion.

Air China wants to order six A380s while Guangzhou-based China Southern Airlines is expected to order four. The government's China Import Export Supplies Corp. is expected to place orders for the two carriers' A380s soon. Both Air China and China Southern expect to deploy the jumbo aircraft on major international routes and on lucrative Beijing-Shanghai, Beijing-Hong Kong and Shanghai-Hong Kong routes. -WD

Air China is confident it will attract investors for its planned Initial Public Offering next year, and a senior official of the Air China group, Li Jiaxing, said the IPO should reach its US$500 million target.

"We have prepared for the IPO and with market conditions good and the airline performing well, it will go ahead as planned. We are confident that foreign investors would be attracted as well," Li said.

He also dismissed press reports that foreign investors would shy away from investing in Air China due to the government's interference in the airline's day-to-day operations.

The Chinese national flag carrier postponed the IPO three times --- in 2001 because of the airline's poor financial state, in 2002 due to poor market conditions and last year because of the downturn in the travel industry.

To prepare for the IPO, Air China has set up a joint stock company with share capital of CNY6.5 billion (US$785 million), and the government's 69% stake in China National Aviation Corp (CNAC) -- valued at HK$3.27 billion (US$420 million) -- has been transferred to Air China to boost the airline's standing.

CNAC, which is listed on the Hong Kong Stock Exchange, controls Hong Kong-based regional carrier Dragon Air and Air Macau.

Air China hired China International Capital Corp. and Merrill Lynch to manage the IPO, whose proceeds would be used to pay for new aircraft, including the Airbus A380, underpinning Air China's domestic and international expansion.

Air China wants to order six A380s while Guangzhou-based China Southern Airlines is expected to order four. The government's China Import Export Supplies Corp. is expected to place orders for the two carriers' A380s soon. Both Air China and China Southern expect to deploy the jumbo aircraft on major international routes and on lucrative Beijing-Shanghai, Beijing-Hong Kong and Shanghai-Hong Kong routes. -WD

Tuesday October 19, 11:12 AM
INTERVIEW: Airbus China Chief Seeks Mainland Market Edge
By Nisha Gopalan

HONG KONG (Dow Jones)--Aircraft maker Airbus, which signed orders to sell 20 A330-300 aircraft to China Eastern Airlines Corp. a week ago, is hoping to break U.S. rival Boeing Co.'s dominance over the China market in the next few years.

In an interview with Dow Jones Newswires, Airbus China President Laurence Barron said sales of the aircraft to China Eastern, on top of orders for six aircraft to Air China, have already put Airbus sales in China this year above last year's.

"As of today, this is our best year ever in China, Hong Kong and Macau, and we still have two and a half months to go," said Barron. "Who knows what can happen in that time?"

Last year, Airbus clinched orders for 30 aircraft in China, Hong Kong and Macau, he said. So far this year, including 21 A321 aircraft signed for China Southern Airlines Co. in January, six A319 planes to Air China as well as three A330s for Hong Kong's de facto flag carrier Cathay Pacific Airways Ltd., Airbus has chalked up orders for 50 aircraft.

But that still puts Airbus behind Boeing, which entered the mainland China market about a decade before the European aircraft maker's first foray into the country in 1985.

Barron said Airbus has 25% of the current fleet in service in China, while Boeing has 72%. In Hong Kong and Macau, it has the dominant share at 62% compared with Boeing's 38%. In all, Airbus has 830 in-service aircraft in China, Hong Kong and Macau - which works out to a third of the market against its U.S. competitor's two-thirds.

"We have been playing catch-up to Boeing, but in the last 10 years, we've made a lot of progress. Our target is for Airbus to have half the in-service fleet in China in the coming years," Barron said.

Barron has reason to be optimistic. Airbus believes that the region - China, Hong Kong and Macau - will need more than 1,500 new aircraft in the next 20 years.

"China will become the second-largest market for civil aircraft after the U.S. in the next 20 years," Barron said. "At China's current economic growth rates, that could even happen in the next 10 years."

Barron said the aircraft maker forecasts 20% growth in mainland Chinese air travel this year and next year, then about 8% average annual growth thereafter.

"That 8% could be a conservative estimate," he said.

One aircraft that could help boost Airbus sales in China is the 555-seater A380, dubbed the superjumbo, which the European aircraft maker has been building and expects to roll out in January next year.

"We're highly confident of seeing the A380 here in China in the colors of at least one Chinese airline, at least by 2008 (the date of the Beijing Olympics)," Barron said. "We expect to say something on this in the coming months."

Airlines such as Air France SA, Virgin Atlantic Airways, Singapore Airlines Ltd. and Deutsche Lufthansa AG have already struck deals to buy the A380, which should begin flying before the middle of next year, Barron said.

Boeing, meanwhile, has been working on building the 7E7, which will be a mid-sized jet the aircraft maker said would be fuel-efficient rather than large.

Toulouse-based Airbus is a joint venture between European Aeronautic Defence and Space Co. and BAE Systems PLC.

Tuesday October 19, 3:05 PM
China Eastern Air Sep Passenger Numbers Fall 7.9% On Year

HONG KONG (Dow Jones)--China Eastern Airlines Corp. (CEA), one of China's major state-controlled airlines, said Tuesday its passenger numbers fell 7.9% on year in September to 1.62 million, after rising 21% in August.

International passenger numbers for the Shanghai-based carrier fell 13.3% from September last year, while domestic passenger figures dropped 6.9%. Part of the decline was due to a high comparison base. In September last year, the containment of SARS in earlier months led to a surge in travel.

The passenger load factor - the percentage of seats that were filled - was 69% in September, down from 73% in August.

The freight load factor rose to 57% in September, up from 52% in August, however.

Wednesday October 20, 8:59 PM
HK's Cathay to take 9.9 pct stake in Air China
By Tony Munroe

HONG KONG, Oct 20 (Reuters) - Hong Kong's Cathay Pacific Airways Ltd. will buy a 9.9 percent stake in Air China when China's flag carrier launches an initial public offering, the airlines said on Wednesday.

The deal, which took observers by surprise, gives a boost to Cathay's long-frustrated China ambitions and could make Air China's planned IPO more attractive, one analyst said.

Beijing-based Air China, which is the mainland's third-largest carrier, has applied to the Hong Kong stock exchange for its IPO, the companies said in a statement.

It hopes to list its shares by late this year or early 2005 in an offer that could raise more than US$500 million and may also include a secondary listing in London, a source familiar with the deal said earlier on Wednesday.

"In my view, it's going to be a hard sell in this market. But with Cathay as a strategic investor, it may help," said Michael Chan, aviation analyst at BOC International.

Hong Kong-based Cathay is the territory's dominant carrier, but its access to fast-growing mainland China has been limited to just three passenger flights a week to Beijing.

This week it said it won rights to add additional passenger services to Beijing, as well as new cargo services to Shanghai and passenger service to Xiamen.

The agreement between Cathay and state-owned Air China calls for further cooperation between the two, including potential alignment of their networks.

"Strategically, it is immensely important for (Cathay)," industry consultant David Dodwell said.

Industry watchers had long expected Cathay to broaden its cooperation with China Eastern Airlines , which is based in Shanghai, a market Cathay covets.

Air China is expected to sell 27 to 28 percent of its enlarged share capital at eight to 10 times its forecast 2004 net profit, sources have said previously. It earned 93 million yuan (US$11.2 million) in 2003.

Cathay Pacific, which is 46 percent owned by property-focused conglomerate Swire Pacific Ltd. , will take 9.9 percent of the expanded share capital of Air China.

"We believe that there are many areas of our operations where we can cooperate together and leverage our respective strengths," Kong Dong, vice chairman of Air China, said in the statement.

Air China's IPO is being underwritten by Merrill Lynch and China International Capital Corp.

"We look forward to becoming Air China's strategic partner and to a mutually beneficial relationship between our two companies," David Turnbull, Cathay's chief executive, said in the statement.

As of June 30, Air China operated a fleet of 136 aircraft serving 69 domestic and 34 international destinations.

The tie-up would further complicate the ownership structures of the respective carriers.

Under the structure of its IPO, Air China will hold 69 percent of Hong Kong-listed China National Aviation Co. Ltd. (CNAC), CNAC said earlier this month. CNAC owns 43 percent of number-two Hong Kong carrier Dragonair, while Cathay owns a 19 percent stake in Dragonair and Swire holds 7.7 percent.

Wednesday October 20, 11:39 PM
Report: Air China may list shares in London, not New York

Mainland China's flag-carrier Air China Ltd. has scrapped plans to list shares in New York and may offer them in London instead, Dow Jones Newswires reported Wednesday.

Air China hopes to raise US$500 million (euro 400 million) in an initial public offering of stock in Hong Kong and another major market, either late this year or early next year.

Air China also announced late Wednesday that Hong Kong's biggest airline, Cathay Pacific Airways Ltd., will acquire a 9.9 percent stake in the state-owned carrier at the time of its IPO.

In a joint statement, Air China and Cathay said they signed a memorandum of understanding about the deal.

The agreement also set out a framework for the two airlines to develop a closer partnership, including joint marketing and sales activities as well as better coordination of the airlines' schedules, the companies said.

"We believe that there are many areas of our operations where we can cooperate together and leverage our respective strengths for the future prosperity of both companies," Kong Dong, Air China's vice chairman said in the statement.

Earlier, Dow Jones reported that Air China had originally planned to sell its shares in New York, but abandoned that idea and is now considering London. The report cited information from a source familiar with the share listing.

Dow Jones did not name the source by name, but quoted the person as saying that many details, including the date of the listing, were still being discussed.

"Things might still change," the source was quoted as saying. The source declined to say why Air China abandoned plans to list in New York.

FedEx Doubles Flights to China Increasing Market Leadership
Monday October 18, 11:59 am ET

MEMPHIS, Tenn.--(BUSINESS WIRE)--Oct. 18, 2004--FedEx Express, an operating unit of FedEx Corp., was today awarded 12 additional weekly flights to China by the U.S. Department of Transportation, bringing its total to 23. The additional authority will allow FedEx Express to operate more all-cargo flights to and from China than any other U.S. airline.

FedEx Express will use six of its awarded frequencies to provide a new westbound round-the-world service connecting the U.S. to Shanghai with stops in Europe and other points in Asia using an MD-11 freighter.

The other six frequencies, available in March 2005, will be used to establish an eastbound round-the-world service connecting the U.S., Europe, Japan and India to Shanghai, Shenzhen, and other points in Asia using an MD-11 aircraft.

Looking ahead to 2006, FedEx has asked the DOT for six additional weekly flights (bringing the total of weekly flight to 29) to include Guangzhou into its global and regional express networks.

Currently, FedEx Express operates 11 weekly flights to China, serving Shanghai, Beijing and Shenzhen. Today, FedEx offers the only direct flight between the United States and the Pearl River Delta, via its daily flight from Shenzhen.

"FedEx already provides access to more cities across China and throughout the Asia Pacific region than any other global express provider. These additional frequencies will enhance our capabilities and strengthen our service offerings between China and North America, Europe and Japan," said Michael L. Ducker, executive vice president, International for FedEx Express. "Without question, China is restructuring the economic landscape of the entire world, and FedEx has been a part of that growth since beginning service there 20 years ago."

In the quarter ended Aug. 31, revenue from international operations increased 25 percent, fueled by strong growth in Asia, including a 52 percent increase in China export volume.

"This year, approximately $60 billion worth of goods will leave China by air and another $61 billion worth of goods will enter China by air. Over the last three years, U.S. exports to China have grown by 75 percent, making the United States second only to Japan as China's top trading partner. In fact, in April 2002 FedEx became one of the first U.S. cargo air carriers to establish direct service between Japan and China," Ducker said.

FedEx is committed to educating small and mid-sized businesses about the benefits of international commerce, particularly to and from China. FedEx was recently chosen by the U.S. Department of Commerce to provide small business customers with the knowledge and tools needed to begin international shipping.

FedEx is also working with the U.S. Chamber of Commerce on a series of educational seminars about doing business in China to promote export opportunities and ensure the growth and competitiveness of small and mid-sized companies in the international arena.

About FedEx in China

FedEx entered China in 1984 and, since that time, has expanded its guaranteed service to cover more than 220 cities across the country with plans to add 100 additional cities over the next few years. Customers in China have access to a full portfolio of FedEx services including the latest pick-up times, fast and efficient delivery and electronic customs clearance. In December, Shanghai became the headquarters for FedEx in China, employing more than 1,900 people.

No worries, China

CLIVE DORMAN
30 October 2004
The Age

The long-predicted boom in air travel between Australia and China is finally happening. After a series of setbacks - from the Tiananmen Square massacre in Beijing in 1989 to the SARS epidemic in 2002 and economic crises in between - liberalisation by Australia and China of their air services agreement has tens of thousands of Chinese visitors coming to Australia.

Once there was only a twice-a-week Beijing-Guangzhou-Melbourne-Sydney milk run, operated only by the Chinese state-owned carrier Air China. Now there is fierce four-way competition between Beijing-based Air China, Guangzhou-based China Southern, Shanghai-based China Eastern and Qantas, which will soon resume flying the Sydney-Shanghai route three times a week after several interruptions caused by one or other of the region's crises.

Some travel industry officials believe that by next decade there will be as many Chinese visitors to Australia as there are from America and Europe.

About 80 per cent of the airline seats coming in from China are now filled by Chinese, but the number of Australians visiting China is also on the rise.

At the moment all services from Melbourne to China are via Sydney bu next month China Eastern will begin north bound non-stop flights from Melbourne to Shanghai. (Air China, China Southern and China Eastern all fly non-stop from either Guangzhou or Shanghai to Melbourne on the southbound journey.)

By the middle of next year there will be as many as 3000 new weekly seats between Melbourne and the Chinas (Hong Kong and the mainland) as a result of air treaty liberalisation.

Industry officials believe it's only a matter of time before the routing of flights from Melbourne to China via Sydney disappears as more and more go direct to their destinations.

It's ironic and disappointing that the airline that has grown to become China's biggest, China Southern, is the smallest player in the Australian market behind China Eastern and Air China.

It's disappointing because even when China Southern goes daily to Australia from December, Melbourne will continue to get only two services a week (with the northbound trip via Sydney).

Yet China Southern is the best-placed of all the local carriers to move traffic in and out of China, in the same way that United Airlines has the advantage at Los Angeles because of its vast US domestic network.

For a start, China Southern's hub in Guangzhou (the old Canton), just over the fence from Hong Kong, is amazing. The new $4 billion airport, 30 kilometres east of the city, is being ramped up to take up to 80 million passengers a year by the end of this decade, making it the third-biggest airport on the planet. (So it should be, as Guangdong province, of which Guangzhou is the capital, accounts for a quarter of China's annual economic output!)

It's also perfectly positioned geographically to take flights from Australia. Not only is it the closest landfall from Down Under, but China Southern's huge local network enables seamless connections to virtually every important destination in the country, from Beijing in the north, to Chengdu and Chongqing in the west and Sanya (China's emerging beach holiday getaway on Hainan Island) in the south. China Southern even flies to Lhasa, Tibet, in the Himalayas.

China Southern says the existing four services a week from Australia arrive in Guangzhou in time to make up to 100 daily domestic connecting flights.

Trying to do the same thing via Shanghai further north can add hours to the trip, if the connection is possible at all. And it's difficult via Hong Kong, which has only a small and relatively infrequent intra-China network operated by Cathay Pacific and the local carrier, Dragonair.

However, there's another task that all the Chinese carriers will be able to perform with increasing frequency and convenience in the next few years: flying Australian travellers on to Europe. China Southern, for example, already operates regular services from Guangzhou to Paris and Amsterdam.

Sunday October 31, 8:57 PM
Boeing, Airbus, Chinese start-ups to slug it out at China air show
Kyodo

Aircraft giants Boeing Co. and Airbus S.A.S. will vie with reemerging Russian competitors this week at an international air show here for the expanding pot of money in China's growing aviation and aerospace markets, participants said Sunday.
Boeing will show off its entire commercial product line, including a rudder co-developed with China's AVIC-1 for its next-generation 7E7 Dreamliner jet.

Airbus is here to talk with the Chinese about customer service and technical assistance.

A group of three major Russian companies including Tupolev will attend the fifth China International Aviation and Aerospace Exhibition to tell China they want to keep up their 40-year business relationship.

"We attach a lot of importance to our relationship with China," said Alexei Didenko, marketing director with Aviaexport PLC, a leading exporter of Russian passenger and cargo aircraft.

China's commercial air fleet includes about 30 Russian planes plus some 300 helicopters, Didenko said. More belong to Boeing and Airbus. Chinese start-ups such as AVIC-1 and AVIC-2, engine makers such as Rolls Royce and GE Transportation are putting forward their best at the show as well.

The Civil Aviation Administration of China is urging more foreigners to sign contracts with Chinese firms to help the industry grow to earn money and adopt technology that could solve problems in personnel training, infrastructure and management, administration vice minister Gao Hongfeng said at a pre-exhibition forum Sunday.

The administration also plans to relax laws on approval for operating domestic flights, he said.

Chinese airlines carried 84.25 million passengers in 2002, up 9 percent over 2001, the English-language China Daily reported. About 46.67 million people flew on Chinese airlines in the first half of 2004, according to the Civil Aviation Administration of China.

Fifty new airports are slated to be built throughout China over the coming four years.

At the exhibition, eight signing ceremonies are set for the next two days, and some of the 120 exhibitors from 30 countries say they are looking for more deals.

"(The air show) has now developed into an important platform for Sino-foreign aviation and aerospace industries to exchange demonstrations of technology and commercial cooperation," a statement from the show says.

Chinese firms signed 90 deals with foreign firms as of the end of 2003.

Money is out in space, too, especially for Japanese companies that might want to make video equipment for China's expected unmanned moon launch, said Richard Fisher, vice president of the Washington-based International Assessment and Strategy Center.

"The story here is that the aerospace industry is floating in money. The aerospace industry in China has finally come out of its hole," Fisher said.

"Watch the moon probe. They need to take pictures. The Japanese should be interested in that," he said.

China will launch its second manned spaceship next year, state media reported Sunday. The first one went up in October 2003.

China's State Council launched the air show in 1995 as a venue to show and sell aviation equipment.

China was at the time busy building airports and acquiring aircraft for a fast-growing commercial flight market backed by rising household incomes.

The show takes place in Zhuhai, a southern coastal city an hour's ferry ride from Hong Kong, roughly every two years.

About 100 pieces of military hardware will go on display this year as well, the official Xinhua News Agency reported.

The state-owned China Aerospace Science and Industry Corp. will show short-range and surface-to-air missiles including a short-range, low-altitude, portable air defense missile designed to hit helicopters, the news agency said.

Daily flight stunt performances by the British, Chinese, French and Russians will also join this year's show, as will the final round of the "Beautiful Angel International Aviation Stewardess" beauty contest.

Domestic airlines will fly in the face of low-cost rivals - Air China chairman shrugs off foreign competition and overcapacity concerns

Annette Chiu in Zhuhai
1 November 2004
South China Morning Post

Major domestic airlines will continue to dominate the mainland market despite challenges posed by emerging low-cost operators, a top executive from Air China said yesterday.

"Low-cost carriers won't be a threat to major airlines [Air China, China Southern and China Eastern Airlines]. Our positions are well set," said Air China chairman Li Jiaxiang on the sidelines of the International Aviation and Aerospace Forum in Zhuhai - a month before the company's initial public offering.

Mr Li spoke of the trend of deregulation in China's aviation industry before the opening ceremony of Air Show China.

The liberalisation of the mainland's aviation regime means greater access for foreign carriers as well as privately owned airlines being given room to flourish.

Chengdu-based Yinglian Airlines (or Eagle United Airlines) and Shanghai-based China Spring Airlines have been given the green light to start hiring crew and leasing aircraft for domestic operations. Both carriers are expected to launch their inaugural flights as early as next year.

Guangdong China Travel Service is also teaming up with Singapore aircraft trader and retrofitting firm A-Sonic Aerospace and Hong Kong-owned China Xpress to set up a low-cost carrier based in Guangzhou.

"I don't think it's appropriate to identify the newcomers as low-cost carriers. They are not the only operators which look to lower operating costs. Every airline is working hard on minimising cost," Mr Li said.

Air China welcomed the opportunity to go head to head against international airlines, he said.

"The main thing is whether you have the confidence to compete in the [international] market ... We do," said Mr Li.

He added that the company had invested 700 million yuan to upgrade inflight equipment to improve services.

Overcapacity, which occurred in the 1990s, was not a concern, Mr Li said, as carriers in general were more rational in drawing up fleet expansion plans. "I believe the growth of passenger demand will outpace the increase in capacity."

Although he declined to comment on the imminent initial public offering, Mr Li said Cathay Pacific Airways' stated intention to buy a 9.9 per cent stake in Air China when the shares went on the block "will enhance co-operation and we can complement each other".

Monday November 1, 6:14 PM
Airbus Plans Engineering Center In China '05
By Ruby Chan

HONG KONG (Dow Jones)--Airbus said Monday it plans to set up an engineering center in China next year.

The center, which is expected to employ 200 people by end-2008, will work on a range of the Toulouse-based aircraft maker's design and manufacturing requirements.

"We would like to see China being in a position to have a share of at least 10% in such a future Airbus program for new generation aircraft," said Airbus Senior Vice President and Airbus China President Laurence Barron in a statement.

The only other similar Airbus facility outside Europe was created a few years ago in the U.S.

Airbus is a joint venture between European Aeronautic Defence and Space Co. and BAE Systems PLC.

Barron said the company expects to deliver 40 aircraft to Chinese airlines this year, and more than 50 in 2005.

Airbus delivered 19 in 2002 and 39 in 2003.

By the end of September, 257 Airbus aircraft were in service in China, Hong Kong and Macau, accounting for over 30% of the total fleet in service, compared with 29 Airbus aircraft in 1995. Barron expects 300 Airbus aircraft to be in service with Chinese airlines by the end of next year.

"Our goal is to take at least a 50% market share in China, as we have been doing in other parts of the world," he said.

Separately, Airbus said Hainan Airlines Co., the fourth largest airline group in China, has signed a contract to buy eight A319s for between US$52.4 million and US$65.3 million each, becoming a new customer of Airbus.

The aircraft, scheduled for delivery from 2005 to 2007, will be mainly deployed on medium- and short-haul routes, with operational bases in Beijing, Xian and Haikou.

Posted: 02 November 2004 1702 hrs

China plans to triple Shanghai air traffic by 2015

SHANGHAI: China expects passenger numbers at Shanghai's two airports to triple to 100 million a year by 2015 from the current 35 million, state press reported.

The government also envisages a tripling of air freight to seven million tonnes by 2015, with three new runways being added to the city's Pudong International Airport.

The airport, one of two in the eastern metropolis of nearly 17 million people, currently has just one runway which is running near full capacity, the Shanghai Morning Post said.

A second airstrip is set to go into operation in the first half of 2005, the newspaper said.

In April, China said it would fully open Shanghai's two airports to all domestic airlines starting next year and would allow more foreign carriers to fly there.

The World Tourism Organization has predicted China could be attracting more visitors than any other country in the world within the next decade.

In preparation, a giant new freight and passenger hub -- Baiyun International Airport -- was opened in southern Guangdong province in August while Beijing Capital International Airport is undergoing its own major expansion program.

- AFP

Airbus Confirms Chinese Order For Eight A319 Jets
Tuesday November 2, 12:33 PM EST

PARIS (Dow Jones)--European commercial aircraft manufacturer Airbus confirmed Tuesday that it has received an order for eight of its single-aisle A319 jets from Hainan Airlines Co. Ltd. of China.

The aircraft will be mainly deployed on medium- and short-haul routes, with operational bases in Beijing, Xi'an and Haikou, Airbus said. The aircraft are scheduled for delivery from 2005 to 2007.

Airbus signed a memorandum of understanding on the A319 order with the Chinese authorities earlier this year, but the identity of the buyer wasn't disclosed at that time.

Based on Airbus's catalog prices, the Hainan order is worth about $470 million, although airlines typically are offered discounts for bulk purchases.

It is the first addition of Airbus jets to Hainan's fleets.

Additional Information from Airbus Press Release

"We are extremely happy to see that the fast-growing Hainan Airlines has become a new customer of Airbus, which marks a significant breakthrough of our business in China," said Airbus President and CEO Noël Forgeard. "Hainan Airlines has established a good reputation for quality service for its passengers. We are confident that the features of the new A319s will give further impetus to the development of the carrier.”

The A319 is a member of the A320 Family, which consists of the A318, A319, A320 and A321, the world's fastest selling single-aisle family. The A320 Family features the most modern design with the widest and most comfortable cabin in its class. More than 3,250 Airbus A320 Family aircraft have been ordered to date, of which over 2,250 have been delivered. The Airbus A320 Family has more than 175 customers and operators to its credit.

Founded in 1993, Hainan Airlines is the fourth largest airline group in China, with more than 100 aircraft operating on over 500 domestic and regional routes.

Airbus, Boeing see China as the future

Plane makers position to capture fastest-growing aviation market

VICKI KWONG; Bloomberg News
Tuesday, November 2nd, 2004 12:01 AM (PST)

Airbus SAS announced plans to buy more aircraft parts in China and The Boeing Co. said it’s optimistic about Chinese orders for its 7E7 airliners, underscoring the duel between the world’s largest plane makers over the fastest-growing aviation market.

Airbus, the world’s largest commercial aircraft maker, will double parts purchases in China to $120 million by 2010, Laurence Barron, China president for the Toulouse, France-based company, said at a news briefing at an international air show in Zhuhai, southern China. Airbus will also set up an engineering plant in China next year, Barron said.

“Airbus would probably like to secure more orders from the growing China aviation industry, and setting up operations there may help,” said Peter Hilton, a transport analyst with Credit Suisse First Boston in Hong Kong.

Airbus and Chicago-based Boeing are jostling to win aircraft orders in a market of 1.3 billion people who are turning to travel as economic growth of about 9 percent a year boosts incomes. The boom is likely to spur purchases of 2,300 aircraft worth $180 billion in the next two decades, Boeing forecasts.

The U.S. company, overtaken by Airbus in commercial-aircraft deliveries last year, is counting on its 7E7 Dreamliner to regain market share. Globally, it has received 82 commitments for the plane, which can seat between 200 and 300 passengers, Randy Tinseth, director of product and services marketing, said at a press conference in Zhuhai.

So far, no sales of the 7E7 have been announced in China.

“There’s a great deal of interest in the aircraft among Chinese carriers,” Tinseth said at a news conference in Zhuhai. “We are very optimistic about our sales potential in China.”

Tinseth declined to comment on a report in the air show’s official magazine that Boeing expects to get Chinese orders for as many as 80 of the planes, a figure that would take the company past a year-end goal of 200 sales for the 7E7, the report said. The magazine didn’t say where it got the information.

Boeing secured its sixth order for the Dreamliner last week from U.S. start-up carrier Primaris Airlines, which said it plans to buy 20 of the planes. The first order came in July from All Nippon Airways Co., Asia’s second-largest carrier, which committed to buy 40. Air New Zealand Ltd., Vietnam Airlines Corp., Italy’s Blue Panorama and the U.K.’s First Choice Holidays Plc have also ordered the aircraft.

Boeing is betting airlines will choose smaller aircraft such as the 7E7 for direct international flights, rather than large aircraft that fly to big cities and leave passengers to take connecting flights to their final destinations.

The number of Chinese traveling abroad will expand almost 13 percent annually to about 100 million in 2020, according to the World Tourism Organization, a United Nations agency. The projected growth rate is triple that in the rest of the world.

China’s air-travel industry might carry a record 120 million passengers this year, the government-controlled China Daily newspaper reported today, citing a vice minister of the General Administration of Civil Aviation of China.

The traffic isn’t one way: China will become the world’s top destination by 2020, surpassing France, Spain, Italy and the U.S., the United Nations agency said. China hosted 71 million overseas travelers in the first eight months of this year.

Airbus’ goal is to take “at least 50 percent market share in China, as we have been doing in other parts of the world,” Barron said at the press briefing, without giving a time frame. The briefing took place as the Fifth China International Aviation and Aerospace Exhibition opened in Zhuhai.

The European plane maker had 257 aircraft operating in China, Hong Kong and Macau at the end of September, representing about 30 percent of the China market, according to Airbus figures. Its share has grown from 7 percent in 1995. Boeing said it had 483 of 774 jetliners flying in China in September, or 62 percent of the market.

Chinese-made parts are already used in more than half of Airbus’s fleet, Barron said. The planned engineering center, which might employ about 200 people by 2008, could be located in Beijing, Barron added.

Airbus, which this month won orders for six aircraft from Air China, has yet to win an order in the country for its 550-seat A380 aircraft.

Boeing, for its part, is banking on China to help it achieve a goal of 500 worldwide orders for 7E7s by the time the plane first flies in 2007.

Like Airbus, Boeing is also expecting to buy more aircraft parts in China. Cumulative purchases of parts made in China are likely to triple to $1.5 billion by 2010, David Wang, the company’s head of China operations, said.

Boeing vs Airbus at China air show
2 November 2004
Xinhua News Agency

ZHUHAI, Nov. 2 (Xinhua) -- Boeing and Airbus, the world's two aviation giants competing for China's market, started their rivalry the first day of China air show at the press conference.

Boeing said it will introduce its 217-seat 7E7 Dreamliner to China. The company held that future aviation market needs airliners with 200 to 400 seats, and demand for super airplanes would be relatively low.

But Airbus, which is trying to promote its 555-seat A380, attacked Boeing's prediction by saying that it is not that super airliners have no market, but that the Boeing Company cannot made products that suiting the need.

Airbus believed that its 555-seat A380, the larger, more efficient and more economical airliner, would better serve China's need for air transportation.

However, both companies are optimistic of China's aviation market.

"China's aviation market enjoys a bright future," said David Wang, president of Boeing China. He predicted that China will need 2,300, or 200 billion US dollars worth of new airliners in the next 20 years as the annual growth rate of China's aviation industry will top the world by maintaining 7.3 percent.

According to Airbus' prediction, China will recruit at least 1,300 airplanes for its arterial lines in the coming 20 years.

Competition between the two giants in China continues to increase. Both are promoting their sales by introducing technology to China and enhancing their purchase from China.

November 01 2004

Hainan Airlines to buy three Boeing jets with bank loan

Hainan Airlines based in China's southernmost island province has ordered three Boeing 737-800 jets with a 1.1 billion yuan (132.5 million US dollars) loan granted by a domestic bank, company sources have confirmed.

The airline company signed a pact with the Shanxi branch of the Industrial and Commercial Bank of China (ICBC) Monday in Taiyuan, capital of north China's Shanxi Province, said Chen Feng, president of Hainan Airlines Group, China's fourth-largest carrier.

The three jets will be delivered in July, August and September, 2005, to their end user Shanxi Airlines, one of the four members the Hainan Airlines Group, said Chen.

Shanxi Airlines has presently two Boeing 737-400s and three 737-700s in its fleet.

The new Boeing 737-800 is equipped with a state-of-the-art engine that is more powerful yet less noisy compared with earlier generation products. It has also larger vertical and horizontal empennages that enhance safety, and a larger passenger cabin and luggage compartment.

Chen said the purchase of the new aircraft would be an essential step to help Shanxi Airlines play a larger role in the regional air passenger transport market in north China.

Hainan Airlines Group, which consists of Hainan Airlines, China Xinhua Airlines, Shanxi Airlines and Chang'an Airlines, is China's fourth largest carrier, following the "big three" flag carriers of Air China, China Eastern Airlines and China Southern Airlines. It has a fleet of more than 80 airplanes and operates 484 domestic and international routes.

Source: Xinhua

Boeing's Forecast for Demand From China Remains Robust

By Charles Hutzler
2 November 2004
The Wall Street Journal Europe

ZHUHAI, China -- Boeing Co. is forecasting continued robust demand from China for new aircraft.

In a market forecast released yesterday, Boeing said China will need nearly 2,300 new planes by 2023 to satisfy demand for passenger and cargo services. The number represents a dip from an estimate of nearly 2,400 planes Boeing issued a year ago, a revision Boeing executive Randy Tinseth said was partly derived from factoring in the plunge in air travel during last year's outbreak of severe acute respiratory syndrome.

Nevertheless, the robust forecast shows how crucial China is becoming to major aircraft makers and the rest of a commercial aviation industry that is just beginning to recover from the global economic downturn and the impact of the 2001 terrorism attacks in the U.S.

U.S.-based Boeing's chief rival, Europe's Airbus, received an order for eight A319s yesterday from Hainan Airlines, China's fourth-largest carrier, for between $52.4 million and $65.3 million each (41 million euros to 51.1 million euros).

Boeing said demand for 2,300 new planes, if it materializes, would represent $183 billion in sales -- about 9% of expected world-wide demand during the next 20 years. China's current fleet is 777 planes.

The pull of China is drawing not only aviation giants like Boeing and Airbus but also all sizes of suppliers of equipment and services. To meet burgeoning demand for passenger and cargo services, China plans to open 100 new airports for commercial use by 2010, from 145 airports currently. Air New Zealand, which has been working with small carrier Xiamen Airlines for a decade, is trying to increase Chinese customers for its flight- and pilot-training programs.

"You have to be in this market," Martin Lin, China representative for Rockwell Collins Inc., said while attending China's biannual air show in the southern city of Zhuhai. Mr. Lin said Rockwell Collins's revenue from sales of communications, aviation-electronics and other equipment in China is growing 10% a year.

While predictions for heady growth are generally uniform -- based on the expectation that China's overall economy will grow 5.5% a year or better for the next 20 years -- Boeing and Airbus have different interpretations of the types of planes the Chinese market will need. Airbus, in a forecast issued last year, sees demand for large aircraft of 400 or more seats totaling 105 units, nearly twice that forecast by Boeing.

Boeing, on the other hand, believes the lion's share of new orders will be for single-aisle planes of between 100 and 300 seats. The company's forecasts once routinely predicted demand for larger planes, but those sales often never came to pass, said Mr. Tinseth, Boeing's director of product and services marketing for commercial airplanes.

While more than half of China's current fleet is composed of Boeing aircraft, Airbus appears to be gaining ground this year.

Shanghai seeks regional hub status
Wednesday, November 3, 2004 Posted: 0600 GMT (1400 HKT)

SHANGHAI, China (AP) -- Shanghai plans to expand its airports and increase access for domestic airlines as it maneuvers to become a regional hub for air travel, the government has said.

Pudong International Airport, the newer and bigger of Shanghai's two airports, will add three new runways to its current one, the city said in a statement posted on its Web site.

Construction of a second runway will be speeded up since the existing runway is already operating at almost full capacity and many airlines are anxious to add flights to the city, it said.

The Civil Aviation Administration of China, the country's aviation regulator, has thrown its support behind the plan to build the city of 20 million into a regional hub, CAAC head Yang Yuanyuan said in a statement released Monday.

'The authority will actively study and set policies to support the development of an aviation hub,' Yang said.

Competition to attract more airlines and travelers has been heating up around the region. Hong Kong faces a challenge from its south China rival, Guangzhou Baiyun International Airport, and the Kansai International Airport in western Japan and Incheon International Airport in South Korea are also vying for regional hub status.

Hoping to boost Shanghai's hub chances, the CAAC earlier allowed Shanghai an exception to its rules on access to allow all Chinese carriers to offer flights originating from city.

Shanghai expects to have 100 million air travelers annually by 2015. That's almost triple the 35 million who have traveled through Pudong International and the city's older Hongqiao Airport so far this year, Shanghai Daily said. Hongqiao is now used exclusively for domestic flights.

The amount of airfreight moving through Pudong and Hongqiao is also expected to triple by 2015 to 7 million tons, the newspaper cited officials meeting in Beijing as saying.

Shanghai is banking on China's growing cachet as a business and leisure travel destination.

Nationwide, annual growth in passenger travel is expected to average 9.3% from 2004 to 2023, China Aviation Industrial Group I said in a forecast released Tuesday at an air show being held in the southern city of Zhuhai.

Although Pudong's runways are nearing capacity, its spacious terminals, opened only in October 1999 along the coast of the city's newly developed eastern district, still seem quite empty.

Many domestic travelers prefer to fly through Hongqiao, which is closer and has easier connections to the older downtown area.

Domestic carriers China Eastern Airlines (CEA) and Shanghai Airlines are the only airlines based in Shanghai, which has been seeking to boost its international competitiveness and raise its profile as China's commercial capital.

Aviation reforms to open up; the market; Rapid change
needed to meet demands of booming economy, says top
official

Agence France-Presse and Annette Chiu in Zhuhai
1 November 2004
South China Morning Post

Beijing will promote rapid reforms of the aviation
industry to meet the demands of China's economy, a
senior official said yesterday at an aerospace forum
in Zhuhai.

Gao Hongfeng, vice-minister of the General
Administration for Civil Aviation of China, said the
mainland would be opening up the market as part of its
terms of entering the World Trade Organisation.

"The direction has been set. We will firmly open the
market at an appropriate pace," Mr Gao said.

Last year, the total turnover of the aviation sector
reached 17.1 billion tonne-kilometres, passengers
numbered 87.59 million and cargo transport amounted to
2.19 million tonnes, with average annual increases of
18 per cent, 16 per cent and 16 per cent respectively.

Mr Gao said the rate of these increases was three
times higher than those recorded globally.

Although China's aviation sector market was the
fastest-growing in the world, Mr Gao said the quality
of its civil aviation development was comparatively
low.

"At present, personnel training, infrastructure and
management cannot match the fast growth of air
transport, and this problem is becoming more and more
serious," he said ahead of the opening of the Fifth
China International Aviation and Aerospace Exhibition.


"There is still an imbalance in air transport between
eastern and western regions {hellip} regulations are
not complete; air transport enterprises still do not
have strong international competitiveness."

Beijing planned to relax restrictions on the approval
of domestic routes and encourage investment -
including from abroad. Authorities would support
domestic airlines forging alliances with foreign
companies, boost training of technicians and encourage
local companies to recruit talent from overseas.

"It can be expected that in the coming 10 years,
China's civil aviation industry will make substantial
progress," he said.

The Zhuhai show, held every two years, is the only
such event on the mainland. This year it attracted
delegations from 32 countries and regions, and has
drawn big global players including Boeing and Airbus.
The development of domestic aircraft was the focus.

State-owned China Aviation Industry Corporation I will
announce details today about the ARJ21-700 - which
will become the first large commercial jetliner
produced in China. Shanghai Airlines and Shandong
Airlines have placed orders of the 70-seater regional
jetliner which are expected to be delivered by 2008.

The other highlight of the show will be the debut
appearance of a new short-range, ultra-low-altitude
portable missile.

China forecasts jump in demand for smaller aircraft

Ralph Jennings
31 October 2004
Kyodo News

China will need 1,000 more smaller aircraft over the
next two decades as the government pushes for an
expansion of regional routes to hard-to-serve airports
around the country, aviation industry officials said
Sunday.

The need for extra planes comes as China tries to find
smaller planes for its 130 airports, 80 of which serve
fewer than 200 passengers a day, said participants at
the International Aviation and Aerospace Forum, which
comes a day ahead of a weeklong air show here in
Zhuhai in southern Guangdong Province.

Planes in demand have capacities of 30 to 120 seats,
said Liao Quanwang, deputy director of the Aviation
Industry Development Research Center of China. He said
the percentage of regional flights would grow from 2.0
to 8.4 percent at some point over the coming two
decades.

China's state-run National Defense Science, Technology
and Industry Commission is pushing for development of
regional routes, commission officials said. About 10
percent of China's fleet consists of smaller aircraft,
compared with the international average of 30 percent.

Bigger planes can land in smaller, less often used
airports, such as those in Yunnan Province and the
Xinjiang Uygur Autonomous Region, but there is not
enough demand to justify them, said Fernando Grau,
airline analysis manager with Embraer, a Brazilian
aircraft maker working with a Chinese partner to build
more than 600 smaller aircraft for China.

Another 50 airports are due to open in China over the
next four years.

''A lot of new airports are being built, but there are
not enough flights,'' Grau said. ''That's probably the
main drive for this (need for aircraft).''

Regional routes around China are a major theme for the
fifth China International Aviation and Aerospace
Exhibition over the next week.

Some of the 120 exhibition booths, 16 press
conferences and eight signing ceremonies scheduled so
far for the coming week will cover deals for smaller
aircraft.

A high-profile headliner is China's three-month-old
ARJ21-700 regional jet, which is due do begin test
flights next year. China hopes to get European and
U.S. government approvals so it can sell the jet
overseas, according to the Civil Aviation
Administration of China Journal in October.

''China has made airplanes before, but this is the
first commercial Western-style type, and they want to
sell it overseas,'' said Andy Solem, China president
of GE Transportation, which made the ARJ21's engines.

Friday November 5, 2004
UPS Launches 12 Additional Weekly Flights to China

SHANGHAI, Nov 5 Asia Pulse - Cargo and package carrier United Parcel Service (UPS) has launched the first of 12 new flights to China with MD-11 service to Shanghai this week. The new flights will triple the current service from six to 18 flights a week.

The additional services follow on the heels of 129 per cent growth in China export volume in the third quarter for UPS, the company said in a statement.

UPS has been serving China since 1988 and is the only U.S. cargo carrier providing daily, non-stop service to and from the United States and China, which started when the company was first granted China aviation rights in 2001.

Next year, UPS will inaugurate the first-ever non-stop service between the U.S. and Guangzhou in the fast-growing Pearl River Delta.

UPS recently also launched an additional six weekly flights between Hong Kong and its intra-Asia hub in Clark Field, the Philippines.

Air China gets approval to acquire stake in Shandong Airlines/Shandong parent
4 November 2004

BEIJING (AFX) - Air China has received approval to acquire stakes in both Shandong Airlines Co Ltd and its parent, Shandong Aviation Group from China National Aviation Holding Co, Air China's parent.

Shandong Airlines said in a statement that China National Aviation was allowed the transfer of a 22.8 pct stake it held in Shandong Airline and a 48 pct stake in Shandong Aviation to Air China.

The statement gave no financial details of the transfer.

Air China will become the largest shareholder in Shandong Aviation and the second largest shareholder in Shandong Airlines after the transaction is completed.

Earlier this year, China National Aviation bought a 22.8 pct stake in Shandong Airlines from Shandong Aviation for 166 mln yuan, and a 42 pct stake in Shandong Aviation from a local government-controlled investment firm for 289.99 mln.

Air China comprises all airline operations of China National Aviation, a company launched in October 2002 as part of an industry restructuring plan which saw the carrier merge with Southwest Airlines and China National Aviation Corp.

China Eastern Seeks Investors To Strengthen Airline's Position

By Bruce Stanley
8 November 2004
The Asian Wall Street Journal

SHANGHAI -- China Eastern Airlines, one of China's three largest carriers, expressed surprise at the planned investment by onetime ally Cathay Pacific Airways in a Beijing-based rival and said it hoped to find a strategic investor of its own.

Li Fenghua, who became China Eastern's chairman last month, acknowledged Friday that his company needed to improve the quality of its service and the punctuality of its flights. He said the right foreign investor could help transform it into a stronger competitor.

"I'm not satisfied with the current situation," Mr. Li said. "It's my own wish to seek overseas investors as well as outstanding Chinese companies that could involve themselves in the management of China Eastern."

China Eastern emerged as one of China's biggest airlines, in number of passengers carried, after the government restructured the country's aviation industry last year by consolidating several smaller carriers into a trio of dominant players. Based in Shanghai, China Eastern splits its business about evenly between overseas and domestic routes. Its main rivals are China Southern Airlines, based in the southern city of Guangzhou, and Air China, headquartered in Beijing.

Until recently, China Eastern had a close relationship with Hong Kong's Cathay Pacific, which helped to train some of its managers and employees through personnel exchanges. Relations between the two cooled after China Eastern withheld support for Cathay's efforts to win Beijing's approval for flights on the profitable route between Hong Kong and Shanghai. Cathay embarked on a new partnership last month when it announced plans to buy a 9.9% stake in Air China once China's flagship carrier has an initial public offering later this year or in early 2005.

Cathay's planned investment in Air China "was a little bit unexpected," said Mr. Li, who is also president of his airline's holding company, China Eastern Air Holding Co. "But I can understand the ambition and emotion of Cathay Pacific to involve itself in the Chinese market."

Although China Eastern and Air China serve different regional markets within China, Mr. Li acknowledged that "there could be some threat" from an Air China invigorated by Cathay's financial strength and management expertise.

China Eastern had a 21% increase in domestic-passenger traffic in 2003 and forecasts a 15% rise for this year. With the domestic market going strong, Mr. Li believes foreign airlines might offer his company attractive terms to gain a foothold in Shanghai. He declined to name a preferred investor, but the secretary of China Eastern's board, Luo Zhuping, suggested that candidates might include Singapore Airlines, Japan Airlines and All Nippon Airways.

As for joining a global airline alliance, the matter has been complicated by Cathay Pacific's pact with Air China, Mr. Luo said. For example, American Airlines, with which China Eastern has a code-sharing arrangement, belongs to the oneworld alliance -- but so does Cathay. That makes it harder for China Eastern to parlay its partnership with American into membership in a group that includes its powerful new rival.

Given such knots and stiff competition on flights from Shanghai to Los Angeles and some other overseas destinations, the carrier right now is focusing on growing inside China. China Eastern says it aims to boost its share of flights in and out of Shanghai to 40% from about 35%.

China Eastern Air Oct Passenger Numbers Rise 1.8% On Year

HONG KONG (Dow Jones)--China Eastern Airlines Corp. (CEA), one of China's major state-controlled airlines, said Wednesday passenger numbers rose 1.8% on year in October to 1.65 million, after falling 7.9% in September.

The rebound in passenger numbers in October was led by a surge in international passengers, which rose 56% from a year earlier to 285,960.

The passenger load factor - the percentage of seats that were filled - was 65% in October, up from 57% in September.

The freight load factor also rose, reaching 59% in October from 57% in September.

China Southern says Oct passengers up 11.4 pct

HONG KONG, Nov 10 (Reuters) - Passenger traffic at China Southern Airlines Co Ltd jumped 11.4 percent in October from the same month last year, thanks to an improving global economy, the country's largest carrier said on Wednesday.

China Southern , which is based in the southern metropolis of Guangzhou, said it carried 2.67 million people in October, compared with 2.33 million passengers in September.

The airline said it filled 72.8 percent of available seats.

BA eyes more China flights but no new destinations

LONDON, Nov 10 (Reuters) - British Airways Plc , Europe's second-biggest airline, said on Wednesday it planned to increase flights on existing routes in China but had no immediate plans to fly to new destinations in the country.

BA also said it was eyeing new services to South Africa and India as it seeks new business amid tough competition in the European short-haul sector and a crowded North Atlantic market.

BA's commercial director Martin George said the airline planned to increase existing services to Hong Kong and Beijing but had no immediate plans to fly into Shanghai.

"Whether we go anywhere else in China we will wait and see," George told a Foreign Press Association lunch.

China and Britain signed a new air services agreement earlier this year, paving the way for increased airline traffic between the two nations.

India and South Africa also hold potential for the carrier. Chief Executive Rod Eddington will appear before a special hearing of the UK aviation regulator on Thursday to argue for a generous slice of new air services between India and Britain.

The South African and British governments will also hold talks later this month aimed at increasing air traffic between the two countries.

BA posted a 23 percent rise in second-quarter operating profit on Tuesday but said high fuel costs and lower ticket prices would continue to weigh on its performance this year.

George told reporters the airline's future profit growth would rely on further cost cuts, but said he did not expect revenue growth to decline next year from the 2-3 percent expected in the current financial year to March 2005.

"Profits in the short to medium term will come from increasing focus on costs," he said, citing potential savings from more on-line bookings and a reduction in staff sick leave.

The Standard
November 10, 2004

ANA EYES STAKE IN AIR CHINA SHARE SALE
Dennis Eng

All Nippon Airways (ANA), which eight months ago sealed a codeshare agreement with Air China for flights between Japan and the mainland, has hinted it may consider investing in the Chinese flag carrier's initial share sale.

This is a delicate issue,'' ANA executive vice-president of corporate planning and member of the board of directors Keisuke Okada said. But we are in a position to make a study.'' Beijing-based Air China is gearing up for an overseas listing and expects its shares to be trading on the Hong Kong stock exchange by the end of this year.

Hong Kong's Cathay Pacific Airways has already indicated it will acquire a 9.9 per cent stake in the mainland airline.

The addition of ANA as a strategic investor makes sense, since Air China is expected to become a Star Alliance member, alongside carriers such as ANA, United Airlines and Lufthansa. We are close to Air China,'' Okada said.

Tie-ups with rival mainland carriers China Eastern Airlines and China Southern Airlines may be difficult, he said, aligned as they are with different aviation networks.

China Southern has opted for SkyTeam, which includes Delta Air Lines, Korean Air, Alitalia and others. China Eastern is set to join the Oneworld network, of which Cathay Pacific is a member.

In a bid to serve the lucrative Beijing and Shanghai routes, international and regional carriers have courted mainland airlines with codeshare deals and sought to integrate them into global alliances.

In October 2003, ANA teamed up with Air China and Shanghai Airlines to allow its passengers to board Air China flights out of Beijing to Chengdu, Chongqing, Hangzhou, Nanjing and Changchun. ANA passengers can fly from Shanghai to Shenzhen, Guangzhou and Xiangfan on Shanghai Airlines.

Under ANA's Air China codeshare deal in March of this year, the airlines jointly operate 105 weekly flights between the Chinese capital, Shanghai and Hangzhou and the Japanese hubs of Tokyo and Osaka. ANA flies 56 times a week from Tokyo's Narita airport and Osaka's Kansai airport to Beijing and Shanghai. Air China operates 39 weekly flights on these routes. The remaining flights are between Hangzhou and Tokyo and Osaka. Shanghai is where we are concentrating on in China,'' ANA director of corporate planning Nakai Takeshi said.

Star Alliance founding member Lufthansa and Air China also codeshare, partner in each other's frequent flier programmes and recently agreed to extend co-operation on their joint Beijing-based Aircraft Maintenance and Engineering Corp.

Chinese Airlines Transport 50% More Passengers Jan-Septp

BEIJING, Nov 12 Asia Pulse - Chinese airlines transported 90.64 million passengers in the January to September period of this year, an on-year surge of 50 per cent, according to the General Administration of Civil Aviation of China (CAAC).

"Passenger transport in the whole year is expected to exceed the benchmark of 100 million," said a CAAC official. "It's a clearindicator that air travel is turning into a means of mass transport."

The official said cargo shipping rose 30 per cent in the first nine months.

By the end of 2003, Chinese airlines operated 1,155 scheduled flight routes, including 194 international routes to 72 cities in 32 countries.

ASIA PULSE

I think China Eastern bought it on to themselves when they refuse to support Cathay's bid for flying to Shanghai. Now that Cathay gained a share in Air China its almost irrelevant for China E. to joing Oneworld and now Air China is going to join Staralliance and China Southern with Skyteam, so China East. is stuck.

Air China's profit surges ahead of dual listing; Air China expects strong profits
listings Hui Yuk-min, Nichole Chan and Anette Jönsson
13 November 2004
South China Morning Post

Air China, which aims to raise up to US$1 billion in a dual listing in Hong Kong and London, expects its net profit to surge more than 13 times to at least 2.3 billion yuan this year, company sources say.

However, this impressive growth figure must be seen in context. It comes from an exceptionally low base because of last year's Sars outbreak and investors should not anticipate such growth in the coming years.

The mainland's flagship carrier saw its net profit slump 68 per cent to 156 million yuan last year as people stopped travelling because of the contagious disease.

Air China will start pre-marketing its US$800 million to US$1 billion initial public offering next week, with the international offering set to take place between November 25 and December 9, according to a market source.

The price is expected to be fixed on December 9. The stock will begin trading in Hong Kong and London on December 16.

The company would sell 2.8 billion shares, or about 30 per cent of the total issued share capital, to finance aircraft purchases and to repay debt, the market source said.

Ten per cent of the global offering, which is led by China Capital International and Merrill Lynch, is earmarked for Hong Kong retail investors and about 10 per cent for a public offer without listing for Japanese investors.

Based on the number of shares to be offered, the carrier is aiming for a market valuation of US$2.67 billion to US$3.33 billion, which corresponds to a multiple of 9.6 to 12 times this year's earnings.

This will put its valuation in line with peers such as China Eastern Airlines and Cathay Pacific Airways, which trade at about 11 to 12 times this year's earnings.

But market watchers expect strong demand for Air China, which has already secured a commitment from Cathay Pacific to buy a 9.9 per cent stake - about one-third of the issue size.

"Air China has chosen a very good time to come to the market. With fuel prices coming down and a possible appreciation of the yuan, there is going to be a lot of buying interest," one source said.

Mainland carriers, such as Air China, China Southern Airlines and China Eastern, will benefit from the widely expected appreciation of the yuan because they have large amounts of debt denominated in US dollars.

Being an international long-haul carrier, Air China is also poised to benefit from the explosive growth of China's tourism industry.

The UN World Tourism Organisation forecast that the number of outbound Chinese travellers will reach 100 million a year by 2020.

"I think Air China will be able to draw good demand as long as it is offered at a reasonable price. There is ample liquidity in the market looking to buy China stocks on expectation of a yuan appreciation," one fund manager said.

Its offering timetable coincides with those of the Housing Authority's $25 billion real estate investment trust and mainland telecommunications equipment firm ZTE Corp's US$350 million offering.

All three are aiming to start trading by the middle of next month before fund managers take a break for the holidays.

China to buy 10 Embraer jets-Brazilian minister

BRASILIA, Brazil, Nov 12 (Reuters) - China's government has guaranteed the purchase in 2005 of at least 10 aircraft from the Chinese unit of Brazil's Embraer for some $200 million, Brazilian Trade Minister Luiz Fernando Furlan said on Friday.

Empresa Brasileira de Aeronautica (Embraer), which set up a joint venture with China Aviation Industry Corporation II (AVIC II) in China in 2003, was worried it had no orders in the Asian country for next year, he said.


"The concern that a company that manufactures planes cannot work without an outlook for orders was passed onto the Chinese government," Furlan told reporters after an event for visiting Chinese president Hu Jintao.

"The Chinese government then made a commitment so that next year there would be production and delivery of at least 10 planes, giving Embraer the ability to plan production and assembly in China," he said.

The minister did not specify who would buy the planes or what model aircraft, although the Chinese venture currently only produces Embraer's 50-seat ERJ 145 regional jet.

A spokesman at Embraer, the world's fourth-largest aircraft manufacturer, declined comment on what the minister had said.

The company's Chinese venture, Embraer Harbin Aircraft Industry Company Limited, has one order for six ERJ 145 jets from China Southern Airlines Co Ltd. , four of which had already been delivered, the spokesman said.

(Additional reporting by Nicholas Winning)

Friday November 12, 4:25 PM
Capital Airport of China Enjoys Rise in Annual Passenger Traffic

BEIJING, Nov 12 Asia Pulse - The annual passenger traffic of the Capital Airport of China topped 20 million person times in 2000, and it is expected to reach 34 million person times this year, predicted Wang Jiadong, General Manager of the Beijing Capital International Airport Co., Ltd.

The current passenger traffic of the Chinese capital airport has far surpassed its designed capacity, and it may face bigger pressure in the future, said the general manager.

Wang stated that the Capital Airport is aiming to become a compound hub airport in the Asia-Pacific region and an ace airport management company in the world, and rank among the world's top 10 airports in terms of passenger traffic by 2020.

The Capital Airport of China had handled more than 30 million passengers by November 9, 2004. It is the first time for a Chinese airport to have an annual passenger traffic exceeding 30 million person times. Capital Airport is expected to rank among the world's top 20 busiest airports.

Shipping by a Thread By Ian Putzger
Airlines & Clothes
BY IAN PUTZGER
4 October 2004
Air Cargo World

Is the fabric of the United States economic future being woven in China? The decades-old quota system that set limits on the amount of pants, shirts and other garments entering the U.S. is about to disappear at the end of this year and that has the American apparel industry - and those who handle shipping the clothing - bracing for a torrent of garments from the world's main factory floor.

"Everybody is positioning themselves for a big influx from China," says Steve Akre, chairman of Portland, Ore.-based forwarder OIA Global Logistics.

Gene Boyer, chief executive of U-Freight America in San Francisco, believes that China's role as a garment exporter will grow as a lot of production looks set to migrate there. "At some point, the bulk will be produced in China. It could be as much as 80 percent," he says.

U.S. textile and clothing makers certainly subscribe to that vision. In early September, they indicated that they would mount a massive lobbying campaign to persuade Washington to impose strict limits on a large range of garment imports from China. The National Textile Association sees a threat of market disruption and is leaning on the Bush administration for relief from what they fear will be the wholesale shift of garment business across the Pacific.

With freighters already chasing other manufacturers to China, air cargo operators are more cautious than that. Garment manufacturing has created intricate trading patterns around the world, after all, and growing traffic through Vietnam, Indonesia, Turkey and India won't necessarily rush to China.

"People are not going to put all eggs in one basket," says Akre.

Volker Hoebelt, air freight manager for Europe of German forwarder Birkart Globistics, has seen a growing trend to source garments from Eastern Europe. Indeed, many forwarders say the garment makers are going increasingly global and becoming increasingly important to air operators.

Akre is bullish about Vietnam. This summer his company signed an agreement with the Ministry of Industry to establish a joint venture company that will deal with all the textile manufacturing outfits owned by the government. In addition to garment exports, this will involve handling inbound raw material flows and customs clearance. Further down the road, Akre intends to expand the scope to footwear and subsequently to electronics.

Still, the foundation of anyone's growth forecast for garments, as with many commodities, clearly is on China.

The demise of the U.S. quota system is expected to trigger a scramble for air freight capacity out of China as the country's garment exports to the U.S. rise. Air freight space out of China is already tight, so an additional surge in exports is going to increase this pressure, Akre warns.

"The real challenge for textiles on space is the explosion of electronics production in China, which traditionally move at higher rates," he says.

As a long-standing logistics provider to sports footwear manufacturer Nike, OIA has some clout to get its hands on space.

"We have the luxury of cargo going into China, quite a substantial amount, which helps to get capacity coming out," Akre says. Still, a sizeable chunk of his traffic will leave China by boat to South Korea.

The Korean airlines have built up a lively sea-air business with traffic reaching Seoul Incheon International Airport by boat from cities in China as far afield as Shanghai to be transferred to their flights across the Pacific. With the maritime leg taking about one day, this is an attractive alternative to direct flights out of Shanghai, Akre says. At normal times the rates for the slower route are a dollar per kilo cheaper; during peak times they can be $2 to $3 lower.

The capacity crunch out of China may be exacerbated by importers trying to gain advantage from price cuts after the quotas are gone.

Boyer has picked up signals that some importers are holding back their orders for now, apparently willing to forego some sales before Christmas so they can take advantage of lower prices in January.

The airline industry is preparing for capacity through China in coming months as U.S. integrated giants FedEx and UPS along with Northwest Airlines and new entrant Polar Air Cargo prepare to add flights under the new liberalized air services treaty between the United States and China.

According to a study commissioned by FedEx, the use of air freight to move apparel is on the rise.

On behalf of the integrator, a market research company interviewed 254 executives who attended the 2004 Magic Marketplace in Las Vegas, which is billed as the largest trade conference worldwide of the apparel industry.

More than 90 percent of the respondents agreed that "mass customization" - defined as the production of high-quality, custom-made clothing at competitive prices with fast delivery - will play an important role in the next five years. Once reserved for the high-end clientele, this strategy is putting higher emphasis on faster delivery, shorter transit times and improved in-transit visibility, the study claims.

One finding of the study was that the time it takes to get a product to the customer from order to delivery, ranked second in respondents' priorities, named by 31.1 percent as essential. More than a quarter cited inventory management as having the most impact on their ability to remain or be competitive, underscoring the importance of logistics in the equation.

However, in a seeming contradiction, shippers were not explicitly in favor of air freight. In fact, Hoebelt says his practical experience is that they try to avoid air shipping as much as possible. Air cargo usually does not feature in contracts between logistics firms and their customers from the apparel camp.

On the other hand, air freight is a regular mode of transportation for the garment industry.

Boyer estimates that 35 to 40 percent of fashion products move by air. So, even though it is not in the contract and his customers try to avoid it, Hoebelt has to secure air freight capacity for this traffic, based on experience. As the leading German textile logistics firm, Birkart has been involved in this segment for years, which gives the company about a third of its 35 percent of its volume. Still, predictions can be difficult, Hoebelt says.

Despite customers' reluctance to embrace air freight, several carriers and forwarders have extended their efforts at specific services tailored to the special needs of commodity segments such as the garment industry. Garment-on-hanger is a significant cargo business at carriers such as American Airlines.

Birkart teamed up with Lufthansa Cargo to develop a special product for the garment market.

Unveiled in June, Fashion-X-Press is an integrated, door-to-door service aimed at shipping samples, collections, follow-up orders, exhibition items and small-volume fashion shipments. Garments are put into special containers at origin, prior to delivery to the airline, and move on hangers throughout the entire journey.

The service is based on Lufthansa's td.Flash express service, but the airline's involvement goes beyond offering guaranteed space. For one thing, the carrier helps market of the service. Moreover, the agreement between the two partners envisages an element of risk sharing. While Birkart has to generate certain volumes, there is flexibility for capacity use on a day-to-day basis.

"Today I may have only one small container, tomorrow maybe two LD-7s. I can't do that if I use Lufthansa today and Cargolux tomorrow," Hoebelt says.

Fashion-X-Press kicked off with four Asian points - Hong Kong, Shanghai, Singapore and Jakarta. "We looked at 15 countries. Where do we have strengths in both directions? Where can we start relatively easily? Vietnam was attractive, but the scanner there was only 1.5 meters high, so you can't put a full unit through it," says Hoebelt.

He said the service will be extended to other points in the near future. Italy, France, Japan and Korea top the list.

As part of its policy to develop services tailored to the needs of specific industry segments, Lufthansa has been pushing into fashion logistics. According to Helga Eder, manager of corporate communications, much of this traffic moves over the carrier's cd.Solutions offering, which was introduced last November.

Hoebelt envisages more services geared to garment customers' needs that Birkart can develop in tandem with its airline partner. With other carriers, on the other hand, there are no special services aimed at this market segment. Cooperation with those concentrates on capacity agreements.

For most forwarders, the efforts at moving garments come on the ground and encompass their own brands of tailored handling.

Savino del Bene, a forwarder that counts up to one quarter percent of its business from fashion logistics between Italy and the United States, has no special programs with airlines.

"Within our capacity arrangements with the airlines, we give priority to high fashion," says Giorgio Laccona, chief executive for North America.

On the other hand, the forwarder has a number of special programs for its clientele from the fashion sector, as do many competitors. Birkart has devised its own special container to move garments on hangars. The Air Textainer, which entered the scene in 1998, is a unit with a solid wooden pallet base, a framework using metal bars and four layers of cardboard for the sides and the top. The cardboard is strong enough to withstand a knife but allows air to get through to the garments.

Birkart is using some 2,000 such containers. They come in four sizes and can be used for ocean as well as air transportation, Hoebelt says.

The principle of moving garments on hangars has been around since the 1960s, but companies are still refining the practice. Bellville Rodair International, a Canadian-British logistics venture, uses its own patented G-O-H containers for air freight and recently expanded their use to the domestic market for an overnight service."

Some of our big clients were losing out on weekend sales. If they trucked their product to Vancouver, Calgary and Edmonton, shipments that left Toronto on Monday, Tuesday would arrive by the weekend; stuff that left on Wednesday wouldn't get there till the following Monday," says Jeff Cullen, chief executive for North America.

After an eight-month pilot, the service was officially launched at the end of August.

Compton, Calif.-based Target Logistic Services developed a "dockside to customer" program, which moves goods that arrive late at a United States port in a variety of modes and time windows, including overnight by air. Apparel importers are one of the primary target groups of the service.

It is no coincidence that logistics packages for apparel imports increasingly stress the domestic leg of the journey. The trend towards bypassing distribution centers is also occurring in the garment industry, Akre says. "We're seeing more of that. We ship more to the door."

Boyer finds that it's predominantly smaller companies that tend to send their traffic straight to the retail outlets. "It depends on the size and the infrastructure of the retail company. Many still have distribution centers," he says.

FEDEX TO TURN SHANGHAI INTO CARGO CENTRE
By Chen Qide
27 September 2004
China Daily

SHANGHAI: US FedEx plans to turn the city into its intercontinental cargo centre in the Asia-Pacific region by adding more flights to its air routes from
China to the US, Europe and the Asia-Pacific hub in Subic Bay in the Philippines.

The plans are based on the awarding by the US Department of Transportation (DOT) to FedEx of 12 new frequencies, resulting from successful negotiations on rights of navigation between the Chinese and the US governments.

"We are looking forward to providing our customers with even more comprehensive service to and from China," said Eddy Chan, head of FedEx Express China.

Today, FedEx operates 11 weekly flights to Shanghai, Beijing and Shenzhen.

When finalized, the award will provide FedEx with 23 weekly flights to China, more than doubling its current number of weekly flights and preserving its
leadership position as the largest express carrier in China, FedEx said in a statement.

"If finalized, six new flights will begin this year and another six in 2005," Chan said.

Based on the Sino-US negotiations, the US will add 111 weekly flights to its air routes to China between 2004 and 2010. At present, there are only 54 weekly flights on Sino-US air routes.

"Adding new flights to China should be attributed to the express carrier's booming business, with its volume increasing by 52 per cent in its first fiscal
quarter (June-August) of 2004, compared with the same period last year," Chan said.

"With more flights, we have enough power to compete with our rivals," he said.

Reports on FedEx's global business in the first fiscal quarter this year showed that its revenue grew by 23 per cent over the same period last year to reach
US$6.98 billion.

Its net income came to US$330 million, an increase of 157 per cent over the same period last year.

Next year, it will operate four daily flights from Shanghai to the US, Europe and its Asia-Pacific hub.

"But it's not enough and we need more flights to meet the growing demand," Chan said.

The FedEx statement said the company has filed a request with the DOT for six additional frequencies connecting Guangzhou to Anchorage.

"Our expanded service would expand our shipment capacity in Southern China," he said.

Meanwhile, FedEx will further enlarge its delivery network in China, which now covers 223 cities with Beijing, Shanghai and Shenzhen as their centres, by
adding 100 more cities in the next five years.

"As the Chinese economy further expands, FedEx will possibly consider setting up bases in Southwest China and Northwest China," he said.

FedEx has also ordered eight A380s from Airbus. The first will fly on a Shanghai route when it is delivered in 2008.

The A380 aircraft can carry 150 tons of cargo, 50 per cent more than Boeing 747 planes and double the capacity of MD-11 carriers.

Chan said that FedEx will invest US$2.1 billion next year to expand its business.

"A considerable amount of the investment will be spent in China, because it has become our major market," he said.

In another development, FedEx has signed a memorandum of understanding with the Guangzhou Baiyun International Airport Company on the possibility of
establishing a hub operation there.

"The project aims to relocate its Asia-Pacific hub in Subic Bay to Guangzhou if it is finalized," Chan said.

He said FedEx is confident of the project and a decision would be made in the next 12 months.

The Baiyun Airport is suitable because from there it is only four to five hours' journey to any major city in Asia.

Southern in 16.9b yuan airlines deal
November 15, 2004

China Southern Airlines - the nation's largest carrier - will buy 16.9 billion yuan (HK$15.9 billion) worth of assets from its parent to expand flights as demand for air travel increases.

The Guangzhou-based company will buy China Southern Airlines Northern and Xinjiang Airlines from its parent, it told the Shanghai stock exchange. China Southern is also listed in New York and Hong Kong.

China Southern's parent bought Northern and Xinjiang Airlines in 2002 as part of an industry organisation.

China Southern said the deal will enable the company to start services to northeast and northwest China.

Shenyang-based Northern operates on 106 domestic routes while Urumqi-based Xinjiang Airlines has 42.

Rising urban incomes are boosting air travel in China, the world's fastest-growing aviation market.

Passenger traffic within China is forecast to grow at an annual 8.1 per cent in the next two decades, compared with a global average of 5.2 per cent, according to Boeing, the world's second-largest maker of commercial aircraft.

China Southern will take over about 15 billion yuan of debt from Northern and Xinjiang Airlines.

Excluding the debt, the company will pay 1.9 billion yuan to its parent. This will be funded by one billion yuan worth of short-term dollar loans from commercial banks, and another 897 million yuan in cash from the company.

China Southern said the purchases will increase its fleet to 214 planes from 139 at the end of June.

The plan needs approval at a shareholders' meeting scheduled for December 31.

Northern forecast a profit of 123 million yuan this year and Xinjiang Airlines predicts 4.3 million yuan net income, based on domestic accounting standards.

China Southern shares rose 4.9 per cent to HK$3.225 on Friday and have lost 7.9 per cent this year.

BLOOMBERG, DOW JONES NEWSWIRES

United Airlines eyes Guangzhou-San Francisco flights
Dennis Eng, Hong Kong Standard

United Airlines, undergoing court-supervised reorganisation after filing for Chapter 11 bankruptcy protection in 2002, hopes to begin daily flights between Guangzhou and San Francisco by next March.

"We are waiting to hear from the United States government. We should get a response soon, within the next four weeks," said Mark Russell, the airline's managing director for Pacific South.

If cleared, United will fly seven times each week to Guangzhou.

The flights will transit through Tokyo's Narita airport in the first year of operation.

Starting from the second year, the airline will a offer non-stop service between Guangzhou and San Francisco. United already serves Beijing and Shanghai with 28 weekly frequencies to and from San Francisco and Chicago.

The routes are being served by Boeing 777 aircraft which hold more than 300 passengers.

Although United's fleet of 54 Boeing 777s is the world's largest, it has already returned five stored 777s to creditors as part of its Chapter 11 reorganisation. More aircraft could leave or join the fleet depending on the success of the restructuring.

United is particularly upbeat about China, especially with national flag carrier Air China expected to join the Star Alliance global aviation network of which United is a member. United and Air China, which is seeking an overseas listing, already have agreements to codeshare and partner in each other's frequent flier programmes.

"Star Alliance would like to see a Chinese carrier join as a member. But it is now a matter for Air China to decide," Russell said.

Elsewhere in the region, United will inaugurate a daily service to Ho Chi Minh City on December 10, exactly three years after the US normalised trade relations with Vietnam.

The Boeing 747-400 flight is an extension of the existing San Francisco to Hong Kong service; it will remain overnight in Ho Chi Minh City and start the return leg the next morning.

"The 747 is a large aircraft to fly to Ho Chi Minh but we expect a lot of the initial business to come from the US rather than from Hong Kong," general manager for sales and marketing Wyn Li said.

13 November 2004 / 02:10 AM

Lawmakers back American Airlines bid for China flights
15 November 2004

FORT WORTH, Texas (AP) - American Airlines says more than one-fourth of the U.S. Senate, about one-sixth of the U.S. House and seven governors support its effort to fly to China.

American, the largest U.S. carrier, is seeking approval from the U.S. Department of Transportation for rights on the Chicago-Shanghai route. Other U.S. carriers, facing cutthroat competition on domestic routes, are also lobbying for access to Asia.

Delta Air Lines Inc. is seeking approval for Atlanta-Beijing service, and Houston-based Continental Airlines Inc. wants to fly between Newark, N.J., and Beijing and Shanghai. United and Northwest already fly between the United States and China.

Fort Worth-based American, a unit of AMR Corp., wants to begin flying between Chicago and Shanghai on May 1, using 236-seat Boeing 777 jets. The airline has also been lining up support from local officials and businesses in Illinois.

Will Ris, American's chief lobbyist, said awarding the route to American would help travelers and shippers by increasing competition in the Chinese air-service market.

American has a relatively low profile on trans-Pacific routes, but company officials have said they want to increase their stake in the market. American already offers nonstop flights from Dallas-Fort Worth International Airport to Japan and has said it will expand that service next April.

Newsday
November 16, 2004, Tuesday

Five airlines compete to fly between U.S., China
James Bernstein

Austin Travel of Melville last month booked eight people on flights to China -- double the number in October 2003.

Hidden Treasure Tours of Long Beach says it now books from all over the country "hundreds of passengers a year" on trips there.

Airlines have picked up on travelers' growing interest in going to China. Five carriers -- including North American Airlines, a small airline based at Kennedy Airport -- are competing to win federal approval for the right to fly between the United States and China. A winner is to be selected soon.

"I see a wave" of travel to China in the next few years, Jeff Austin, Austin's president, said yesterday. "People have done Hong Kong and Taipei. They see this as a new opportunity."

So do the troubled airlines, many of whom are seeking more international business as they battle low-cost carriers in the domestic market. At present, the only passenger carriers allowed to fly to China are United Airlines and Northwest Airlines.

Bill Mosley, a spokesman for the federal Department of Transportation, said the agency will soon select another carrier that will also fly the China route.

"We had been hearing from carriers for a long time that the China agreement was too restrictive," said Mosley, referring to the two-airline limit.

The DOT is to select one new carrier that will be allowed to make seven weekly round-trip flights between the United States and China, beginning in March 2005.

The federal agency is also to select another passenger airline, or a cargo airline, to make the flights, beginning in March 2006.

Delta Air Lines, American Airlines, Hawaiian Airlines, Continental Airlines and North American are the bidders. They are to submit final proposals next week. Yesterday, American said its bid is supported by 25 U.S. senators, 80 House members, and the governors of seven states. Airline experts noted that one reason American has received such support may be that the carrier is based in Texas, President George W. Bush's home state.

Dan McKinnon, president of North American, said he believed his airline offered a unique alternative.

"We are the low-cost carrier in the deal," McKinnon said. "One-third of the passengers in the U.S. today are flying low-cost carriers. Why shouldn't a low-cost carrier fly" to China "instead of one of the big guys?"

Wednesday November 17, 4:46 PM
China's Civil Aviation Market Enters High-Speed Growth Period

SHANGHAI, Nov 17 Asia Pulse - Thanks to rapid economic development and opening up to the outside world, China's civil aviation market is developing fast with great demand, a CAAC leading official said.

Speaking at the 57th Annual International Aviation Safety Meeting opened in Shanghai on November 16, Wang Chanshun, CAAC deputy director, said air cargo and passenger transportation in the country is on the rise.

In the first 10 months this year, total transport turnover, passenger traffic and cargo and postal freight volume grew by 40.4 per cent, 44.9 per cent and 28.9 per cent respectively year-on-year, and the passenger volume had exceeded 100 million.

He said the country's civil aviation in 2003 registered a total transport turnover of 17.1 billion ton/kilometer, passenger volume of 87.59 million person times and cargo and postal volume of 2.19 million tons. Its growth rate was three times that of the world average.

At present, China's civil aviation possesses 1,227 planes of various kinds, including 740 freight planes, Wang said, adding that China operated 1,198 regular flight routes with a total length of 2.37 million kilometers in 2003.

Finnair to Launch Direct Flights to Guangzhou, September 2005
Finnair Press Release

Finnair will launch direct flights from Helsinki to Guangzhou (Canton) in China on September 2, 2005. Finnair will fly to the city three times a week. Guangzhou is located in southern China on the Pearl River Delta and is one of the country’s most important economic centres.

Guangzhou is located in the economically significant Guangdong Province through which passes a third of Chinese exports. Guangzhou is also part of the Pearl River Delta (PRD) economic and cultural powerhouse, which also includes Hong Kong and Macao. With a population of some 40 million, the PRD is one of the largest and fastest developing industrial areas in the world.

Finnair operates to ultramodern Guangzhou airport which opened this year. The airport is the first in China to offer an especially built transit area for passengers. The airport has excellent connections to other parts of mainland China as well as Hong Kong and Macao.

Finnair flies to Guangzhou from Helsinki on Tuesdays, Fridays and Sundays with flights from Guangzhou to Helsinki on Mondays, Wednesdays and Saturdays. Flight time between the two cities is approximately ten hours. Finnair offers excellent connections from these flights to the rest of its extensive European network.

Guangzhou, or Canton as it is also known, is also a historically significant city which has held on to its traditional Chinese ambiance. The town has attracted foreign trade for the past 2000 years. Guangzhou has a population of about ten million.

Mainland driving up jet fuel demand
Karen Teo, Hong Kong Standard
November 22, 2004

The mainland is driving global aviation fuel demand growth as rapid economic progress continues to see an upsurge in air travel. However, demand may not be as phenomenal next year as traffic figures return to normal and economic growth stabilises, according to the latest industry estimates.

The growth in China's aviation fuel demand is important because the mainland imports about 40 per cent of its needs. Most of that is consumed by the two largest and busiest airports, Beijing Capital International and Shanghai International.

Imports are expected to top 2.59 million tons (56,800 barrels per day) this year. This represents a record 30 per cent growth from a year ago. The normal growth rate should be in the region of 10 to 12 per cent.

The unusual spike in imports this year is largely attributed to a recovery in international traffic figures from the impact of Sars, which resulted in a plunge in worldwide travel demand, particularly in China and other Asian countries.

The International Air Transport Association (IATA) says international air traffic could grow by 14 per centin 2004, compared to flat growth in 2003. International passenger traffic for the nine months to September grew 17.7 per cent over the same period in 2003, while cargo posted gains of 14.1 per cent, according to IATA.

Reflecting improved travel demand this year, China's aviation industry is expected to report its best profits since 1997 as the domestic passenger load factor has reached 70 per cent for the first time since 1996, according to the Shenzhen Daily.

The sector, which was hit by a slowdown during the Sars epidemic last year, reported a loss of 5 billion yuan (HK$4.7 billion) in 2003.

"This year has seen incredible growth in air travel generally - 90 million passengers January to Sep-tember, representing 50 per cent year-on-year growth - and so naturally China's [aviation fuel] procurement has been strong this year as well," says John Casey of the Internal Audit and Investor Relations at Singapore-based China Aviation Oil.

The company is responsible for almost all of the mainland's aviation fuel imports.

However, it is unlikely that 2005 will replicate this growth, according to China Aviation's estimates.

Aviation fuel imports are unlikely to grow at a 30 per cent rate next year, given that 2004 already saw phenomenal growth coupled with the fact that the country's GDP is expected to slow down.

China Aviation estimates that a 10 per cent rise in aviation fuel imports to 2.8 million tons in 2005 is probable, assuming a GDP growth rate of 7 per cent.

The Asia-Pacific Economic Co-operation forum estimates that China's GDP will grow at 8.5 per cent next year, compared to 9.1 per cent in 2003.

LSG Sky Chefs Seeking Joint Ventures in China

BEIJING, Nov 22 Asia Pulse - Eyeing an expansion in its share of the booming Chinese market, LSG Sky Chefs, which enjoys a 30 per cent share of the world's airline catering business, is seeking joint ventures at China's 30 busiest airports.

The company, which is part of the Germany-based LSG Lufthansa Service Holdings AG, runs joint ventures in eight Chinese mainland cities, including Beijing, Shanghai, Chengdu in western China's Sichuan Province, and Sanya in southern China's Hainan Province.

Serving 120,000 meals a day and currently generating annual revenue of about US$2.2 billion on the mainland, it has an 11 per cent of the share of the market, said H.K. Cheung, chief operating officer for LSG Sky Chefs' Asia-Pacific operation.

Its share is much higher for international flights from the mainland airports it serves, he said.

LSG Sky Chefs sees immense potential in the Chinese market, with more overseas visitors coming for the 2008 Beijing Olympic Games and the World Expo in Shanghai in 2010, Cheung said.

China's air travel industry will also be stimulated by the growing middle class and the flourishing domestic tourism sector, he said.

China is forecast to become the No 1 tourist destination in the world and the fourth largest source of tourists by 2020, according to the World Tourism Organization.

The number of overseas tourists grew by 21 per cent year-on-year and by 11 per cent over 2002 to 79.9 million in the first nine months of this year, according to official statistics.

The number of air passengers of Chinese airlines, which topped 90.64 million in the first nine months, is expected to set a record of more than 100 million this year.

The latest venture of LSG Sky Chefs was launched at the new Guangzhou Baiyun International Airport in Guangzhou, Guangdong Province in South China last week. LSG Asia GmbH, parent of LSG Sky Chefs, owns 30 per cent of the venture called Guangzhou Baiyun International Airport LSG Sky Chefs Co, the airport company holds 65 per cent and Beijing Hua Zhuo Investment Management Co the remaining 5 per cent.

Covering 12,000 square metres and involving 150 million yuan (US$18.07 million) of investment, the Guangzhou venture has the capacity to cook 18,000 meals a day. It is serving about 6,000 meals for 50 flights a day at present.

(XIC)

Struggling Airlines Compete Fiercely for China Routes
By JEREMY W. PETERS


Five United States airlines are fighting for a business opportunity not seen in a decade and a half: flights to China.


Over the next 15 months, the authorities in Beijing will allow two daily round trips from a major American city to Shanghai or another large city in China. They have also approved, in principle, additional routes for both passengers and cargo, and those flights would be phased in over five years.


The first of the new routes is to begin in March 2005, the next one added in 2006, and the Department of Transportation will determine whether this second route will be for a passenger or cargo flight.


One or two routes to China do not sound like a big source of revenue for an airline, but this represents a growth market for United States airlines struggling with troubled balance sheets and increased domestic competition from low-cost carriers.


Since 1987, only two passenger airlines, Northwest and United, have flown to China, because Beijing restricts air traffic from overseas. But in July, the Transportation Department and the Civil Aviation Administration of China negotiated an agreement that would allow the number of flights between the two countries to increase nearly fivefold over the next five years, to 249 a week.


Almost as soon as the agreement was announced, the United States airlines started lining up. Three long-haul carriers - Delta, American and Continental - are competing against two smaller carriers, Hawaiian Airlines and North American Airlines. United hopes to expand its business in the China market, and so has also submitted a bid with the Transportation Department to fly the new route. Northwest has filed for only a future cargo route and not for passenger flights.


The airlines are to submit their final bids today to the Transportation Department, which will then choose the carriers for the two new trans-Pacific routes.


Unlike the airline market in the United States, where intense competition is making it difficult for most of the large carriers to be profitable, routes to Asia make money.


"China is obviously a big and growing market," said D. Scott Yohe, Delta's senior vice president for government affairs.


Since 2000, passenger traffic between the United States and China has increased 53 percent, to 185,000 passengers, in the first five months of this year, according to the Bureau of Transportation Statistics.


"There's no question it's an important route for any airline," said Dan McKinnon, the founder and president of North American Airlines, which is based at Kennedy International Airport in New York. "It doesn't matter if it's American, Delta or Continental. It's important for all of us."


Delta projected that it would get an overall economic boost of about $400 million annually if it added service to China, though some analysts called that optimistic. Hawaiian Airlines said the state of Hawaii could expect about $11 million more in tax revenue from it during the first year of service to China.


American, while indicating that it did not have hard figures for revenue, said its plan would be to fly 136,000 passengers to China the first year. "In the long run, we think this is a very profitable area of the world to be in," said William Ris, American's senior vice president for government affairs.


The competing airlines have started campaigns to win the routes. American, the largest carrier, outlines its case on a separate Web site, http://flyaatochina.com, and lists more than 100 members of Congress who have sent letters of support to Transportation Secretary Norman Y. Mineta.


Delta has set up a similar section on its Web site where people can e-mail a letter to Mr. Mineta that says in part, "Delta's proposal to provide daily nonstop service from Atlanta to Beijing in March 2006 is the best proposal." A company spokeswoman said Delta supporters had sent at least 9,000 messages.


Since September, the airlines have been trading jabs in thousands of pages of legal filings with the Transportation Department.


Hawaiian Airlines said in its filing, "Chicago simply cannot adequately serve those passengers most in need of new service to China, those in the western United States."


That was a jab at American Airlines, which would fly to China from Chicago. Then, Hawaiian took aim at Delta and Continental, declaring, "Atlanta, much like Newark, is simply not a good choice for this service."


Delta has proposed flying to China from its hub in Atlanta, and Continental from Newark.


Of North American Airlines, Hawaiian added, "Little can be said that provides a hint that North American understands the market or has the background or capability to serve the market."


In its filing, North American was more subdued. "Two legacy carriers and the three major alliances already serve China," it said. "Given this fact, why shouldn't the public have access to a low-fare carrier to China?"

Pacific Life Insurance compensates for air crash victims

www.chinaview.cn 2004-11-22 22:30:54

BEIJING, Nov. 22 (Xinhuanet) -- The Shanghai-based Pacific Life Insurance Co. Ltd., announced Monday that it would grant a total of 900,000 yuan (108,696 US dollars) for the six crew members killed in the air crash in northwest China's Baotou.

The Pacific Life Insurance Co. Ltd said the crew members took out a collective insurance policy with the company.

The three pilots received a compensation of 200,000 yuan each, two stewards and one bodyguard for 100,000 each, according to the company, adding that the compensation has been given to the victims' family Monday morning.

Wang Guoliang, board chairman of the Pacific Life Assurance Co.Ltd., said the company has opened a telephone hotline numbered 95500 and will compensate for any passenger killed in the air crash as long as he/she is confirmed as the client of the company.

A 50-seat branch-line jet CRJ-200, with 47 passengers and six crew members aboard, crashed shortly after take-off en route from Baotou, Inner Mongolia Autonomous Region, to Shanghai, about 8 a.m.Sunday. The flight was operated by the Yunnan Branch Co., a unit of China Eastern Airlines.

All of the people aboard and a man on the ground were killed. The remains of 54 victims have been found.

Huang Yi, a senior official with the State Administration of Work Safety, said cause of the air crash was under tense investigation.

Copyright 2004 Financial Times Information
Il Sole 24 Ore
November 19, 2004

Italy's Blue Panorama to Fly to China

The Italian airline Blue Panorama has announced that it is to offer direct flights from Milan Malpensa, via Venice, to Shanghai from November 30. In so doing, the carrier will end the monopoly which Air China has held on flights between Italy and China since the Italian flagship airline, Alitalia, abandoned its own services on the route. Alitalia's flights to the People's Republic will, moreover, resume on December 2, when it begins flying between Milan Malpensa and Shanghai three times a week.

Blue Panorama, which also flys twice-weekly to Bangkok from Malpensa and Bologna, is now negotiating a commercial agreement with the Chinese carrier China Eastern. For 2004, it expects to show turnover of 138m euros.

Tuesday November 23, 5:34 AM
Bombardier shares fall as China grounds jets

MONTREAL (Reuters) - Shares of Bombardier Inc. fell 7.4 percent Monday as China grounded the company's locally operated jets, a day after 54 people died in the crash of one of its regional airliners in Inner Mongolia.

Bombardier's class B shares fell 20 Canadian cents, or 7.4 percent, to close at C$2.50 in Toronto Monday, approaching its year low of C$2.43. The stock's year high is C$7.13.

A 50-seat Bombardier CRJ200 operated by China Eastern airlines crashed into a frozen lake seconds after takeoff from Baotou in Inner Mongolia Sunday, killing 53 people on board and one on the ground. The jet was en route to Shanghai.

Horst Huenekin, analyst at Westwind Partners, said it was too early to say what long-term effect the crash might have on Bombardier, the world's third-largest civil aircraft maker, as the investigation will examine a range of issues.

Those include the possibility of pilot error, maintenance of the aircraft, and design of the jet.

China Eastern grounded its five other CRJ200s. China's civil aviation authority ordered other Chinese airlines operating 24 others to ground their Bombardier jets beginning Tuesday for maintenance checks.

"It's purely precautionary and we expect that it will take a couple of days," said Bombardier spokeswoman Sylvie Gauthier.

Bombardier said six Chinese airlines had been operating a total of 30 of its regional jets, including 28 of its 50-seaters and two CRJ700 70-seaters.

Bombardier said it sent an accident response team to the crash site and Canada's transportation safety agency had also dispatched an investigator.

($1=$1.18 Canadian)

Struggling Airlines Compete Fiercely for China Routes
By JEREMY W. PETERS
22 November 2004
The New York Times

Five United States airlines are fighting for a business opportunity not seen in a decade and a half: flights to China.

Over the next 15 months, the authorities in Beijing will allow two daily round trips from a major American city to Shanghai or another large city in China. They have also approved, in principle, additional routes for both passengers and cargo, and those flights would be phased in over five years.

The first of the new routes is to begin in March 2005, the next one added in 2006, and the Department of Transportation will determine whether this second route will be for a passenger or cargo flight.

One or two routes to China do not sound like a big source of revenue for an airline, but this represents a growth market for United States airlines struggling with troubled balance sheets and increased domestic competition from low-cost carriers.

Since 1987, only two passenger airlines, Northwest and United, have flown to China, because Beijing restricts air traffic from overseas. But in July, the Transportation Department and the Civil Aviation Administration of China negotiated an agreement that would allow the number of flights between the two countries to increase nearly fivefold over the next five years, to 249 a week.

Almost as soon as the agreement was announced, the United States airlines started lining up. Three long-haul carriers -- Delta, American and Continental -- are competing against two smaller carriers, Hawaiian Airlines and North American Airlines. United hopes to expand its business in the China market, and so has also submitted a bid with the Transportation Department to fly the new route. Northwest has filed for only a future cargo route and not for passenger flights.

The airlines are to submit their final bids today to the Transportation Department, which will then choose the carriers for the two new trans-Pacific routes.

Unlike the airline market in the United States, where intense competition is making it difficult for most of the large carriers to be profitable, routes to Asia make money.

''China is obviously a big and growing market,'' said D. Scott Yohe, Delta's senior vice president for government affairs.

Since 2000, passenger traffic between the United States and China has increased 53 percent, to 185,000 passengers, in the first five months of this year, according to the Bureau of Transportation Statistics.

''There's no question it's an important route for any airline,'' said Dan McKinnon, the founder and president of North American Airlines, which is based at Kennedy International Airport in New York. ''It doesn't matter if it's American, Delta or Continental. It's important for all of us.''

Delta projected that it would get an overall economic boost of about $400 million annually if it added service to China, though some analysts called that optimistic. Hawaiian Airlines said the state of Hawaii could expect about $11 million more in tax revenue from it during the first year of service to China.

American, while indicating that it did not have hard figures for revenue, said its plan would be to fly 136,000 passengers to China the first year. ''In the long run, we think this is a very profitable area of the world to be in,'' said William Ris, American's senior vice president for government affairs.

The competing airlines have started campaigns to win the routes. American, the largest carrier, outlines its case on a separate Web site, http://flyaatochina.com, and lists more than 100 members of Congress who have sent letters of support to Transportation Secretary Norman Y. Mineta.

Delta has set up a similar section on its Web site where people can e-mail a letter to Mr. Mineta that says in part, ''Delta's proposal to provide daily nonstop service from Atlanta to Beijing in March 2006 is the best proposal.'' A company spokeswoman said Delta supporters had sent at least 9,000 messages.

Since September, the airlines have been trading jabs in thousands of pages of legal filings with the Transportation Department.

Hawaiian Airlines said in its filing, ''Chicago simply cannot adequately serve those passengers most in need of new service to China, those in the western United States.''

That was a jab at American Airlines, which would fly to China from Chicago. Then, Hawaiian took aim at Delta and Continental, declaring, ''Atlanta, much like Newark, is simply not a good choice for this service.''

Delta has proposed flying to China from its hub in Atlanta, and Continental from Newark.

Of North American Airlines, Hawaiian added, ''Little can be said that provides a hint that North American understands the market or has the background or capability to serve the market.''

In its filing, North American was more subdued. ''Two legacy carriers and the three major alliances already serve China,'' it said. ''Given this fact, why shouldn't the public have access to a low-fare carrier to China?''

China's Junyao Group aims to offer scheduled airline service

SHANGHAI, Nov 23 (AFP) -
Junyao Group, a privately-owned mainland Chinese conglomerate involved in aviation, dairy and real estate, has applied to set up a new airline, state press reported Tuesday.

The Shanghai-based company, originally set up by recently deceased entrepreneur Wang Junyao, was the first operator of private chartered flights in China, the Liberation Daily reported.

Junyao, which has total assets of some 3.5 billion yuan (420 million dollars), is awaiting official approval to run regular scheduled flights. Approval is expected by the end of the year, the newspaper said.

The company began flying charter flights from Changsha in central Hunan province to Zhejiang's Wenzhou in 1991.

Company officials were not immediately available for comment.

Junyao will join a growing list of aspiring scheduled airline operators.

Three other chartered carriers -- Aukai, Spring and Eagle United -- have also applied to operate scheduled flight services.

Junyao already owns an 18 percent-stake in Wuhan Airlines, a regional airline controlled by China Eastern Airlines.

Struggling Airlines Compete Fiercely for China Routes '

Uh, I already posted this article yesterday.

Struggling Airlines Compete Fiercely for China Routes
By JEREMY W. PETERS
22 November 2004
The New York Times

Five United States airlines are fighting for a business opportunity not seen in a decade and a half: flights to China.

Over the next 15 months, the authorities in Beijing will allow two daily round trips from a major American city to Shanghai or another large city in China. They have also approved, in principle, additional routes for both passengers and cargo, and those flights would be phased in over five years.

The first of the new routes is to begin in March 2005, the next one added in 2006, and the Department of Transportation will determine whether this second route will be for a passenger or cargo flight.

One or two routes to China do not sound like a big source of revenue for an airline, but this represents a growth market for United States airlines struggling with troubled balance sheets and increased domestic competition from low-cost carriers.

Since 1987, only two passenger airlines, Northwest and United, have flown to China, because Beijing restricts air traffic from overseas. But in July, the Transportation Department and the Civil Aviation Administration of China negotiated an agreement that would allow the number of flights between the two countries to increase nearly fivefold over the next five years, to 249 a week.

Almost as soon as the agreement was announced, the United States airlines started lining up. Three long-haul carriers -- Delta, American and Continental -- are competing against two smaller carriers, Hawaiian Airlines and North American Airlines. United hopes to expand its business in the China market, and so has also submitted a bid with the Transportation Department to fly the new route. Northwest has filed for only a future cargo route and not for passenger flights.

The airlines are to submit their final bids today to the Transportation Department, which will then choose the carriers for the two new trans-Pacific routes.

Unlike the airline market in the United States, where intense competition is making it difficult for most of the large carriers to be profitable, routes to Asia make money.

''China is obviously a big and growing market,'' said D. Scott Yohe, Delta's senior vice president for government affairs.

Since 2000, passenger traffic between the United States and China has increased 53 percent, to 185,000 passengers, in the first five months of this year, according to the Bureau of Transportation Statistics.

''There's no question it's an important route for any airline,'' said Dan McKinnon, the founder and president of North American Airlines, which is based at Kennedy International Airport in New York. ''It doesn't matter if it's American, Delta or Continental. It's important for all of us.''

Delta projected that it would get an overall economic boost of about $400 million annually if it added service to China, though some analysts called that optimistic. Hawaiian Airlines said the state of Hawaii could expect about $11 million more in tax revenue from it during the first year of service to China.

American, while indicating that it did not have hard figures for revenue, said its plan would be to fly 136,000 passengers to China the first year. ''In the long run, we think this is a very profitable area of the world to be in,'' said William Ris, American's senior vice president for government affairs.

The competing airlines have started campaigns to win the routes. American, the largest carrier, outlines its case on a separate Web site, http://flyaatochina.com, and lists more than 100 members of Congress who have sent letters of support to Transportation Secretary Norman Y. Mineta.

Delta has set up a similar section on its Web site where people can e-mail a letter to Mr. Mineta that says in part, ''Delta's proposal to provide daily nonstop service from Atlanta to Beijing in March 2006 is the best proposal.'' A company spokeswoman said Delta supporters had sent at least 9,000 messages.

Since September, the airlines have been trading jabs in thousands of pages of legal filings with the Transportation Department.

Hawaiian Airlines said in its filing, ''Chicago simply cannot adequately serve those passengers most in need of new service to China, those in the western United States.''

That was a jab at American Airlines, which would fly to China from Chicago. Then, Hawaiian took aim at Delta and Continental, declaring, ''Atlanta, much like Newark, is simply not a good choice for this service.''

Delta has proposed flying to China from its hub in Atlanta, and Continental from Newark.

Of North American Airlines, Hawaiian added, ''Little can be said that provides a hint that North American understands the market or has the background or capability to serve the market.''

In its filing, North American was more subdued. ''Two legacy carriers and the three major alliances already serve China,'' it said. ''Given this fact, why shouldn't the public have access to a low-fare carrier to China?''



authorities in Beijing? i have always thought that it's up to U.S. authorities? (see some previous posts)

Wednesday November 24, 6:59 AM
U.S. Airlines Vie for Flights to China

(AP) Three of the nation's largest airlines and several smaller carriers have made their final presentations to federal regulators and are taking potshots at each other in a competition to win the first new flights between the United States and China in more than a decade.

The stakes are high. Facing fierce competition at home, U.S. carriers view China as a potentially lucrative market with a growing economy. The winner will join UAL Corp.'s United Airlines and Northwest Airlines Corp., which already fly to China.

American Airlines, the largest U.S. carrier, and Houston-based Continental Airlines Inc. are bidding to launch service next year. American would fly between Chicago and Shanghai, and Continental would use its hub at Newark, N.J., to serve Beijing and Shanghai.

Atlanta-based Delta Air Lines Inc. seeks approval for an Atlanta-Beijing route beginning in 2006. Hawaiian Airlines Inc. and North American Airlines are also in the bidding, as are several cargo carriers.

Under an agreement between the two governments, the U.S. Department of Transportation can pick one U.S. carrier to operate seven weekly nonstops beginning next year and another _ either a cargo airline or a combination passenger-and-cargo carrier _ to start in 2006.

In filings with the agency this week, the airlines touted their own credentials while taking swipes at their rivals.

American, a unit of Fort Worth-based AMR Corp., bragged about support from more than 100 members of Congress and played up Chicago's location in the middle of the country, easily reached with connecting flights from many cities. American sniffed that Continental's bid would have little impact beyond the New York area, which is already served by Air China.

Continental responded that American's China service from Chicago would be too similar to that of United Airlines.

"Do we need American and United flying duplicate service from Chicago? We think not," said Rahsaan Johnson, a Continental spokesman. "New York is the largest market between the United States and China, and no U.S. carrier serves that route."

Both American and Continental are also interested in the 2006 award, putting them in competition with Delta.

American disparaged Delta's proposal to fly from Atlanta, which it said is "too far south and east." Continental said Atlanta isn't a big market for U.S.-China travel.

Delta fired back that more than two-thirds of Chinese travelers to the United States visit interior cities beyond the four current "gateways." Delta said it provides the best network of connecting U.S. flights in the "critically underserved" area east of the Mississippi River.

Hawaiian, which filed for bankruptcy protection last year, said in its bid it could serve the neglected West Coast market to China. New York-based North American, a charter airline making the move to scheduled service, wants to fly from Oakland, Calif., via Honolulu, to Shanghai.

Dan McKinnon, a former aviation regulator who is president of privately-held North American, said his airline could scoop up connecting passengers on other low-cost carriers and fly them to China.

"We're the only low-cost applicant in the field," McKinnon said. "One-third of the passengers are on low-cost carriers. Why shouldn't this go to a low-cost carrier?"

Although China's population exceeds 1 billion, the number of air travelers is a fraction of the U.S. market. Analysts and industry consultants say Chinese officials are beginning to encourage travel and tourism, however. They say air traffic in China is growing along with the economy, making the market attractive to U.S. and European airlines.

"It's a decent opportunity right now, but in the future it's going to be phenomenal," said Adam Pilarski, an executive with aviation consultants Avitas Inc. in Reston, Va.

Consultants say another appeal of the market is that the Chinese government limits flights, preventing the kind of competition that has led to lower fares _ and huge losses _ for carriers in the U.S. market.

Shares of AMR closed unchanged at $8.76 on the New York Stock Exchange Tuesday. Continental shares ended the session up 26 cents, at $10.99, and Delta shares were down 6 cents, to $6.55.

China will not halt launch of private carriers despite crash - analysts
23 November 2004

BEIJING (AFX) - China is unlikely to put on hold plans to launch privately-owned carriers after a weekend crash killed 55 people, but the aviation regulator is expected to impose tougher safety standards and raise the threshold for newcomers, industry analysts said.

A China Eastern Airlines Bombardier CRJ-200 plunged into the water Sunday morning shortly after taking off from the northern city of Baotou on a flight to Shanghai. It was the country's deadliest aviation disaster in two years. Investigators have not yet determined the cause of the crash but have ruled out terrorism.

'They (the new airlines) will take off sooner or later, but will have to pass tougher safety checks, as no one wants to see another disaster,' said Gao Xiaoqing, an analyst with Great Wall Securities.

Other analysts said they agreed.

'I don't think one accident will cause fundamental changes in government policies towards private airlines,' Ma Ying, an analyst with Haitong Securities told XFN-Asia.

The Bombardier was operated by Yunnan Air, a small airline under the wing of major carrier China Eastern.

The crash followed a report by state media last week touting the safety record of domestic airlines -- more than five mln flying hours without an accident.

It triggered market concerns that the regulator might reverse course and slow its plans to allow the creation of at least three privately-funded carriers.

But analysts said the government has been encouraging private investment in the aviation sector to keep up with air traffic demand that has been growing at an average rate of 15 pct over the past years as the economy surges ahead.

China Eastern's stock price fell 0.10 yuan, or 2.18 pct, to 4.48 yuan today.

Haitong's Ma said the General Administration of Civil Aviation of China will no doubt impose more stringent safety standards and raise the threshold for aspiring new airlines.

Since the beginning of this year, the regulator has given the initial go-ahead to three private carriers -- Eagle United, funded by an IT firm based in Guangdong, Spring Airlines, backed by a Shanghai travel agency, and Aukai Airlines, co-financed by three local investment firms.

None of the companies has any experience in running an airline.

While the trio await their flying licenses, Shanghai-based chartered air service operator Junyao Group, also reportedly filed an application this week to launch a regular airline.

Aviation officials were not available for comment today, but a spokeswoman told XFN-Asia in an earlier interview that while encouraging more qualified candidates to enter the aviation market, the regulator will exercise caution in issuing new licenses, because 'safety has always been our utmost concern.'

China has three major state-run airline groups - Air China, China Eastern Airlines and China Southern Airlines.

There are around two dozen smaller regional carriers, including Hainan Airlines Co Ltd (SHA 600221; SHB 900945) and Shanghai Airlines Co Ltd (SHA 600591), backed by local governments.

The country also has four cargo carriers and a newly-formed joint venture -- Jade Cargo International -- financed by Deutsche Lufthansa AG unit Lufthansa Cargo, DEG Bank and Shenzhen Airlines.

PLANE CRASH RAISES VITAL SAFETY QUESTIONS
By Zhi Ming
26 November 2004
China Daily

The recovery of the two cockpit recorders of the crashed plane in Baotou, Inner Mongolia Autonomous Region will hopefully help decode the cause of the accident, but it is not necessarily going to dispel the growing "flying panic" of the public.

On Sunday, the 50-seat branch-line jet CRJ-200, with 47 passengers and six crew members on board, dived into a lake in Nanhai Park in Baotou shortly after it took off. All on board and two on the ground were killed.

It has been reported that in the wake of the Baotou accident, travellers have backed off from taking planes, especially small ones. As a result, air fares are on the decline on some routes.

Human error has been ruled out as the cause of the crash, said one member of the investigation team, according to the Xinhua News Agency.

Li Fenghua, general manager of China Eastern Airlines, which operates the plane, also said the widely rumoured possible causes, such as irregular early take-off, careless safety checks and operational error by a tired crew, were not well founded.

But the public still doubts the airline's managerial and operational soundness.

The Beijing Times reported that three passengers on the plane used the identity cards of others to get on board. Li Fenghua said this could not have caused the accident. He may be right, but the loophole does pose great potential hazards for safety.

A series of accidents - although not fatal - have occurred recently, which reinforces the public's fear.

On Monday, a Bombardier CRJ-200 plane experienced landing gear problems in Northeast China's Jilin Province, just a day after the crash of the same type of aircraft in Baotou. The plane had to circle in the air for more than an hour to dump fuel before safely returning to the take-off airport.

On Tuesday, an Air China plane slid off the runway onto nearby grassland after landing at the Kunming airport in Southwest China's Yunnan Province.

It is understandable that many are wondering why these accidents are happening and whether they are purely accidental. Something is wrong.

Are those accidents caused by operational or mechanical malfunctions? Is there any defect in the planes themselves? The public will not feel reassured before questions like these are answered.

China: Beyond the Factory Floor:
Delivery Services Expand Role --- DHL, FedEx, UPS See Opportunity in Managing Supply Chains
By Bruce Stanley
26 November 2004
The Asian Wall Street Journal

Shanghai -- EXPRESS DELIVERY companies that gambled years ago on the potential demand for their services in China are finally cashing in on growth in a burgeoning industry.

But DHL, FedEx Corp. and United Parcel Service Inc. are already looking beyond expediting components and finished goods into Chinese factories and on to overseas buyers, to what they see as an even greater opportunity: Helping manufacturers in China save time and money by managing their increasingly complex supply chains.

As Chinese exports become more sophisticated, factories here are working harder to juggle their supplies to avoid crippling shortages and costly build-ups of inventory. Increasing competition means that manufacturers also have to produce faster and smarter -- a need that opens up promising niches for the logistics companies. At stake is a market for outsourced logistics services in China that consultants at McKinsey & Co. value at US$84 billion, and say could more than double by 2010.

FedEx, UPS and DHL already fulfill similar roles elsewhere. Indeed, as growth sputters for air deliveries in the U.S. market and ground-delivery firms encroach on their turf, the three have identified everyday supply-chain needs such as consolidating freight, managing warehouses and fulfilling orders as dynamic new prospects.

In China, however, they're doing so in a country that is both a high-tech workshop to the world and a quagmire of choked roads, erratic customs practices and frequent corruption.

The challenge of improving a client's supply chain is "geometrically greater" than moving goods quickly from one place to another, says Ron Jordan, the head of business development in Asia for UPS' Supply Chain Solutions unit. UPS, for example, now controls more than 92,900 square meters of warehouse space to help manage inventories for clients in China's industrial heartland around Shanghai and the southern manufacturing hub of Guangzhou.

Inside a UPS warehouse on the outskirts of Shanghai, electric forklifts zip quietly among four-story steel shelves stacked with palettes of data-storage devices from Thailand and bulk bags of fiberglass from Belgium. Nicole Wang, a supervisor, says she authorizes daily deliveries of up to 4,000 boxes of components on behalf of electronic equipment maker Molex Inc., of Lisle, Illinois. Molex itself doesn't need to get involved in the everyday movement of goods, except to alert her about incoming inventory and to verify any incomplete shipping documents.

"It makes perfect sense. Nobody wants to own more square footage than they need," Mr. Jordan says.

DHL, a subsidiary of Germany's Deutsche Post World Net, estimates that its customers can usually save 10% to 20% on their distribution costs by outsourcing management of their supply chains. It already stores emergency spare parts for its clients and inspects products rejected by their buyers as faulty. Increasingly, DHL also makes licensed repairs on damaged goods.

"It's not contributing a huge amount to the bottom line, but it's adding value and helping us build relationships with our customers," says John Mullen, the chief executive officer in charge of DHL's express delivery business in Asia and the Americas. Operating from a hub in Hong Kong, the company plans to enlarge its supply-chain business next year by building three new logistics centers and 16 warehouses to store parts across the mainland.

This push into logistics comes as the big three express companies also ramp up their core business in China. None of them will disclose their financial performance in China, but all say their businesses are growing quickly. Last month, following an air services pact between the U.S. and China, FedEx won approval to double the number of its flights here while rival UPS secured a three-fold increase of its own. Both U.S. companies plan to locate freight-handling hubs in strategic Chinese cities to compete more aggressively with DHL. The potential is enormous: FedEx says each of its daily flights from Guangzhou is already "maxed out" with cargo.

Their respective shares in the emerging logistics market are hard to determine, but each is forging ahead. All three are expanding in China by riding the coattails of relationships they already have with multinational customers elsewhere.

FedEx of Memphis, Tennessee, won the right to manage two "parts banks" for radiotherapy machines built by Varian Medical Systems of Palo Alto, California, by leveraging on experience it gained running a similar facility for Varian in the Netherlands. If a Varian machine in a Chinese hospital breaks down, FedEx processes an electronic order for a replacement part, chooses the part from among 1,000 items in each part bank, and then packs and delivers it to the hospital -- usually all within the same day.

Before FedEx took over this function earlier in the year, a Varian staffer in Shanghai would have to drive to a government-run parts bank and wait there for someone to come and unlock the door. The employee would then rummage for the required part, drive back through dense traffic to Varian's office and -- finally -- chase down a courier to take the item to the hospital needing it. Moving back and forth across this city of 13 million people took so long that the staffer would often postpone trips until there were two or three orders in hand, says Varian's global logistics manager Virginia Boyle.

DHL developed a Web-based program for just-in-time deliveries to a company that makes power-supply equipment for cellphones and computers. The client, Astec Power of Carlsbad, California, can now monitor each component and analyze the costs of a single item at any point in its supply chain, enabling it to squeeze expenses "tremendously," said the company's logistics development manager Terry Chan. Supplies now take 40% less time to reach its factory in the southern Chinese city of Shenzhen. At the same time, Astec Power, a division of Emerson Network Power, has more than doubled its output.

"The problem is that the regulatory environment hasn't really caught up to support" this larger logistics role, said David Cunningham, president of FedEx's Asia Pacific Division.

Delayed customs clearances also vex producers, and customs practices can vary in different parts of the country. Exporters frequently subdivide big shipments into several smaller batches, then ship each consignment by a different route to try to minimize the risk of a major hold-up. Industry specialists say some customs officials demanding bribes deserve part of the blame.

Truckers must obtain a separate approval from authorities in each province they enter. And the sheer number of trucking firms is a challenge. China has 2.7 million trucking companies, according to the U.S.-China Business Council. Many are mom-and-pop outfits with just one vehicle.

"Their drivers don't wear uniforms, and their trucks may be 20 years old," says DHL's Mr. Mullen. "But some of them are charging only 20% of what we do."

China Eastern Flight Makes Emergency Landing - Report
26 November 2004
Dow Jones International News

SHANGHAI (AP)--A China Eastern Airlines (CEA) jetliner with 300 passengers aboard made an emergency landing in southern China after its cabin pressurization system failed, a newspaper reported.

No one was hurt Wednesday when the China Eastern Airbus A300, flying from Shanghai to the southern Chinese island of Hainan, was diverted to the southern city of Guangzhou, the Yangcheng Evening News reported.

Passengers felt nausea and discomfort in their ears before the captain announced problems with the cabin pressure and diverted the flight, the newspaper said in its Thursday edition.

China Eastern's publicity office referred questions to a spokesman who it said wasn't immediately available.

The incident came just days after a China Eastern Bombardier CRJ-200 crashed Sunday in northern China, killing 55 people.

Investigators are looking for the cause of the disaster, but say they have found no evidence of terrorism or other intentional damage.

Shanghai airport on verge of surpassing passenger count in HK
Murray Bailey
29 November 2004
South China Morning Post

In the battle for regional airport supremacy, Hong Kong looks safe compared with its neighbours.

But a little further away, Shanghai looks likely to overtake Hong Kong this year.

Traffic recorded at Shanghai's two airports has come a long way fast.

Last year, when traffic in Hong Kong was hit harder by Sars than was Shanghai, Hong Kong was still ahead for the whole year - counting nearly 27 million passengers compared with Shanghai's 25 million.

But this year has been a different story, with Shanghai reporting a record year, according to data from the Airports Council International.

The passenger count between Hong Kong and Shanghai varied by only a few thousand for the first seven months of the year.

But with Shanghai growing much faster, it seems certain to overtake Hong Kong by year-end. Closer to home, Guangzhou is expected to expand quickly with its new airport.

At present, it has little more than half of Hong Kong's passenger count. Moreover, expansion of new routes and new airlines can be a slow process.

The most recent expansion at Guangzhou has been with flights from its home-base airline China Southern and its subsidiaries, although foreign airlines are expected to steadily add and expand services to Guangzhou. And some of that growth will result in losses to Hong Kong.

The growing competition between the bigger airports - such as Guangzhou, Hong Kong, and Shanghai - may mean that smaller airports in the region will lose out.

For instance, despite their smaller size (which would usually mean faster percentage growth), both Macau and Shenzhen are growing at a slower pace this year than the big airports.

And, given the fall in traffic last year as a result of Sars, Macau's 37 per cent growth this year can be seen as less than impressive.

If Cathay completes its planned 10 per cent purchase of Air China - whose group includes Air Macau and Dragonair - the three SAR airlines may work together.

Currently they are fierce commercial rivals. How are they doing?

When compared with 2002 - to lose the distortion caused by Sars - it seems that in broad terms, Air Macau is struggling, Cathay is doing well, but Dragonair is storming ahead.

Some returns, however, show there are some less-obvious areas of concern.

Over the first three quarters of this year, all three were filling less of their capacity than in 2002 - considered a danger sign when there is downward pressure on fares and freight rates, as there is today.

Yet Cathay, despite being the biggest of the three, is filling a greater portion than its smaller rivals - a comfortable 77 per cent for the passenger measure, and 72 per cent for passengers and cargo.

Load factors at both Air Macau and Dragonair run in the 60s, and are particularly weak in traffic measures that include freight.

www.chinaview.cn 2004-11-29 08:21:17

Lufthansa plots strategy for more market share

BEIJING, Nov. 29 (Xinhuanet) -- German-based global aviation giant Deutsche Lufthansa AG (Lufthansa) is brewing a bold long-term business strategy to further tap into the fledgling but promising Chinese market, thanks to the new and more liberal Sino-German aviation pact, company executives said.

"We will boost our flight capacity to China by 50 per cent from now to 2007, because of the new market-opening deal between China and Germany," Thierry Antinori, executive vice president marketing & Sales of Lufthansa, told China Daily in an interview recently.

The senior marketing manager, however, was tight-lipped on details about Chinese destination cities that Lufthansa intends to fly, China Daily reported Monday. "I'd better not give our opponents any clue about our good ideas," Antinori said.

A senior official with the General Administration of Civil Aviation of China (CAAC), the country's aviation watchdog, told China Daily recently, on condition of anonymity, that China and Germany have already reached a more open aviation agreement, granting passenger and cargo carriers from both sides more freedom to fly to each other's market.

"The new agreement is a good move, since it makes change and will strengthen relationships between China and Germany. It is in line with the robust economic relationship between the two countries," Antinori said.

Despite being quite ambitious in its new business expansion plan, the German flagship carrier makes it crystal clear that rather than attempting to make instant money, it would gradually take advantage of the new market-opening aviation agreement.

"We will take off step by step with the new market growth. Once the market growth is enhanced, we can embrace the opportunity for further business expansion," Wolfgang Mayrhuber, chairman and chief executive officer of Lufthansa, said.

"(Therefore) we will continue to maintain a gradual business expansion strategy in China. If we dump capacity, the ticket price will come down and our local business in China will become not profitable," Mayrhuber said.

The unidentified official from CAAC also disclosed that similar negotiations with more European countries, such as Spain, about possible market-opening aviation pacts will be held by the end of this year, which means maybe more competition for Lufthansa.

"No, we are not afraid. Instead, we are open to competition, as long as the competition is fair. In fact, we are not afraid of more competition. We have established our position as a global carrier, and our hubs Frankfurt and Munich are located in the centre of Europe, which give us an geological upper hand in international transfer flights," Antinori said.

To cement its status as a global airliner, Lufthansa will offer its first class passengers a new dimension in travel from December 1. Concierge services, limousine-transfer direct to the aircraft, an exclusive ambience with gourmet restaurant and personal attention for guests from arrival at the airport right through to take-off are the special features of the service.

The exclusive service starts on the ground in Frankfurt, in the newly-built First Class terminal and in new First Class lounges.

Lufthansa is leading other European competitors in China in terms of flights available locally. It flies to Beijing, Shanghai and Hong Kong from both Frankfurt and Munich as well as to Guangzhou from Munich via Shanghai and offers a total of 41 weekly flights.

Lufthansa has been co-operating with Air China since October 2000. It flies to the Chinese mainland's major hubs Beijing, Shanghai and Guangzhou (via Shanghai) through code sharing agreements with Air China.

Also through recently expanded code sharing, Lufthansa can reach second tier cities like Dalian, Chengdu, Hangzhou, Nanjing and Xi'an.

(China Daily)

Busy skies over the 'factory of the world'
Paloma Khan
29 November 2004
International Freighting Weekly

Lufthansa Cargo, British Airways World Cargo, UPS and FedEx are just some of the operators to increase frequencies to China, with more planning to follow suit next year.

FedEx opened a new Chinese HQ in Shanghai last month in response to the "explosive growth" in the market, says David Cunningham, president AsiaPacific.

"China has taken shape rapidly, but still has great capacity for growth, and much of this remains untapped. Air cargo figures from China are 10 times greater than a decade ago.

FedEx recorded a 52% increase in export volumes from China during Q2 of this year. It operates 23 weekly flights from the US to China, the most dedicated cargo flights between the two countries operated by any of the integrators, says Cunningham.

He has approached the US Department of Transport to consider awarding FedEx six more, including one to Guangzhou, hoping to gain a share of the 12 new slots awarded to the US last month.

"We are working on the best way to expand our hub operations in Asia. We have been holding discussions with the Guangzhou Baiyun International Airport Company and the relevant government officials." The integrator also has plans to open eight additional joint-venture branch offices in China between June next year and May 2006. Its ultimate goal is to add 100 new cities.

Lufthansa Cargo introduced a thrice-weekly freighter from Frankfurt to Guangzhou at the beginning of this month in a bid to be closer to the huge number of manufacturers operating in and around the city widely considered "the factory of the world". Previously goods would be trucked to Lufthansa's cargo hub at Hong Kong.

"We have actively been trying to expand our presence in southern China, particularly around the Pearl River Delta. If services take off the way we expect, we will add more frequencies next year, " says Frank Naeve, general manager sales, greater China, Hong Kong and Taiwan.

"Business out of China is booming at the moment and we are seeing one of the biggest high seasons ever.

October is normally quiet and it looks likely to go on into next year." One of reasons he has such high hopes for next year is the abolition of textile quotas by the WTO from 1 January.

Previously, there was a ceiling placed on the value of textiles any one country could export. Financial analysts believe countries with competitive advantages, like low labour costs, natural resources and geographical proximity to importing countries, will at last be able to realise their export potential.

China is one country predicted to benefit from the change in rules. According to Chiedu Osawake, director of the textile division at the WTO, the combined value of China's textile and clothing exports was US$53bn ( t41bn) in 2001, $62bn ( t48bn) in 2002 and $73bn ( t56bn) last year.

Naeve hopes Lufthansa can win a share of any extra garment volumes. "There is an expectation of a boom in textiles from China because of volume and price ratio." Like every other airline, Lufthansa's trade is largely westbound from Asia, with European retailers stocking up for Christmas having a significant impact on cargo volumes, at times creating a capacity shortage. "Certainly it's tight from Shanghai and Hong Kong, but it's not as bad in Beijing, " says Naeve.

"Eastbound, the market is not as positive but we combat this by making additional stops – in the Middle East, for example, " he adds.

Despite the carrier's push into southern China, Hong Kong remains its major regional cargo hub, with 17 freighters a week between Hong Kong and Frankfurt, shared with Cathay Pacific.

Naeve is keen to point out that the new Guangzhou service is not taking cargo away from the Hong Kong flights and that there is still plenty of cargo for all Lufthansa's frequencies.

With five freighters from Shanghai to Frankfurt, and an additional four serving Shanghai and Beijing, in cooperation with Air China Cargo, the carrier has the market covered, but plans to continue expanding.

"We are not moving away from Hong Kong. We believe it will remain important, but we constantly look at new points to serve with freighters. We are looking at the next city to develop now. Our growth pattern is to serve new markets as well as cementing our position, " adds Naeve.

British Airways World Cargo saw a 20% increase in volumes last year, much of which was driven by an increase in freighter schedules. "Out of Hong Kong, we moved from five a week to seven during the second half of the year, " says Chris Chan, area manager operations and commercial for China/Hong Kong, Taiwan and the Philippines.

BAWC also operates a weekly freighter from Shanghai, stopping at Mumbai and Delhi. "It is certainly performing up to the commitment put forward in the business case.

"The split between Shanghai and India is 80% and 20% respectively. We are seeing a lot of electronics and hi-tech components out of Shanghai and there is certainly a growth in garments.

"There is a general increase in cargo from the manufacturing areas around the Yangtze River Delta." BAWC serves southern China with bellyhold capacity on its 17 weekly passenger services out of Hong Kong, and northern China, with a four-times-a-week passenger service from Beijing.

Chan believes the Hong Kong market is strengthening. "It has gone through an economic reform and is more of a service industry.

"However, Hong Kong will continue to be the logistics centre for the Pearl River Delta because of its airline frequencies and also the seaport infrastructure, which will take a long time to recreate on the mainland."

Air China plans cost cuts, fuel hedging after IPO
By Daisy Ku

HONG KONG, Nov 29 (Reuters) - Air China Ltd. aims to save up to 1 billion yuan (US$121 million) by 2007, or 2 to 3 percent of its operating costs, partly through stepped-up hedging of fuel purchases, fund managers said on Monday.

Investors learned of the airline's plans in its marketing of an initial public offering in Hong Kong and London worth up to $1.1 billion, which is expected to draw heavy demand in a cash-rich Hong Kong market. The Hang Seng index hit a three-and-a-half year high on Monday.

The state-run carrier also expects to generate savings from more efficient use of its fleet and centralised purchasing, management told a marketing luncheon on Monday, according to fund managers who were there.

The Beijing-based carrier, the biggest and last of the big three China airline companies to list, said it planned to hedge 22-50 percent of its jet fuel next year, compared with 25 percent in 2004, fund managers said.

Jet fuel accounted for 28 percent of Air China's operating cost in the first half of 2004, up from 20 percent in 2003.

The company intends to save 200-230 million yuan in 2005 by hedging more jet fuel purchases, fund managers said.

For every US$1 increase in crude oil prices, Air China's net profit will drop more than 5 percent, underwriter China International Capital Corp. (CICC) said.

LOWER COST

Chinese carriers have historically paid a 60-70 percent domestic premium above the Singapore price on jet fuel. However, due to this year's rapid surge in global oil prices, the current premium has narrowed to 5 percent.

"Air China makes good profit despite the high oil price. Its earnings will improve when the oil price drops," said Apex Capital Management director Alex Au.

Air China said in its preliminary prospectus that net profit would jump 13.3 times to 2.29 billion yuan in 2004 as it recovers from the deadly SARS epidemic of 2003.

CICC expects Air China's earnings to climb by 13 percent to 2.6 billion yuan in 2005 and by 20 percent to 3.1 billion in 2006.

Air China, the first big carrier to complete the integration of its mergers under a consolidation of China's airline industry, absorbed China Southwest Airlines and Zhejiang Airlines in 2003.

As a result, its unit costs are 3.7 percent and 13.2 percent lower than those of rivals China Eastern Airlines and China Southern Airlines, respectively.

Air China plans to use 4.8 billion yuan of its proceeds to buy 14 planes and the remainder to repay debt.

Fund managers said the company plans to pay 10 to 15 percent of its profit as dividend in the future. The company makes no dividend commitment in its prospectus.

The carrier is planning to increase capital spending to 23 billion yuan between 2004 and 2007, resulting in net cash outflows of 818 million yuan and 580 million yuan in 2005 and 2006, compared with a net cash inflow of 898 million in 2004.

Air China is offering 2.805 billion shares, or 31 percent of its enlarged share capital at HK$2.35-$3.10 each, which is 9.96 to 13.14 times estimated 2004 earnings per share of 0.25 yuan each.

Hong Kong's Cathay Pacific Airways will buy 905 million shares, or 32.3 percent of the offering, with a 12-month lock-up period.

Air China shares will begin trading on Dec. 15. Merrill Lynch is also underwriting the deal.

Guangzhou plans airport tie-ups to create south China hub
26 November 2004
Xinhua Financial Network (XFN) News

GUANGZHOU, China (XFN-ASIA) - Guangzhou wants to become southern China's air hub through a tie-up plan with other regional airports, said Zhang Kejian, vice-president of Guangdong Airport Management Corp which runs the city's Baiyun International Airport.

Zhang said he is in talks with airport bosses in nearby Shenzhen, Zhuhai and Macau.

"We want to be the hub airport of southern China," Zhang said. "We are exploring alliances with Shenzhen, Zhuhai and Macau airports ... we think that the most important thing is cooperation with other Chinese airports."

The announcement comes days after talks on a similar arrangement between Hong Kong, Shenzhen and Zhuhai effectively collapsed.

Hong Kong had hoped an alliance could have secured its prominence in the southern Chinese air market.

Failure to strike a deal with two of its strongest rivals on lucrative China routes is likely to deepen investor fears of rising competition before a planned listing of Hong Kong's airport in 2006.

Although Zhang would give no details of what form the alliance would take, he indicated it could involve the purchase of equity stakes in the other airports.

He added that while he hopes business at his airport will eclipse that of its southern rival, he has not ruled out other forms of cooperation with Hong Kong.

"We often negotiate with the other large airports -- Beijing and Shanghai included -- and we are also exchanging ideas with Hong Kong," he said.

The 2.4 bln usd Baiyun Airport, the largest in China, opened in August and immediately drew worried looks from Hong Kong airport, which has enjoyed primacy in the region for decades.

Zhang said that in its first three months of operation 6.1 mln passengers had passed through its gates, and it is well on the way to achieving its target of 27 mln passengers and 1 mln tons of cargo in its first year.

Hong Kong, which can handle 35 mln passengers and 3 mln tons of cargo per year, still has the advantage as China's aviation infrastructure struggles to modernize, according to logistics experts.

Guangzhou airport eyes HK's prime hub status

It wants to link up with nearby airports to be main base for southern China

Guangzhou (China) - GUANGZHOU'S new international airport threw down the gauntlet on Thursday, vowing to rob rival Hong Kong of its status as southern China's air hub through a tie-up plan with other regional airports.

Mr Zhang Kejian, vice-president of Guangdong Airport Management Corporation which runs the city's Baiyun International Airport, said he was in talks with airport bosses in nearby Shenzhen, Zhuhai and Macau. 'We want to be the hub airport of southern China. We are exploring alliances with Shenzhen, Zhuhai and Macau airports...the most important thing is cooperation with other Chinese airports.'

The announcement comes days after talks on a similar arrangement between Hong Kong, Shenzhen and Zhuhai effectively collapsed. Hong Kong had hoped that an alliance could have secured its prominence in the southern Chinese air market. Failure to strike a deal with two of its strongest rivals on lucrative China routes is likely to deepen investor fears of rising competition before a planned listing of Hong Kong's airport in 2006.

Mr Zhang indicated that the alliances could involve the purchase of equity stakes in the other airports. He added that while he hoped business at his airport would eclipse that of its southern rival, he had not ruled out other forms of cooperation with Hong Kong.

The US$2.4 billion (S$4 billion) Baiyun airport, one of the busiest in China, opened in August and immediately drew worried looks from its Hong Kong counterpart, which has enjoyed primacy in the region for decades.

Mr Zhang said that in its first three months of operation, 6.1 million passengers had passed through its gates. And the airport was well on the way to achieving its target of 27 million passengers and a million tonnes of cargo in its first year.

Hong Kong, which can handle 35 million passengers and three million tonnes of cargo annually, still has the advantage as China's aviation infrastructure struggles to modernise, say logistics experts. -- AGENCE FRANCE-PRESSE

U.S. Airlines Vie for Rights to Fly to China
Carriers Enlist Employees, Politicians to Press Their Cases in Washington to Win Routes

By Amy Schatz and Evan Perez
1 December 2004
The Wall Street Journal

FOR U.S. AIRLINES struggling with bruising competition at home, a fight has broken out over rights to fly to China.

Late this year or early in 2005, the Department of Transportation will choose one passenger carrier to provide nonstop service to China starting as soon as March and another airline -- either passenger or cargo -- to start service in 2006.

Airlines vying to be chosen have to submit reams of documents but can't lobby bureaucrats directly, so they have enlisted hundreds of politicians and business leaders and thousands of employees to write on their behalf. AMR Corp's American Airlines has drafted 26 senators, 78 congressmen and 38 chambers of commerce to write letters on its behalf.

In the end, serving the lucrative Chinese market could all come down to location.

American Airlines wants to begin nonstop service in May to Shanghai from Chicago, a route UAL Corp.'s United Airlines already flies. Continental Airlines wants to fly to Beijing from Newark, N.J. It argues that no U.S. carrier provides daily nonstop service to China from the New York City area, though Air China offers nonstop flights four days a week.

Delta Air Lines wants to begin flights to Beijing from Atlanta -- but only in 2006 when it can afford to refit aircraft to fly the Chinese route. It argues that the fast-growing U.S. Southeast, with no direct flights to China, is being neglected.

American and Continental also are applying for the route that starts in 2006, in case they don't win in the first round -- but four freight carriers also are fighting for that slot.

The new flights are the product of a pact reached in June between Chinese and U.S. officials. The two sides agreed to allow 249 weekly flights, up from the 54 flights Beijing previously allowed, by the end of the six-year agreement. Altogether, seven passenger and seven cargo airlines are trying to win new flights to the world's most populous nation.

Passenger traffic between the U.S. and China rose 26% from 1999 through 2003, including a drop in traffic last year, partly the result of difficulties obtaining visas in both countries. About 341,600 passengers flew to China from the U.S. on commercial airlines last year, down from 484,000 in 2002, according to the Transportation Department.

The competition for the new slots is especially fierce because the big U.S. carriers, battered by high fuel costs and domestic fare wars, see increased international service as their ticket out of financial troubles. They want to cash in on trans-Pacific routes, especially to China, where they face little competition and can charge premium fares. Delta, United and American all announced restructuring plans in recent months that include more international flights.

Besides, new routes to tightly controlled markets don't come up very often. Scott Yohe, Delta's lead Washington lobbyist, says restrictive bilateral government agreements still govern many of the industry's most coveted routes. "Because of the financial condition of the industry it magnifies it even more," he says.

Patrick Murphy, a Washington aviation consultant working for a cargo carrier that is vying for more Chinese flights in 2006 says some of the activity "is defensive: If you don't do it, you look like you've got no support."

At times, the contest has become downright nasty: Northwest Airlines, which offers passenger and cargo service to China, charged in a letter last week that Federal Express Corp. should be disqualified from receiving any additional flights in 2006 because the company didn't file proper business forecasts. A FedEx spokeswoman said the company believes it provided ample information in its application and dismissed Northwest's charge.

Meanwhile, American's intense lobbying effort so far has yielded more letters from supporters, but Delta and Continental aren't far behind. United and US Airways Group Inc. are operating under bankruptcy-court protection and Delta has been on the brink recently.

American is trying to avoid a repeat of 2000, when it lost a competition with United Parcel Service Inc. to offer service to China. UPS had gathered letters from more than half the Senate and thousands of its employees, most slight variations of a form letter. It is unclear whether UPS's letters were a deciding factor, but they certainly didn't hurt.

American is taking no chances this time around. In addition to letters from politicians and chambers of commerce, it has drummed up thousands of letters from employees. "We took that seriously and this time tried to show as much support as we could," says William Ris, American's lead Washington lobbyist. "We want to make sure there is very widespread support for the proposal we're making."

Not to be outdone, other airlines have launched similar letter-writing campaigns. Delta says it has won support from House and Senate aviation subcommittee chairmen, more than two dozen mayors, airport directors and governors, as well as from economic-development officials from 13 states.

Transportation Department officials look at many of the letters, but "the fact of the matter is we make our decision on the merits of the case," says Karan Bhatia, DOT's assistant secretary for aviation and international affairs, who will award the Chinese flights.

U.S. negotiators, meantime, have turned their attention to opening up broader pacts with other countries. Efforts to reach an "open skies" agreement with the European Union has failed to date, but U.S. officials will begin formal talks for such an agreement with India early next year. India is "a huge market and it's only going to get larger and larger," says John Byerly, the State Department's deputy assistant secretary for transportation affairs.

Negotiators also hope to work out a deal with Mexico to allow more passenger service between the U.S. and Mexican cities by early next year, and they are scheduled to talk with Hong Kong officials in April.

Wow..China is like gold to the airlines. I don't hear much about Chinese carriers applying for American routes..odd.

Friday December 3, 12:27 PM
CORRECT: Air China's Jet Fuel Provider Added 2 Suppliers

HONG KONG (Dow Jones)--Air China Ltd. (0753.HK), the mainland's largest commercial airline, Thursday said the China Aviation Oil (Singapore) Corp. (C47.SG) debacle won't have any impact on the country's jet fuel supply or pricing mechanisms.

China Aviation Oil is the dominant jet-fuel supplier in the mainland and is seeking court protection from creditors after racking up US$550 million in losses from oil derivatives trading. It is also being investigated by its parent, China Aviation Holding Co.

Air China's Chairman Li Jiaxiang said the company has consulted various government departments on the issue and was assured that the scandal will have no impact on jet fuel supply and prices.

Li said Air China aims to have diversified sources of jet fuel and has just added PetroChina Co. (PTR) and China Petroleum & Chemical Corp. (SNP), or Sinopec, as suppliers two weeks ago. He didn't provide further details on the deals.

The China Aviation Oil scandal also didn't hurt investors' appetite for Air China's initial public offering, with the institutional tranche having been fully booked, said a person familiar with the situation.

The carrier is selling 2.806 billion shares at between HK$2.35 and HK$3.1 a share. Of the offered shares, the Hong Kong retail tranche will be 10% with the rest to be placed with institutional investors. The company has an option to sell another 15% of the offered shares.

Air China said the IPO's retail tranche will open for subscription Friday and close on Wednesday. The shares will be listed on Hong Kong stock exchange Dec. 15.

Last month, Cathay Pacific (0293.HK) signed a memorandum of understanding to buy 9.9% of Air China's IPO shares.

Air China has a fleet of 136 aircraft serving 69 domestic and 34 international destinations.

Friday December 3, 11:37 PM
UPS plans expansion into China but Hong Kong still its major hub

HONG KONG (AFP) - US logistics giant United Parcel Service (UPS) said that it plans a major expansion into China but Hong Kong will remain its major regional logistics hub.

"It's essential, it's extremely important," Ken Torok, company president for the Asia-Pacific Region, said, referring to Asia's rising economic giant.

He said the company will launch a service to southern Guangzhou city in April with six flights a week. A Shanghai hub is planned for 2007.

UPS said Thursday it will take full control of its international operations in China from its Hong Kong partner Sinotrans Air Transportation.

The 100 million dollar deal will see UPS take over operations covering Shanghai, Guangzhou, Shenzhen, Tianjin and Qingdao in January 2005 to be followed by another 18 additional locations by December 2005.

UPS shipments from China soared 129 percent year-on-year in the third quarter, compared with growth of 30 percent for the Asia region as a whole.

While Torok recognised the importance of raising the group's profile in China, he said Hong Kong's role as a major regional hub would not be threatened as it has good connections with Asia and the rest of the world.

"We don't see Hong Kong's role as a regional hub will diminish," he added.

Zimbabwe Independent - AAGM: Airzim Faces Stiff Challenge
Itai Dzamara
03 December 2004
Zimbabwe Independent

AIR Zimbabwe's flight to China could fail to generate profits for the national airline because of stiff competition from Kenya Airways, Ethiopian Airways and South African Airways.

The national airline officially launched its service to Singapore and Beijing last month. It is having to undercut rivals on the same route to attract customers. This is likely to impact negatively on the national airline's capacity to show a profit from its much-trumpeted new schedule.

South African Airways has daily flights between Johannesburg and Singapore as well as Hong Kong where code-sharing partners such as Cathay Pacific pick up passengers to other points in China, while Kenya Airways has daily flights between Nairobi and Hong Kong. It has KLM as a technical partner.

Kenya Airways also flies to Harare three times a week and redistributes passengers to the Far East from its hub in Nairobi.

Ethiopian Airways has two flights to China a week, which pass through Johannesburg.

The three airlines, which have better standards and international reputations than Air Zimbabwe, are likely to continue attracting the bulk of travellers from southern Africa to the Far East.

Air Zimbabwe launched its inaugural flight to Beijing via Singapore last month. Acting managing director Oscar Madombwe said last week soon after the airline's Boeing 767 returned from China that Air Zimbabwe would provide two flights to China a week.

Madombwe admitted that the airline faced stiff competition from established regional carriers.

"There is very stiff competition indeed," he said. "As you would appreciate, Johannesburg is currently the hub of international travellers and there is Ethiopian Airways flying to Beijing while Kenya Airways and South African Airways also have flights to China," he said. "There are a number of things that we need to improve, especially on standards, in order to compete favourably."

Air Zimbabwe will continue charging a promotional fare of US$1 000 for the return ticket to China, while the other airlines are charging between US$1 500 and $1 800, a factor which could affect the national airline's viability on the route.

Madombwe confirmed that the promotional fare would be used for some time.

"The operational fare of US$1 000 will be used at least up to the end of the year because we want to attract clients. I acknowledge that it affects viability but we have to adopt such measures to penetrate the market."

Madombwe said he didn't have the figures for bookings to date. "But I think the main source of our market must be China."

Air Zimbabwe has two long-haul Boeing 767s, one of which will be plying the China route while the other plies the lucrative Harare-London route.

Shanghai''s Surprise
BY IAN PUTZGER
04 December 2004
Air Cargo World

As the latest wave of the stampede to China kicked into gear, Shanghai was solidifying its place as the main object of desire. Polar Air Cargo, the new entrant into the scheduled United States-China market, is putting all of its frequencies into the city''s Pudong airport. Northwest Airlines, FedEx Express and UPS have plans for other points, but for now they''re concentrating on Shanghai.

And when Menlo Worldwide Forwarding teamed up with World Airways last month for charter authority, it was Shanghai the company wanted to serve.

Chinese carriers jockeying for position to enter the international arena have also set their hearts on Shanghai. The city is a natural choice for Shanghai Airlines, seen widely as the frontrunner, but less obvious for Hainan Air, which has ambitions to mount Shanghai-San Francisco cargo flights next year, according to one observer.

Away from the world'' s favorite boom town, the interest focuses on the Pearl River Delta and the industrial cities of Guangzhou and Shenzhen.

Beijing works well for passenger flights but the heavy industry in the north is more geared to maritime transportation. Factories in Southern China, on the other hand, exported $19.23 billion worth of toys, textiles, electronics and other goods in 2003, about a third of the country''s export total.

Jaded Service

Already before its new Baiyun airport opened this summer, Guangzhou had been widely tipped to emerge as the next major gateway. Northwest wanted to fly freighters there, but didn''t get sufficient traffic rights from the U.S. Department of Transportation, so those plans are on hold until 2006. FedEx has signed a framework agreement with the airport authority with a view to establishing a hub there.

Lufthansa Cargo is equally bullish about the south but it is betting on Shenzhen, despite Lufthansa passenger flights to Baiyun.

In October, the German carrier signed an agreement with Shenzhen Airlines to form a joint venture carrier called Jade Cargo International. Earmarked to start in February with two A300-600 freighters, Jade aims to serve Chinese as well as other Asian destinations like India, Singapore, Malaysia and Thailand. It may later expand beyond the region, according to LH Cargo. The agreement, which includes a Lufthansa 25 percent stake in the cargo venturee, follows the establishment of a cargo handling joint venture between Luffthansa Cargo and the Shenzhen airport authority.

Shenzhen''s airport managers aim to make the city the region''s chief cargo airport by 2015, but some observers are skeptical. Some carriers and forwarders believe the airport is going to be squeezed by both Baiyun and nearby Hong Kong International Airport.

Of greater concern, however, is that signs of strain are beginning to show at the world''s factory floor.

Energy Short

Energy production can''t keep pace with the rapid growth of economic development in the area. The power shortage has been exacerbated by the high cost of coal and oil and a number of deadly coal mining accidents.

As a consequence, several areas near Shenzhen have suffered frequent power outages, which has forced a number of factories to shut down for one or even two days a week, said Sam Tang, general manager of Grace Fine Paper Products, a Hong Kong-based packaging manufacturer whose production plant is half an hour''s drive from Guangzhou.

Like many others, Grace had moved production from Hong Kong across the border to escape the city''s high costs and tap into China''s pool of cheap labor. However, workers have been in short supply in the region this year, belying the myth of China''s seemingly inexhaustible supply of cheap labor. This has companies reconsidering their strategies, said Tang.

Costs have risen to a point where some manufacturers have packed up and moved. Hong Kong-listed Yue Yuen Industrial Holdings, the world''s largest shoe maker, is moving production further inland, while global brands such as Nike and Reebok have switched some manufacturing contracts away from China to places such as Vietnam. Labor and utility costs in provinces like Jiangxi are about 30 percent lower than those in the Pearl River Delta, which is also feeling the impact from a tight property market.

To spread development to the interior, the Chinese government embarked on a "go west" campaign two years ago, an effort that seems to be bearing fruit. Intel is building a $200 million plant in Chengdu in Sichuan province, more than 1,000 miles from Guangzhou, and Motorola has a research center there.

These developments are forcing carriers to consider their long-term strategies for China.

Recently, FedEx indicated that high costs could get in the way of a hub operation at Baiyun. Jim Friedel, president of NWA Cargo, believes that more gateways will open up in the years ahead. Northwest is still in line for Guangzhou: the airline has the city in its filing for traffic rights for 2006. This time, however, Northwest added another site to its wish list: Xiamen.

China signs $1 bln Airbus deal as Schroeder visits
By Daniela Vates

BEIJING, Dec 6 (Reuters) - Chinese flag carrier Air China Ltd. signed a $1.3 billion deal to buy 23 new Airbus jetliners on Monday during the annual visit to Beijing of German Chancellor Gerhard Schroeder.

The agreement came during heightened speculation that China had suspended some of its dealings with Airbus until the European Union decides to lift an arms embargo imposed against China after the Chinese army brutally crushed pro-democracy protests in 1989. China has denied there is a link.

The 23 planes included A319s and A320s in a deal worth about 1 billion euros ($1.34 billion), German government sources said.

Schroeder arrived in Beijing on Monday for a three-day trip likely to focus on expanding trade ties and the arms ban, which Germany is keen to see lifted.

China's fixed exchange rate, blamed in Europe and the United States for yawning trade imbalances, had been expected to be on the agenda but was not discussed when Schroeder dined with Premier Wen Jiabao, German government sources said.

He meets President Hu Jintao on Tuesday.

Most of the schedule for the German leader's sixth working visit to China was devoted to expanding trade ties and tapping China's booming market.

"China's economy is growing in a very dynamic way. Everybody can see that. One of the core parts of this growth is the automotive industry," Schroeder told reporters in German at the inauguration of a production site for DaimlerChrysler AG.

DaimlerChrysler told Reuters in an interview it expects to sell 50,000 units in China this year, a top executive said on Monday, about 15 percent less than an earlier announced target.

Schroeder is accompanied by a large delegation from German companies including Deutsche Bank , engineering group Siemens AG and insurance giant Allianz .

On Tuesday, Schroeder will travel to the northeastern city of Changchun to open a Volkswagen AG plant before flying to Tokyo on Wednesday.

UNHAPPY ABOUT YUAN

Despite the increasing corporate ties, German officials have indicated unhappiness about China's yuan currency and urged Beijing to relax its peg of 8.28 to the dollar, with concerns the low exchange rate is giving Chinese exporters an unfair advantage.

But it is the arms embargo, imposed in 1989 after China's suppression of pro-democracy demonstrators on Tiananmen Square, that has become a key political issue.

China has received no less than three European leaders in the past week ahead of a China-EU summit in the Hague that begins on Wednesday, hoping to push the group to lift the sales ban it calls a relic from the Cold War that is jeopardising ties.

Italian President Carlo Azeglio Ciampi is in China until Thursday, and British Deputy Prime Minister John Prescott visited last week.

Local media also reported Hu spoke on the telephone with French President Jacques Chirac at the weekend, but did not mention whether the arms embargo was raised.

Chinese Vice Foreign Minister Zhang Yesui last week dismissed reports China would not buy Airbus planes if the ban was not lifted, saying its developing tourism industry needed more aircraft.

Germany is one of the EU's biggest arms exporters and is seen as supporting an end to the embargo along with France, which first pressed for a review of the ban. (Additional reporting by Lindsay Beck)

China seen ordering Airbus superjumbo "soon"
By Scott Hillis

BEIJING, Dec 7 (Reuters) - European aerospace giant EADS said on Tuesday it expects China will soon buy its new superjumbo Airbus jet but warned time was running short to assure delivery by the 2008 Beijing Olympics.

"Pretty soon we will sit together and sign a contract because the A380 will fly to China for the 2008 Olympics, not only for Chinese airlines but others as well," EADS chief executive Rainer Hertrich told reporters.

But Hertrich added: "The Chinese have to hurry up because there are not so many slots for the A380. All our customers are keen to get the aircraft as soon as possible."

The European Union's weapons embargo against China, in place since the crushing of the 1989 Tiananmen Square democracy protests, did not appear to be linked to Beijing's delay in ordering the new aircraft, Hertrich said.

"I did not receive during my visit here any hint that the embargo was linked to the A380," Hertrich said.

Hertrich, in Beijing as part of a business delegation with German Chancellor Gerhard Schroeder, spoke a day after China said it would buy 23 Airbus jets. That order did not include any of the superjumbo A380 jets.

Although German officials said on Monday that flag carrier Air China Ltd. would buy the planes for $1.3 billion, an Airbus spokesman said on Tuesday that the customer had not been officially announced and that the deal was worth $1.2 billion.

Airbus said in a statement that China Aviation Supplies Import and Export Group Corp., a trading firm for the country's air industry, would buy the 23 aircraft from the A320 narrow-body family of jets, which includes the A318, A319, A320 and A321.

Hertrich reiterated a goal of boosting Airbus's share of China's commercial aviation market to 50 percent from the current 25 percent and said Airbus would quadruple its subcontracting in China to $120 million by 2010.

Airbus's chief rival in China is U.S. aerospace giant Boeing Co. .

Asked about the effects of a weakening U.S. currency, Hertrich said EADS was well-hedged through next year, but warned that profits could be hurt if the exchange rate stayed near $1.30 to the euro beyond that.

"We do not have a problem in the short term. For 2005, nearly all of Airbus is actually covered by our hedge book," he said. "In the long term, it will affect profitability if the dollar exchange rate stays where it is today."

EADS also hoped to sell China a computer security system for the 2008 Olympic Games, Hertrich said.

The computer system could aid in crowd control, but Hertrich said he was not concerned that it would be used to put down civil unrest in China, where public protests are quickly quelled by authorities keen to maintain social stability.

"Take this knife," Hertrich said, picking up a utensil at a breakfast table. "You use it for your bread, your meat. But you can take it and kill someone with the same knife. Does that mean we should not build knives?

"China is a stable country and the world will be in Beijing for the Olympic Games, and those games will only take place if security is provided."

China Forecast to Have 200 Airports by 2010

BEIJING, Dec 9 Asia Pulse - China's civil aviation industry has entered a fast-growth stage and the number of airports is expected to reach about 200 by 2010.

Chinese civil aviation's total traffic volume, passenger traffic, and freight traffic (excluding those of Hong Kong, Macao and Taiwan) have grown at an annual rate of 18 per cent, 16 per cent and 16 per cent on average in the past 20-plus years, more than tripling that of the world average level, said Gao Hong Feng, vice director of the Civil Aviation Administration of China at the opening ceremony of the Airport Conference of China-Portuguese-Speaking Countries held in Beijing on December 7.

More than 100 airport and civil aviation representatives from the mainland of China, Portugal, Brazil, Angola, Cape Verde, Guinea-Bissau, Mozambique, East Timor and Macao attended the conference.

They plan to examine issues concerning airport infrastructure development plan, investment system, operation efficiency and management, airport security and environment protection.

Air China, the biggest airline in China, raised $1.07bn (£558m), after pricing its flotation near the top of its range, sources said.

It sold 2.8 billion shares, or 31% of its equity, at HK$2.98 ($0.38) each, near the top of a HK$2.35-$3.10 range.

Strong demand meant its shares were more than 83 times oversubscribed by ordinary Chinese investors.

The Hong Kong market has been performing well and as a new listing, Air China should see strong demand.

Its flotation price values the business at nearly 11 times its projected 2005 earnings. By contrast, rivals China Eastern Airlines and China Southern Airlines trade at 11.8 times and 14.9 times forward earnings, respectively.

Going for growth

Air China absorbed China Southwest Airlines and Zhejing Airlines under a broad consolidation of China's fragmented airline industry.

It now has a 35 percent market share of China's 20 busiest domestic routes and 51.4% of China's international market.

Air China is the last of China's three large airline groups to list and due to heavy demand from individual retail investors, the public portion of the float was lifted to 40% of the offering from 10%, after it was oversubscribed 83 times.

Institutional investors were also keen on the stock, placing orders for 37 times more Air China shares than were available to them.

Cathay Pacific Airways, Hong Kong's dominant airline, paid HK$2.697bn for 905 million shares in Air China - 32.3% of the shares offered.

The company's earnings are expected to rise 13% to 2.6bn yuan (US$13.5m) in 2005, its underwriter China International Capital Corp. had said. Merrill Lynch is the other underwriter of the deal.

http://newsimg.bbc.co.uk/media/images/40613000/jpg/_40613539_airchina203elvis.jpg

Sino-European Aviation Cooperation Enters a New Stage

SHANGHAI, Dec 14 Asia Pulse - Aviation cooperation between China and Europe has entered a new stage this year with the Europe-based Airbus having sold a record number of planes to China and China invited to share Airbus' new aircraft program for the first time.

Airbus's China company announced here recently that China has just signed contracts with Airbus for the purchase of 23 Airbus A320 family aircraft worthy of US$1.2 billion, marking a successful year for the cooperation between Airbus and its Chinese partners.

The year 2004 also witnessed a breakthrough of Sino-European aviation cooperation, as Chinese companies will take five per cent of the work on Airbus's A350 program, said Gustav Humbert, Airbus Chief Operating Officer and Executive Vice President Programs in China recently.

According to Humbert, the five-percent share is only a short-term goal for Airbus' China strategy, and in the future, China will be allowed to take ten per cent share in new Airbus programs.

In 2004, Chinese aviation companies ordered a total of 58 aircraft from Airbus, increasing its total order from Airbus to 81.In the future, Airbus hopes to share half of China's commercial aircraft market, said sources with the European giant airplane-maker.

Airbus is planning to increase its subcontracts in China, according to its China strategy. Beginning from 2007, Airbus will increase its annual subcontract volume in China from the current US$30 million to US$60 million, and the figure will jump to US$120 million in 2010.

Airbus also plans to establish a program design center in China under its future strategy. Starting from 2008, about 200 Chinese engineers will have access to participating in aircraft-design work for Airbus, which will help China become an all-round partner of Airbus in the future.

When Airbus accelerates its pace to expand market in China, the owners of Airbus Industrie, the European Aeronautic Defense and Space Company (EADS) also made great progress in its China business.

EADS announced here recently that it had just signed an agreement with its Chinese counterpart in order to provide a solution for the 2008 Beijing Olympics safety system. It also planned to build a center to demonstrate its safeguarding system in case of big events in Beijing.

Sources said last year EADS invested US$30 million for five per cent share of Avichina, a branch company of the China Aviation Industrial Corporation (AVIC), to jointly develop, produce and export new aviation products, making itself the first overseas investor for China's aviation industry.

Currently, EADS is focusing on cooperation with China in the field of helicopter. Last month, the AVIC signed an agreement with Eurocopter, an EADS firm, to co-produce a new helicopter, which will be in operation in 2010. The Eurocopter also plans to set up a production line for EC 120 helicopter in Harbin, capital city of northeast China's Heilongjiang Province.

(XIC)

China Eastern Air says Nov passengers up 9.5 pct

SHANGHAI, Dec 15 (Reuters) - China Eastern Airlines Co. Ltd. posted a 9.47 percent rise in November passenger traffic, thanks to an improving global economy and booming travel, the country's second-largest carrier said on Wednesday.

However, the number of passengers carried fell about 14.5 percent to 1.41 million in November from October, the Shanghai-based airline said in a statement.

It filled 66.02 percent of seats in November, up 6.45 percent from the same month last year but down 4.58 percent from October.

Larger rival, China Southern Airlines Co. Ltd. , reported a 12.4 percent jump in passenger numbers in November from the previous year, with 2.42 million people carried. But that was down about 9 percent from October.

Passenger traffic at China Eastern and China Southern eased on a monthly basis in November following China's week-long golden holiday in October.

Shares of China Eastern listed in Hong Kong have risen about 31 percent in the past year, compared with China Southern's 3.91 percent loss in the same period. (Additional reporting by Alison Leung in Hong Kong)

Thursday December 16, 2:01 AM
IATA: China to Lead Growth in Air Travel

AP - China is expected to be the world's fastest-growing market for air travel as the world's airlines look for global growth in passenger traffic of 6 percent annually over the next four years, a trade association said Wednesday.

The growth will help the industry continue its recovery from the 2001 terror attacks on the United States and the SARS epidemic, the International Air Transport Association said in its year-end report.

But it has a long way to go to erase the record $35 billion losses of the past four years, said IATA Director-General Giovanni Bisignani.

"It looks like we will finish 2004 with the strongest traffic rebound that the industry has seen since the 1991 recovery from the effects of the Gulf War," said Bisignani.

The industry carried 1.8 billion passengers this year, up 14 percent, he told reporters. Nonetheless, the world's airlines are still expected to post combined losses of nearly $5 billion dollars for 2004.

Economic growth and deregulation are expected to keep the number of passengers rising, IATA said.

"We are not quite forecasting a return to the buoyant 1990s trend but, at an average growth rate of 6 percent, it is not that far off," it said, noting that passenger traffic grew by an average 6.5 percent a year between 1990 and 2000.

The Chinese air passenger market, which numbered 21.9 million people in 2003, is forecast to turn in an average annual growth of 12.5 percent until 2008, the report said.

"China will lead the global economic expansion for the foreseeable future, which will generate significant long-haul business traffic to and from North America," IATA said.

Growth in air travel between North America and India is also expected to exceed 10 percent, it said.

Three former Soviet Bloc countries would be among the five fastest-growing passenger markets during the period _ Poland at 11 percent, Hungary at 9.6 percent and the Czech Republic at 9.1 percent, just behind fourth place United Arab Emirates at 9.3 percent, IATA said.

The industry continues to suffer from high fuel prices, but could break even in 2005 if oil prices drop to an average of $36 a barrel, it said.

Crude oil prices have been around $40 a barrel for much of this year _ although they reached a high of $55.17 in October.

IATA economist Brian Pearce said a $34-a-barrel average would let the industry earn a $1.2 billion profit in 2005.

Analysis - China Hastens Aviation Reform

BEIJING, Dec 17 Asia Pulse - Air China's debut on the Hong Kong and London stock markets Wednesday can be seen as a signal of deepening aviation reform, which changed from increasing aviation efficiency to redefining the ownership, said Chen Liran, an aviation insider.

China's huge potential in aviation is well-recognized. The stock price of China Southern and China Eastern rose 30 percent in November despite a plane crash and China Aviation Oil company scandal. The market value of China Southern reached about US$1.7 billion and that of China Eastern reached some one billion US dollars. After Air China's Initial Public Offering (IPO), its market value will surpass US$2.5 billion.

Several airlines listed earlier, including Hainan Airlines, Shenzhen Airlines and Xiamen Airlines, made profits after their IPOs as well.

"Apart from the fact that they can collect more money on the market, the most crucial thing for these airlines is that they allbecome public companies," acknowledged Liu Yongtao, a Chinese aviation expert.

Experts hold that the goal of aviation reform is to make profitfor state-owned companies.

The debut of flag carrier Air China and the recent investment of Cathay Pacific to Air China signifies that China's aviation industry planned to strengthen public supervision on airline companies, according to experts.

Air China will release its fiscal report on operation performance to all investors after its IPO, and the market will judge its achievements by raising or lowering the stock price.

(XIC)'S

www.skyscraper.favos.nl

Foreign Airlines Face Qualification Checks for Entry to China

BEIJING, Dec 17 Asia Pulse - China is working to strengthen safety supervision over foreign air carriers while speeding its opening-up drive.

Starting next year, foreign airlines who apply for passenger or cargo business in China will have to undergo a qualification examination from regional civil aviation authorities before entering the vast aviation market.

All foreign airlines that have been operating flights in the country will also have to undergo similar examinations before 2007.

A new regulation on airline management was mapped out by the General Administration of Civil Aviation of China (CAAC), the industry watchdog. It is expected to take effect next year.

The regulation aims to regulate the management of foreign carriers and ensure safer flights, said Wang Changshun, CAAC's vice-director, in Beijing.

Based on the minimum safety criteria defined by the International Civil Aviation Organization (ICAO), the regulation simplifies the procedure of examination and approval for market access but stresses safety supervision.

According to the regulation, airlines which operate less than 10 flights a year or carry out a specific contract during a certain period during the period of Olympic Games, for instance are exempt from the examination.

Some 74 foreign airlines operate regular flights in the country and the number of planes landing in or taking off from Chinese airports adds up to 500 per day, according to CAAC's statistics.

Their performance has a bearing on the nation's aviation safety as well as that of people and property on the ground, Wang said.

Airlines are expected to meet the standards of the individual countries where they operate as well as international safety standards, said an official from the CAAC's Department of International Co-operation.

"Although CAAC has attached importance to safety supervision of foreign airlines in the past, there were no regulations to standardize management," he said.

In the past, foreign airlines could operate after CAAC approved them, he added.

It has become an international practice to conduct safety exami-nation and supervision over foreign airlines, the official said.

(XIC)

Qatar Airways First Middle East Airline To Beijing
Award-Winning Carrier Links Chinese Capital With Arabian Gulf
Corporate Press Release
26 November 2004

Beijing, PEOPLE’S REPUBLIC OF CHINA – Award-winning Qatar Airways, one of the fastest growing airlines in the world, has become the first Middle East carrier to launch non-stop scheduled flights between Doha and Beijing, capital of the State of Qatar in the Arabian Gulf.

The first flight touched down at Beijing International Airport with a large delegation of dignitaries – including the Chinese Ambassador to Qatar, Zhao Huimin, and members of the media from Qatar – headed up by Qatar Airways Chief Executive Officer, Akbar Al Baker.

The new flights, operated three times a week, are part of an aggressive winter route expansion campaign that sees six new destinations being served from Doha to cities around the world over the next two months.

Beijing, the political capital of the People’s Republic of China, becomes the second city in the country to be served by Qatar Airways following the successful launch last year of non-stop scheduled flights between Doha and Shanghai.

The Chinese capital also becomes Qatar Airways’ 9th destination in the Far East that also includes Seoul, Bangkok, Singapore, Cebu, Manila, Jakarta and Kuala Lumpur.

The airline now operates to 55 cities across Europe, the Middle East, Africa, Indian subcontinent and the Far East. By the end of 2005, Qatar Airways will serve at least 70 destinations, including cities in North America and Australia.

Al Baker said on arrival in Beijing: “Since the launch of our Shanghai flights last year, the route has proved very popular and it was only natural for us to extend our Five Star service to business and leisure travellers by introducing Beijing as our second destination in China.

“Qatar Airways is pleased to be the only Middle East carrier to offer the travelling community an air link to yet another city in China and share in the prosperity of a country which is enjoying an economic boom.”

He added: “This new route will appeal to both business and leisure travellers and offer good connections to passengers travelling between continents via Doha which is rapidly developing as a convenient hub in the Middle East.”

As one of the fastest growing and youngest carriers in the world, Qatar Airways has made significant inroads in the global aviation industry to become an award-winning airline in just a short few years.

“We recently joined an elite club of only two other airlines to be awarded a Five Star ranking for our high standards, excellent service and good quality by Skytrax, the independent aviation industry monitoring agency,” said Al Baker.

Skytrax has also ranked Qatar Airways’ cabin crew as the best in the Middle East for the second year running and fifth best in the world following a survey of more than two million passengers worldwide.

The Beijing flights are operated by state-of-the-art Airbus A330-200 aircraft in a two-class configuration of 24 seats in Business and 236 seats in Economy.

Beijing is one of Qatar Airways’ six new route launches this winter from Doha to further enhance the airline’s position as a truly international brand. Flights to London Gatwick have been inaugurated today (November 26), Seychelles comes on line on December 1, Yangon joins the network on January 8, 2005, and both Johannesburg and Cape Town are launched on January 16.

From the beginning of next summer’s flying programme in March 2005, five additional routes – Osaka, Melbourne, Athens, Tunis and Algiers – will join the rapidly developing worldwide network, further extending Qatar Airways’ reach to 64 destinations from Doha.

Al Baker added: “This route expansion programme reinforces our position as one of the fastest growing airlines in the world with new aircraft joining the fleet at a rate of almost one a month.”

Qatar Airways operates a modern all-Airbus fleet of 36 aircraft which will double in size over the next few years following a $5.1bn order for 34 additional Airbus jets.

The airline currently offers the latest inflight interactive entertainment system on board the Airbus A330. The Audio and Video On Demand system features 32 Hollywood movies and films from around the world and short programmes, together with a choice of 40 CDs, 16 audio channels and 12 interactive games such as Solitaire and Millionaire.

To celebrate the launch of the Beijing flights, members of Qatar Airways’ Privilege Club frequent flyer programme will be able to earn double Qmiles for the first full month of the new service.

Qatar Airways flies to Beijing three times a week. Flight QR898 leaves Doha at 2315 on Tuesdays, Thursdays, and Sundays, arriving in Beijing at 1215 (next day) local time.

Return flight QR899 leaves Beijing at 2350 on Mondays, Wednesdays, and Fridays, arriving in Doha at 0430 (next day) local time.

'Landmark' orders for regional jet
December 22, 2004

China has secured orders for 20 MA60 passenger jets, realising its long-held ambition to export locally-made planes to overseas markets, company officials said on Tuesday.

Most of the orders for the 60-seat regional planes have come from African countries, China Daily reported. The deal is worth two billion yuan (HK$1.88 billion) in total.

Produced by the Xian Aircraft, the planes were bought by China National Aero-Technology Import and Export Corp (Catic), which has firm orders for 20 jets.

"We have sold 20 planes in this deal," a Xian Aircraft spokesman confirmed.

Catic president Fu Shula said many countries had expressed interest.

"Now we have at least 100 potential buyers in 24 countries to help us realise our 2007 target," he said.

Xian Aircraft general manager Gao Dacheng said he was confident of the plane's performance and was certain it would convince more overseas airlines to become customers.

"With international safety standards and comfort, our plane saves on operating costs for our customers," he said.

Gao cited company figures showing the MA60 could save up to a third in operational costs compared with similar foreign aircraft.

Fu called the deal an "encouraging landmark" for China's aviation industry, which has dreamed of exporting its planes for years.

Until now, it has been hampered by what the newspaper referred to as "technical barriers" placed in its way by American and European competitors.

"It [the deal] is encouraging for the nation's aviation industry," Fu said.

The MA60 jet can cover a distance of 1,600 kilometres with a full load at up to 504 kilometres per hour.

China is already trying to get a share of the market in small regional passenger jets with the development of the 70- to 90-seat ARJ21, which is scheduled for commercial launch by 2007.

It also hopes to put its own large passenger planes in the air by 2018.

AGENCE FRANCE-PRESSE

FT.com site: US airlines battle it out over the route to China
Caroline Daniel
22 December 2004
Financial Times

Odete Sousa, a Brazilian who lives in Liechtenstein, is one of the more unlikely lobbyists to emerge from the most heavily contested aviation route battle in the US in the past five years - the right to fly direct to China.

But the emergence of Ms Sousa, a former Continental flight attendant who has written to the Department of Transportation to back the company's application, reflects the fact that airlines will pull out all the stops to boost their chances of winning a slice of a potentially lucrative market.

In her emotional letter she said she had been laid off since September 11 2001. "On the basis of a tourist trip and reading, I concluded that flights between the US and China would become increasingly important in the years to come."

She had studied Chinese to improve her job prospects. "I hope to return to Continental in the spring of 2005 as a qualified Chinese speaker on flights to China," she said.

It remains to be seen whether her commitment to self-improvement will sway the DOT officials who next month are expected to pick two more passenger airlines to offer services to China in 2005 and 2006 the first such awards for more than 20 years. What is not in doubt is the size of the stakes.

An expansive US-China bilateral aviation agreement, signed in July, allows new US cargo and passenger carriers to enter the market. It envisages a five-fold rise in flights by 2010, phasing in 200 additional flights a week.

Karan Bhatia, assistant secretary for aviation and international affairs, talks of a landmark agreement of great significance to US airlines, consumers and the broader US economy. "Over the next seven years the total economic impact for the US will be $12bn, from [the opening up of] passenger and cargo routes."

But the experience of US airlines already flying directly to China suggests the route is not a licence to print money Northwest ended its non-stop flights from Detroit because it could not make the route pay.

Yet establishing a foothold in China, where demand is expected to boom, is seen as critical. Delta forecasts its proposed Atlanta service will attract 165,000 passengers annually.

American Airlines has marshalled the support of 26 senators, 78 house representatives, seven governors, 24 mayors and 38 airports. Delta and Continental have submitted email-freezing blockbuster applications, sending at least 10,000 employee letters.

These applications offer an insight into why convenient access to China is considered vital. Coca-Cola, which backs Delta's bid to fly from Atlanta in 2006, noted China was its fifth largest market. .

American's proposed Chicago-to-Shanghai service has flushed out unexpected China aficionados across the academic and commercial spectrum. The Wartburg Theological seminary in Dubuque, Iowa, argued it would increase tourism and cultural ties, while Chicago's Museum of Contemporary Art said its Chinese exhibition would have cost less had American served the Shanghai airport.

In another twist, two passengers wrote to the DOT to argue in favour of fewer services from New York. Backing Delta's bid, they attacked Continental's plan to offer a Newark-Beijing service from 2005. "As New Yorkers we assure the department that we do not need any more non-stop services to China," they declared.

Their contention goes to the heart of the inter-airline battle. Delta says if its application is successful it will open up a direct service from the southeast of the US. "You need to go to Chicago or California and change planes, which is not convenient," says Scott Yohe, Delta's senior vice-president for government affairs. "Chicago does not need another service [ahead of] the south and the southeast. If American got this, three out of six daily non-stops would be from Chicago."

Continental, which is battling American for the 2005 rights, nevertheless has a strong case for flying from Newark. But American, as the world's largest airline, seems the natural next-in-line to break into the China market. The Oneworld alliance, of which it is part, is the only international alliance without direct access from the US to the country. Moreover its previous efforts in 1998 were hampered by United, which announced plans to open a Chicago-Shanghai service, undermining American's case for the same route. But United put its plans on ice and did not start flights until October this year. That perceived unfairness could buoy American's case for 2005.

As Will Ris, senior vice-president, government affairs at American, says: "United has said they won't make money if American gets the routes, as there are not enough people to serve. We look at it from a 10-year perspective. It is absolutely clear that China is where you want to be five or ten years from now even if you don't break even initially."

China's Demand for Transportation to Surge: Report

BEIJING, Dec 24 Asia Pulse - China's demand for transportation is forecast to increase by 1.5-2 times in the next 20 years, according to a forecast made by an analysis report by the State Development and Reform Commission.

The report said China's average per capita travel is likely to increase from the present 12.5 times to 20 times by 2010, and to 30 times by 2020.

The average demand for passenger transport is forecast to increase about 6 per cent each year in the 2000-2020 period, and demand for cargo transport will maintain a steady growth to 3 per cent-3.5 per cent.

The report holds that China's comprehensive transport system will achieve remarkable development by 2010.

Based on an estimation of the report, a rational scale of China's highway network shall be 4.50-5.50 million kilometers long as compared with the present scale of 1.18 million kilometers, and highway density shall reach about 50 kilometers per 100 square kilometers. Only such rational scale can help the country to basically reach the target of linking all natural villages and residential areas with highways.

A rational scale of railway shall be 100,000-120,000 kilometers as compared with the present railway operation scale of 73,000 kilometers. It will extend railways to prefecture-level cities or cities with population exceeding 200,000.

A rational scale of civil airports shall be 210-230 as against the presents 155 airports, and 60 per cent of cities above prefecture level shall have an airport, and some large cities shall have two airports.

(XIC)

China moves to ease concern about aircraft orders

SHANGHAI, Dec 30 (Reuters) - China's civil aviation regulator said on Thursday that although in principle it will not permit new aircraft orders next year, airlines can still sign deals for equipment to be delivered in 2006 and beyond.

Earlier this week the head of the General Administration of Civil Aviation of China said that domestic airlines had ordered enough planes to meet requirements next year, sending shares of U.S. aircraft giant Boeing Co. down by more than 2 percent.

"Just because a contract is signed does not mean the goods will be delivered that year -- it's not that easy," a regulatory spokeswoman in Beijing said by telephone, adding order talks could continue and deals still be signed.

Yang Yuanyuan, head of the regulatory body, said that Chinese airlines had already bought and arranged to be shipped next year a total of 147 planes, which was sufficient.

"He was only talking about 2005, not 2006 or beyond," the spokeswoman said.

It typically takes a year or more from the contract signing for new aircraft to actually be delivered. Chinese airlines also tend not to lease aircraft, as is common in the west.

All aircraft orders in China must be approved by the government, and overseen by China Aviation Supplies Import and Export Group Corp., which signs the contracts and distributes the aircraft to Chinese airlines.

The move comes as aircraft manufacturers Boeing Co. and Airbus -- controlled by European aerospace giant EADS -- try to tap into China's growth.

Both aircraft makers are negotiating deals with China, trying to sell the country their latest and most expensive planes -- the Boeing 7E7 wide-body jet and the Airbus superjumbo A380.

Boeing said the decision to freeze orders in 2005 will have no impact on its ongoing discussions.

Airbus' China office declined to comment.

Boeing has predicted that China will become the world's second-largest commercial aviation market, behind the United States, within 20 years.

The company said China will need 2,300 planes over the next two decades, as increasingly well-off Chinese take to the air.

China Eastern Airlines , which commands the country's second-largest commercial fleet, said last Friday it would buy 6 Boeing 737-700 jets for about $240 million. Those planes will be delivered in 2006.

In October, Airbus confirmed an order for 20 of its A330 wide-body jets for China Eastern.

Why would it be so hard to recieve rights to fly into China?

Singapore's Keppel unit in China airport services venture

By Joyce Hooi

KEPPEL Integrated Engineering (KIE) kicked off a joint-venture airport services company with its Chinese partner yesterday - its first foray into the industry in China.

KIE, a wholly owned subsidiary of Keppel Corp, has a 25 per cent stake in Guangzhou Baiyun Airport Facilities Management and Operation Company through an investment of US$793,000 (S$1.3 million).

The remainder is owned by Guangzhou Baiyun International Airport Ground Handling Service Company, a subsidiary of Guangzhou Baiyun International Airport (GBIA).

The joint venture has a 15-year tenure providing operations and management services to the airport's aero- bridges, escalators, travellators and elevators, as well as the air-conditioning, baggage handling and building management systems.

The airport officially opened in August this year and is expected to handle up to 25 million passengers and one million tonnes of cargo a year.

Mr Yick Ping Wong, KIE's managing director, said: 'KIE, through its subsidiary Keppel FMO, has a proven track record of offering its core expertise of maintenance and operations services to mission-critical facilities including airports, hospitals and industrial plants.

'By leveraging on Keppel's expertise and experience in facility management and maintenance, the joint venture hopes to contribute to GBIA's bid to become one of the most efficient and advanced airports in the region.'

Keppel FMO has worked with major clients such as Changi International Airport, Alexandra Hospital, Ministry of Home Affairs and Nanyang Technological University since 1985.

The American aviation authorities successfully negotiated a new free skies pact with China last year. However, it only opens up a limited capacity of new routes, so airlines are competing for these new rights.

AAHK appointed by Beijing Capital Airport to provide consultancy services

http://www.hongkongairport.com/eng/aboutus/photo/20041210_001.jpg

(Hong Kong, 10 December 2004) - Airport Authority Hong Kong (AAHK) has been appointed by its Beijing counterpart to conduct a study on the flow management of its baggage sorting system. A report will be submitted to the Beijing Capital International Airport before the end of this year.

To cope with additional demand on baggage handling capacity from more flights and passengers, Beijing Airport has plans to enhance efficiency of its baggage sorting system.

This is the second consultancy study that AAHK has undertaken for Beijing. Last year, AAHK was enlisted to conduct a study on security systems.

The scope of this baggage sorting system consultancy includes a study into the operation procedures and efficiency of the baggage system at Beijing Airport's Terminal 2. Also included is an assessment of the ultimate and actual capacity of the baggage system, as well as the management systems.

AAHK's Chief Executive Officer, Dr David J Pang, said with rapid economic and transport integration of Hong Kong and the Mainland, the sharing of experience will help provide enhanced service to all mainland travellers. The better mutual understanding also provides a solid foundation for further cooperation.

AAHK's Airport Management Director, Mr Howard Eng, said as aviation hubs, both Beijing Airport and Hong Kong International Airport face the same challenge - the challenge to raise efficiency and at the same time enhance service quality. The exchange of experience and knowledge can further enhance the competitiveness of both airports.



Hong Kong and Shanghai airports cooperate to boost hub status

http://www.hongkongairport.com/eng/aboutus/photo/20041213_001.jpg

(HONG KONG, 13 December 2004) - The Airport Authority Hong Kong (AA) will share with the Shanghai Airport Authority (SAA) its expertise and experience in airport management.

The two major aviation hubs today signed an agreement for AA to provide consultancy services to its Shanghai counterpart, in areas including terminal flow management, retail business operation and air cargo development.

The consultancy services agreement follows an earlier consultancy service on baggage handling system for another mainland aviation hub, Beijing Capital International Airport.

For Shanghai, AA has conducted studies and will make recommendations on the city airport's terminal capacity and operational management; retail business strategies, and air cargo and logistics development.

A study has been carried out to identify the capacity constraints and areas for operation improvements at the existing terminal of Shanghai airport. Recommendations to enhance the flow of arriving and departing passengers and customer service will be provided for Shanghai to maximize the handling capacity of its current terminal until a second facility comes into place in 2008.

Retail business strategies, encompassing tenant and merchandise mix, marketing plan, and service standards, will be proposed to the SAA after a research is conducted on market demands.

AA has also completed a review of the West Cargo Logistics Park Development project, a master landuse plan for the air cargo and logistics expansion at Shanghai airport. The review will be followed by suggestions on aviation and customs policies, landuse demand and planning, as well as infrastructure enhancement.

AA's Chief Executive Officer Dr David J Pang said, "The consultancy services crystallize the Letter of Intent we signed with the Shanghai Airport Authority in October last year to strengthen exchanges and promote closer co-operation between the two airports.

"Shanghai Pudong International Airport and Hong Kong International Airport both play a pivotal role in promoting international air travel in the Yangtze River and Pearl River Delta respectively. Communication and co-operation will doubtlessly contribute to reinforcing competitiveness of the two airports, in turn contribute to the country's economic development."

SAA Chairman, Mr Wu Nianzu, said, "We are pleased to have the opportunity to share with AA the experience in managing an international airport. The collaboration of the two airports will add impetus to the expansion of the market place and consolidate the status in the international aviation industry, a vision that is common to both airports."

AA's Commercial Director, Mr Hans Bakker, commended the personnel of both airport authorities for their dedication and efforts. "A platform has been established for the sharing of airport management knowledge and experience among aviation professionals from the two cities. This will mark the beginning of long-term and on-going co-operation.

The consultancy services will complete in five months. Other forms of exchanges between the two airports, including visits, training and conferences will be organized to further cement ties between the two airports.

Published December 31, 2004

China to halt plane purchases in 2005

(SHANGHAI) China, the world's fastest-growing aviation market, won't allow new aircraft purchases next year because it will have enough planes to meet travel demand, its aviation regulator said.

Increasing plane purchases may hurt air safety and service, Civil Aviation Administration of China Director Yang Yuanyuan said in a speech published in the CAAC Journal.

Airbus SAS and Boeing Co, the world's largest commercial planemakers, are vying for orders in China, where passenger traffic growth is forecast to exceed the global average in the next two decades. Boeing expects Chinese airlines to buy 2,400 planes worth US$197 billion in that period, making China the world's second-largest airplane market out of the US.

'They are receiving aircraft more rapidly than they can absorb,' said Paul Nisbet, a JSA Research Inc analyst in Newport, Rhode Island. 'China did the same thing several years ago and it lasted for only about a year. What happened then was they ended up with excess demand.'


Both Boeing and Airbus declined immediate comment. Mr Nisbet said China's decision won't affect 2005 airplane deliveries, which are already under contract.

'Boeing and Airbus are 100 per cent ordered up for next year's production,' he said. 'It could affect 2006 orders, but we don't know how long the ban will stay in place.'

Boeing on Oct 27 said it expected deliveries to rise 12 per cent to 320 next year from a forecast 285 this year because of demand from airlines outside the US, especially in Asia.

'Asia is very strong because that's where the traffic growth is,' Boeing CEO Harry Stonecipher, 68, said in a July interview. 'The Chinese need lots of airplanes, and they'll buy lots of airplanes.'

Air travel for China's carriers is forecast to expand 7.5 per cent annually, compared with 4.5 per cent growth in North America, Boeing said on its website. Next year, 147 planes will be delivered to Chinese airlines, Chinanews said on its website yesterday.


Boeing has said rising demand from Chinese travellers will translate into sales of its new 7E7 model. The company is counting on the 7E7 to regain market share from Airbus.


Boeing in November said it had 'high hopes' that airlines in China would soon place orders for as many as 80 of its 7E7s. So far it has received 52 firm orders for its 7E7. It had set a goal for selling 200 of the planes this year.

China contributed US$749 million, or 1.5 per cent, of Boeing's US$50.5 billion in total sales in 2003. Through November of this year, Boeing had delivered 261 planes, of which 16, or 6.1 per cent, went to Chinese airlines. - Bloomberg

Air China suspends flight to Phuket
(Xinhua)
Updated: 2004-12-29 09:57

Air China has suspended its two flights each week to Phuket of Thailand due to the tsunamis triggered by a strong earthquake on Sunday, according to sources with Air China.

Tourist companies such as China Travel International (CTI), Comfort Travel and Beijing Travel Service are working on compensations for the tourists who registered to travel there later this month. Previously the travel agencies have joined hands in using Air China's chartered flights since the beginning of the winter.

Air China sent a flight to Phuket Tuesday with no passengers to carry back those stranded in Phuket.

The travel agencies have paid for international calls of tourists to their families after the tsunamis happened, said Yang Weihong, an official in charge of southeast Asian market in CTI.

Yang said the route to southeast Asian market will be affected in the short term, however the negative influence on tourism will diminish gradually.

Tuesday December 28, 2:17 PM
Flag carrier Air China has no plan to help bail out oil trader CAO

BEIJING : Flag carrier Air China said Monday it has no plans to help bail out the embattled Singapore arm of the country's biggest jet fuel supplier, China Aviation Oil Holding Co (CAHOC).

"We have no plan and will not in any way help restructure or bail out China Aviation Oil (Singapore) Corp Ltd (CAO)," said Wang Yongsheng, spokesman of Air China, which listed in Hong Kong earlier this month.

Wang's comments were in response to earlier reports that Air China and domestic oil majors - China Petroleum Chemical Corp (Sinopec) and China National Petroleum Corp (CNPC) - would help CAO.

CNPC declined to comment and officials at Sinopec were not immediately available.

In November, before CAO announced a US$550 million loss from trading derivatives, its parent CAHOC set up a jet fuel joint venture with Sinopec and CNPC.

CAHOC holds a 51 percent stake in the joint venture company, while Sinopec holds 29 percent and CNPC 20 percent.

CAO has filed for court protection from creditors after declaring the massive trading loss.

It is under investigation by Singapore regulators for alleged irregularities while piecing together a rescue plan with the help of its parent.

AFP

Angry mob sparks airport chaos
Workers walk off the job as delayed travellers smash equipment and assault staff
Bill Savadove in Shanghai
1 January 2005
South China Morning Post

Scores of passengers angered by the handling of flight cancellations tussled with staff and smashed equipment at Shanghai's international airport late on Thursday.

Witnesses said hundreds of passengers stranded by a snowstorm filled the domestic section of the terminal of the Pudong International Airport, with sporadic outbreaks of violence erupting throughout the night.

Passengers criticised a lack of information and the authorities' slowness or failure to provide food and accommodation when it became apparent that the snowstorm would prevent normal operations from around 5pm on Thursday.

"At least they could have fed us or told us what was happening," said one woman waiting for a flight to Hong Kong.

The incident is a black mark for Shanghai, which is striving to become an international aviation hub.

Pudong airport, which can handle up to 20 million passengers a year, opened in 1999.

Airport workers said more than 100 passengers forced their way past security checkpoints to the domestic area's gates but were later removed by police. More than 10 police vehicles were still parked outside the airport at mid-morning yesterday, but it was not known if any people were detained.

Passengers clambered over check-in counters for domestic flights and surrounded ticket clerks, shouting at them and pushing and shoving. "I've been waiting almost 17 hours," said a businessman from Shandong province who was booked on a flight to Guilin that was supposed to leave at 6pm on Thursday.

Airlines provided transport and free hotels to some passengers, but others said they were forced to camp overnight in the airport. Shanghai closed its elevated highways and bridges on Thursday evening because of the snow, bringing transport to a halt.

When passengers returned in the morning, their anger flared again after many found flights remained delayed or cancelled. Although the airport re-opened yesterday morning, many scheduled flights had not arrived.

Airline staff apparently walked off the job amid the chaos yesterday, either fearing for their safety or waiting for the crowds to calm down. At least one computer was smashed by passengers.

"It was complete chaos," said a Beijing businesswoman who caught a flight yesterday morning.

Representatives of the airport and most airlines declined to comment. A China Eastern Airlines spokesman said: "Many flights were affected. We handled it as best we could."

Additional reporting by Minnie Yang

Shanghai's new runway will be ready in march
4 January 2005
South China Morning Post

The second runway at Shanghai's international airport will start operating in March, with a third to follow before the end of 2007 as part of the city's ambitious plans to create a global air hub.

The announcement, made through state media, marks the first time the city has released a timetable for the opening of the two new runways at Pudong International Airport. A fourth is planned, depending on market conditions.

A second terminal building is also scheduled to open in 2008. The new runways and terminal will be able to accommodate the Airbus A380 super jumbo, officials of the Shanghai Airport Group said.

Southern Airlines may order 20 Boeing 7E7s

(Agencies)
Updated: 2005-01-05 16:53

China Southern Airlines could be set to place a 2.4 billion dollar order for 20 of Boeing's new 7E7 jets.

The new fuel-efficient jets could be operational by the Beijing 2008 Olympics.

Last month, Chinese aviation authorities reportedly ordered a freeze on new commercial aircraft orders in 2005 in an effort to curb sharp and uncontrolled growth by domestic airlines.

However, airline company executives have shrugged off the new directive saying it would not affect development strategies as the ban only applied to new purchases in 2005 and not deliveries of existing orders.

Liu Shaoyong, a China Southern Airlines manager, said that the company's purchasing plans had already been decided and were not affected.

Boeing is said to have secured initial agreements with three other Chinese airlines, as well as Southern, for orders of 7E7s for delivery by 2008.

Wednesday January 5, 3:11 PM
China Southern Airlines may order 20 Boeing 7E7s

BEIJING (AFP) - China Southern Airlines, the country's top domestic carrier, could be set to place a 2.4 billion dollar order for 20 of Boeing's new 7E7 jets.

Boeing's new fuel-efficient jets could be deliverd by 2008, when the Olympic Games will be held in Beijing, the Beijing News reported, citing unnamed sources.

Last month, Chinese aviation authorities reportedly ordered a freeze on new commercial aircraft orders in 2005 in an effort to curb sharp and uncontrolled growth by domestic airlines.

However, airline company executives have shrugged off the new directive saying it would not affect development strategies as the ban only applied to new purchases in 2005 and not deliveries of existing orders.

Liu Shaoyong, a China Southern Airlines manager, was quoted as saying that the company's purchasing plans had already been decided and were not affected.

Boeing is believed to have secured initial agreements with four Chinese airlines for orders of 7E7s for delivery by 2008.

Boeing has so far received 126 orders for 7E7s, with 56 confirmed, leaving it short of its 2004 launch target of some 200. The aircraft is seen as crucial in the company's strategy as it faces up to ever increasing competition from Europe's Airbus.

The Boeing plane will carry around 217 passengers on routes of up to 15,700 kilometers (9,800 miles).

The world's biggest aircraft builder said the plane will use 20 percent less fuel than any similar sized jet while travelling at speeds of around 850 kilometers (530 miles) an hour.

i hope the continental will receive the right to fly into china

China to drive growth in air traffic
7 January 2005
The Nation (Thailand)

China looks set to lead the world's growth in passenger and cargo traffic in the next several years. Nophakhun Limsamarnphun reports in the final part of a series on the aviation business.

The International Air Transport Association (IATA), which groups more than 270 airlines worldwide, has forecast that global passenger and cargo traffic will grow at an annual average rate of 6 per cent until 2008.

Over the four years, China will likely head the pack, with a 12.5-per-cent annual growth rate in passenger traffic, followed by Poland, Hungary, the United Arab Emirates and the Czech Republic.

As for cargo traffic, the China-Netherlands route will likely see the highest average annual growth at 23 per cent. Next will be Poland-Sri Lanka, 21.7 per cent; Phillippines-Hungary, 18.2 per cent; China-Malaysia, 16.2 per cent; and Austria-China, 14.6 per cent.

Of the world's three most dynamic regions in terms of economic prospects, Asia comes out ahead of North America and Europe in most forecasts for the next four years. Asian growth is mainly driven by China, an increasingly dynamic India and a hesitant recovery in Japan, Brian Pierce, IATA's chief economist, said during a recent global media briefing in Geneva.

"China is set for powerful medium-term growth under its ongoing economic liberalisation policies and the investment boom that has been generated," Pierce said, adding that Asia's high growth prospects for the aviation industry are against the backdrop of a slightly weaker world economy projected for this year.

Giovanni Bisignani, IATA director-general, said: "It looks like we've finished 2004 with the strongest traffic rebound that the industry has seen since the 1991 recovery from the effects of the Gulf War. Expectations for the rest of the forecast period are in line with historical trends. If nothing changes in the operating environment, this is the start of a good news story for the industry."

As for last year, passenger and cargo traffic is expected to have grown by more than 10 per cent, with China and India being the main engines.

On China, Bisignani said its government appeared to be on the right track in promoting the aviation industry as 20 airports are being planned or are under construction, at a combined cost of more than US$160 billion (Bt6.3 trillion). This is to prepare for the high growth rates in both passenger and cargo traffic over the next several years and for the 2008 Beijing Olympics.

"Obviously, they have a vision that represents great challenges and opportunities for the rest of the world in terms of competition [for aviation business] and for investment funds. China has also adopted the 'open skies' policy for Shanghai and Hainan, for instance.

"It has also embraced new air routes and has prepared other policies for fast and balanced development of the aviation industry," Bisignani said in an interview with The Nation.

Thai passenger flights dry up, but airlines pitch in with aid
Danny Chung, Hong Kong Standard
January 10, 2005

Hong Kong and China-based airlines are in the front line of aviation industry efforts to relieve the suffering of millions of people caught up in the tsunami devastation.

China Southern Airlines, the mainland's biggest airline by fleet size, diverted commercial cargo services from Leige in Belgium, Amsterdam and Chicago to Shanghai and Shenzhen for emergency flights.

The airline said its passenger services have not been affected.

"We have not experienced a drop in leisure or business travel during this crisis," China Southern's senior advisor for international public relations Jeff Ruffolo said.

Cathay Pacific's chief executive, Philip Chen, said it has raised HK$3 million, of which HK$1 million came from staff. Cathay donated HK$1 million and also matched contributions from staff.

On the international front, British Airways said it will be donating 1 million (HK$14.7 million), half of which is cash and the other half free tickets and cargo space.

Thai low-cost carrier Nok Air has offered free tickets to doctors wanting to travel to Phuket. And AirAsia said that along with its "sister companies" Thai AirAsia and AWAIR of Indonesia, it has been flying in relief workers, air supplies and doctors to help with the clear-up operation.

"These relief efforts are not quantifiable," AirAsia said when asked about the cost.

While they help out with relief efforts, airlines are undoubtedly suffering from loss of business from the tsunamis.

Dragonair, which ran a thrice- weekly service to Phuket before the disaster struck, has suspended services until the end of the month. The suspension has been caused by a "severe drop in demand," a spokeswoman said.

According to the Centre for Asia Pacific Aviation (Capa), Air China, which recently listed on the Hong Kong stock exchange, suspended twice-weekly Beijing-to-Phuket services with no resumption date given.

Asiana of South Korea suspended services between Incheon and Phuket from December 30 until January 31.

Capa quoted Thai Air's estimate that the airline could lose 270 million baht (HK$53.59 million) from cancellations or postponements caused by the tsunamis.

Despite these setbacks, Capa is upbeat about the industry's ability to recover.

"Asia's aviation and tourism industry has demonstrated remarkable resilience in this era of the `constant shock syndrome', and will pull through this latest setback strongly," the centre wrote in a statement last week

It said the growing presence of low-cost carriers serving Thailand as well as confidence-restoring measures by Thai Airways and Thai tourism authority including industry groups such as the Pacific Asia Travel Association will restore demand for "attractively priced travel".

Cathay Pacific corporate communications manager for public affairs, Carolyn Leung, said she expected passenger loads will be affected but does not see a long-term loss.

Celestial Asia Securities analyst Tony Tong said since the Thai route is only one of many for most airlines, the effect of the tsunamis in Southeast Asia will not have a significant financial effect. Tong said airlines had other pressures such as interest rate rises in the US and the high price of oil.

China's Private Airlines Ready for Take-Off

BEIJING, Jan 11 Asia Pulse - China's first three private airlines are now ready for take-off and the deadline for all preparations is estimated to be the first half of the year.

Tuesday's China Daily quoted a reliable source as saying that the three companies, namely Ao'kai, United Eagle and Chunqiu, may take off during the May Day holidays at the earliest.

But the three companies refused to either confirm or deny an earlier media report that they would become operational during the Lunar New Year holidays.

Experts noted that more and more private companies are expressing an interest in China's lucrative aviation market.

(XIC)

China to lead world growth in air travel
Last Updated(Beijing Time):2005-01-11 10:23

China is expected to be the world's fastest-growing market for air travel.

The Chinese air passenger market, which numbered 21.9 million people in 2003, is forecast to turn in an average annual growth of 12.5 percent until 2008, the International Air Transport Association said in its year-end report.

"China will lead the global economic expansion for the foreseeable future, which will generate significant long-haul business traffic to and from North America," IATA said.

Kunming - Malaysia Airlines' 7th Chinese Destination

KUALA LUMPUR, Jan 8 (Bernama) -- National carrier, Malaysia Airlines (MAS) today announced the commencement of three times weekly direct services between Kuala Lumpur and Kunming, China, next week.

In a statement today it said that effective Jan 15, MAS' flight MH352 departs Kuala Lumpur at 0910 hours every Wednesday, Saturday and Sunday and arrives in Kunming at 1235 hours the same day.

The flight departs Kunming at 1355 hours and arrives in Kuala Lumpur at 1730 hours the same day.

A two-class configuration Airbus A330-200 aircraft with 187 Economy Class seats and 42 Golden Club Class seats will be deployed for this new service, providing a total weekly capacity of 687 seats in each direction.

MAS said that Kunming becomes MAS' 7th scheduled services destination in China after Hong Kong, Guangzhou, Beijing, Shanghai, Xiamen and Chengdu.

MAS added that the introduction of the new link was in line with the carrier's continued efforts to strengthen its market presence in China.

In conjunction with the launch, MAS is offering various Golden Holidays packages from Kuala Lumpur to Kunming, namely 4 days/3 nights Discover Kunming, 5 days/4 nights Mysteries of Kunming Tour, 8 days/7 nights Kunming Heritage Tour/Kunming Amazing Tour, 4 days/3 nights Kunming Exclusive /Free & Easy, with prices from as low as RM1,356 per person on twin-share basis.

On an A330 Aircraft, isn't this a little TOO big?

China's Private Airlines Ready for Take-Off

BEIJING, Jan 11 Asia Pulse - China's first three private airlines are now ready for take-off and the deadline for all preparations is estimated to be the first half of the year.

Tuesday's China Daily quoted a reliable source as saying that the three companies, namely Ao'kai, United Eagle and Chunqiu, may take off during the May Day holidays at the earliest.

But the three companies refused to either confirm or deny an earlier media report that they would become operational during the Lunar New Year holidays.

Experts noted that more and more private companies are expressing an interest in China's lucrative aviation market.

(XIC)


i dont like the names...

Airlines target migrant workers in spring rush - Ticket prices are slashed to tap overflow of passengers from stretched rail system
Annette Chiu
12 January 2005
South China Morning Post

The annual return of tens of millions of migrant workers to their homes during next month's Lunar New Year holiday, which badly strains the overstretched rail network, will take on a new dimension as regional airlines angle for a small share of the world's largest human migration.

Sichuan Airlines is offering a 65 per cent discount on 14 routes to factory, construction and other migrant workers, most of whom have never flown before.

Air fares from Beijing to Chengdu, Sichuan's capital, have been slashed to 500 yuan for migrant workers only. That is 25 per cent more expensive than a "hard bed" train ticket but still cheaper than the most expensive "soft bed" class.

"It's a promotion plan to build our brand," an executive from Sichuan Airlines said. "Although we can hardly cover costs with the low ticket price, it's a move to help migrant workers going back home for the Lunar New Year.

"It helps our image."

The special holiday fares for migrant workers highlight intense competition in the domestic airline industry, with smaller carriers in particular turning to niche markets.

"Not many workers can afford to fly back home, even with the discount," said Gary Zhang of Sun Hung Kai Research. "It's more like a gimmick for the airlines to launch such promotions. But they do show how competitive the domestic market is."

The mainland's rapid industrialisation has flushed huge numbers of peasants from rural areas into cities in search of work. It is estimated there are up to 150 million migrant workers in the country, most earning less than 1,000 yuan a month.

A spokesman for Xiamen Airlines said the Fujian-based carrier was considering a similar promotion for migrant workers.

"We are still working on aircraft deployment as capacity is always strained during the Spring Festival," he said.

The airlines are hoping to capitalise on an overflow of passengers from the stretched rail system. Each year, thousands of workers are stranded in cities during the holidays without a train ticket home.

Adding a twist to their rivals' strategy, Shenzhen Airlines hopes to boost demand on its thin traffic routes by encouraging migrant workers to bring their families to southern China instead.

Spokesman Hou Bin said the carrier would offer 60 per cent to 72 per cent discounts on more than 20 routes.

The airline's average load factor on routes to Shenzhen and Guangzhou from second or third-tier cities in the interior was about 30 per cent. But the carrier expects the cheaper tickets to help fill between 50 and 60 per cent of the seats.

"Although we cannot recover the cost by offering the discounts, filling the seats helps our income stream," Mr Hou said.

Published January 12, 2005

Cathay Pacific to service Shanghai freight

(HONG KONG) Cathay Pacific Airways announced yesterday that it will launch daily freighter services to Shanghai from Jan 27, further expanding the airline's mainland network and strengthening Hong Kong as the predominant gateway to the Chinese mainland.

Shanghai will be the second mainland city Cathay Pacific will serve. The airline resumed passenger services to Beijing on Dec 2, 2003 after a break of 13 years, and now operates daily services to the Chinese capital, according to Cathay Pacific.

Cathay Pacific has also been allocated rights upon designation to operate three weekly passenger services to Xiamen and will launch services in late February this year, subject to operational requirements, it said.

Cathay Pacific director and general manager Cargo Ron Mathison said, 'Cathay Pacific's new freighter service will connect the mainland's biggest commercial centres and provide direct links across the Cathay Pacific network from Shanghai to destinations throughout the region, and beyond to major markets in Europe and North America.'

'The service will further strengthen Hong Kong as a global logistics hub and gateway to the mainland and we plan to add additional freighter frequencies to Shanghai in the near future.' Mr Mathison added.

The daily freighter services to Shanghai will be operated by a Boeing 747-200 freighter aircraft, according to Cathay Pacific. - Xinhua

Thursday January 13, 10:15 AM
CHINA PRESS: Chinese Airlines Post CNY6.23B Profit In '04

BEIJING (Dow Jones)--China's civil aviation regulator said local airlines made a total profit of CNY6.23 billion in 2004, reversing the previous year's loss, the Beijing Morning post reports.

Three major state-run carriers - Air China Ltd. (0753.HK), China Eastern Airlines Ltd. (CEA) and China Southern Airlines Co. (ZNH) - contributed a combined profit of CNY5.39 billion last year, the report says, citing the Civil Aviation Administration of China.

That result boosted the whole civil aviation industry's profit to CNY8.69 billion in 2004, equivalent to the sum of profits recorded in the previous decade, the report says. The industry has posted losses in the last several years.

Passenger traffic totaled 120 million in 2004, up 38% on year, it adds.

Hainan's Meilan Airport 2004 passenger numbers up

HONG KONG, Jan 14 (Reuters) - China's Hainan Meilan International Airport Co. Ltd. (0357.HK) said on Friday passenger numbers at its Hainan island airport rose 24 percent from 2003 to 2004.

The increase was due to economic growth and a liberalisation of aviation rights allowing more international airlines to use the airport.

The Hong Kong-listed firm said in a statement 7.48 million passengers passed through Hainan's main airport last year, an all-time high, while cargo throughput in 2004 rose 21 percent to 98,482.5 tonnes from the previous year.

China Southern Airlines continues emergency airlift to Medan & Colombo
14 January 2005
M2 Presswire

BEIJING - China Southern Airlines, the largest airline in China, is continuing its 747 freight airlift of emergency medical supplies to the flood ravaged areas of Indonesia and Sri Lanka.

Today, a China Southern Airlines 747-400 departed from Beijing Capital Airport on route to Medan, Indonesia and then will continue onwards to Colombo, Sri Lanka. The emergency airlift includes 75 tons of food, medicine, tents and electric generators.

"Just because this disaster happened nearly three weeks old, does not mean that it has magically gone away. We all can do our part to alleviate the pain and suffering inflicted upon the innocent from this incredible natural calamity," said Mr. Li Kun, Executive Vice President, China Southern Airlines.

This 747-400 emergency airlift is the fifth such cargo flight conducted by China Southern since the massive earthquake and resulting tsunami slammed into South Asia on December 26.

Mr. Li added that each 747-400 freight airlift has also included local language interpreters.

China Southern has used both of its 747-400 freighters from its standard Europe/China and USA/China commercial service and has been pushing them into emergency airlift duty to Colombo, Sri Lanka and Medan, Indonesia.

The China Southern Airlines 747-400 freighter aircraft used in today`s emergency airlift will return to Shenzhen in Southern China from Colombo and then placed back into regular commercial service from China to Liege, Belgium.

All facets of China Southern Airlines' operations are participating in this unprecedented airlift of emergency supplies and medicines to these flood ravaged areas, including the airline's ultra-modern System Operations Control Center at the new Baiyun International Airport which is coordinating all air logistics and country clearance approvals.

波音7E7获中国大订单 三大航空集团拟购买50架


　　国内三大航空集团拟从波音公司购买50架7E7飞机，协议预计下月签署
　　被波音公司寄予厚望的“梦想飞机”7E7终于在中国市场上打了一个漂亮的翻身仗。记者昨日获悉，国内三大航空集团拟从波音公司购买50架7E7。如果双方最后达成协议，这将是继全日空航空之后，波音公司在其全新机型7E7上获得的最大订单。

　　昨日，东航高层向记者透露，东航、国航以及南航，正在计划购买总计50架的波音7E7，其中，东航购买的数量大概在15架左右。而之前也曾有媒体报道，南航计划购买20架波音7E7。

　　他透露，目前三大航空集团跟波音公司还在谈判当中。2月份，由民航总局和三大航空集团高层组成的代表团将赴美国波音总部考察，如果一切顺利，双方有望在那时签署协议。

　　对于此次三大航空集团为何选择波音7E7，这位高层并未作过多解释，他只是说这是一款新机型，在技术上有一些创新。

　　波音7E7是波音公司近十年来推出的唯一一款全新客机，也是波音公司寄望击败对手空客的“杀手锏”。但尽管波音公司一直不遗余力地在全球推广这款“梦想飞机”，效果并不如人意。

　　自2003年12月波音公司董事会批准，向全球各航空公司提供波音7E7销售建议书，至今已经一年多，由客户宣布的波音7E7订单和承诺共计只有126架，其中56架达成确认合同。而此前7E7飞机的销售人员一直宣称，到2004年年底，他们会获得200架的订单。

　　然而，如果此次来自中国的订单敲定，对于波音公司的7E7销售将是一个极大的鼓舞。而波音与空客在中国市场上的争夺局面，也将产生微妙的变化。

　　根据空客对市场的预测，全球市场对中型飞机的需求将达到3000架。处于发展初级阶段的中国市场充满了巨大的潜力，对中型飞机的需求将占到其中的20％。面对此次波音在中型飞机上的先行一步，空客方面目前拒绝发表任何评价。

　　基于对未来民航市场的判断是“小机型、多班次”，波音公司着力开发300座左右的波音7E7飞机，该系列飞机包括可载客200到300人的三种机型，航程为3500到8500海里（6500至16000公里）。

　　波音公司称，波音7E7的油耗将比现有的同级别飞机低20%，能为航空公司多提供45%的货运能力，其飞行速度更可达到0.85马赫，可与当今最快的宽体飞机相媲美。（索佩敏）


责任编辑：原晓晖 　　　　　　　　来源： 每日经济新闻

AAHK appointed by Beijing Capital Airport to provide consultancy services

http://www.hongkongairport.com/eng/aboutus/photo/20041210_001.jpg

(Hong Kong, 10 December 2004) - Airport Authority Hong Kong (AAHK) has been appointed by its Beijing counterpart to conduct a study on the flow management of its baggage sorting system. A report will be submitted to the Beijing Capital International Airport before the end of this year.

To cope with additional demand on baggage handling capacity from more flights and passengers, Beijing Airport has plans to enhance efficiency of its baggage sorting system.

This is the second consultancy study that AAHK has undertaken for Beijing. Last year, AAHK was enlisted to conduct a study on security systems.

The scope of this baggage sorting system consultancy includes a study into the operation procedures and efficiency of the baggage system at Beijing Airport's Terminal 2. Also included is an assessment of the ultimate and actual capacity of the baggage system, as well as the management systems.

AAHK's Chief Executive Officer, Dr David J Pang, said with rapid economic and transport integration of Hong Kong and the Mainland, the sharing of experience will help provide enhanced service to all mainland travellers. The better mutual understanding also provides a solid foundation for further cooperation.

AAHK's Airport Management Director, Mr Howard Eng, said as aviation hubs, both Beijing Airport and Hong Kong International Airport face the same challenge - the challenge to raise efficiency and at the same time enhance service quality. The exchange of experience and knowledge can further enhance the competitiveness of both airports.



Hong Kong and Shanghai airports cooperate to boost hub status

http://www.hongkongairport.com/eng/aboutus/photo/20041213_001.jpg

(HONG KONG, 13 December 2004) - The Airport Authority Hong Kong (AA) will share with the Shanghai Airport Authority (SAA) its expertise and experience in airport management.

The two major aviation hubs today signed an agreement for AA to provide consultancy services to its Shanghai counterpart, in areas including terminal flow management, retail business operation and air cargo development.

The consultancy services agreement follows an earlier consultancy service on baggage handling system for another mainland aviation hub, Beijing Capital International Airport.

For Shanghai, AA has conducted studies and will make recommendations on the city airport's terminal capacity and operational management; retail business strategies, and air cargo and logistics development.

A study has been carried out to identify the capacity constraints and areas for operation improvements at the existing terminal of Shanghai airport. Recommendations to enhance the flow of arriving and departing passengers and customer service will be provided for Shanghai to maximize the handling capacity of its current terminal until a second facility comes into place in 2008.

Retail business strategies, encompassing tenant and merchandise mix, marketing plan, and service standards, will be proposed to the SAA after a research is conducted on market demands.

AA has also completed a review of the West Cargo Logistics Park Development project, a master landuse plan for the air cargo and logistics expansion at Shanghai airport. The review will be followed by suggestions on aviation and customs policies, landuse demand and planning, as well as infrastructure enhancement.

AA's Chief Executive Officer Dr David J Pang said, "The consultancy services crystallize the Letter of Intent we signed with the Shanghai Airport Authority in October last year to strengthen exchanges and promote closer co-operation between the two airports.

"Shanghai Pudong International Airport and Hong Kong International Airport both play a pivotal role in promoting international air travel in the Yangtze River and Pearl River Delta respectively. Communication and co-operation will doubtlessly contribute to reinforcing competitiveness of the two airports, in turn contribute to the country's economic development."

SAA Chairman, Mr Wu Nianzu, said, "We are pleased to have the opportunity to share with AA the experience in managing an international airport. The collaboration of the two airports will add impetus to the expansion of the market place and consolidate the status in the international aviation industry, a vision that is common to both airports."

AA's Commercial Director, Mr Hans Bakker, commended the personnel of both airport authorities for their dedication and efforts. "A platform has been established for the sharing of airport management knowledge and experience among aviation professionals from the two cities. This will mark the beginning of long-term and on-going co-operation.

The consultancy services will complete in five months. Other forms of exchanges between the two airports, including visits, training and conferences will be organized to further cement ties between the two airports.


exchange of experience?? It looks like HK is giving one-way "exchange" of experience to China. Why does HK need experience from China anyway? What experience? HK airport is lot more efficient with great management skill than any airport in china.

China Southern leases 9 Boeing B737-800 aircraft

HONG KONG, Jan 17 (Reuters) - China Southern Airlines Co. Ltd. said on Monday it has agreed to lease nine Boeing B737-800 aircraft from GE Capital Aviation Services for seven years.

China Southern said the aircraft will be delivered from April 2004 to February 2006, but it did not say how much it will pay to lease the planes.

The Chinese carrier said the deal will enable the company to expand its flight network and enhance its competitiveness and operating capability.

Shares of China Southern have risen 4 percent over the past three months to close at HK$2.725 on Friday.

Beijing Capital Airport 2004 Passengers Up 43% On Year
17 January 2005

HONG KONG (Dow Jones)--Beijing Capital International Airport Co. (0694.HK) said Monday passenger traffic at the Chinese capital's airport rose 43% on year in 2004.

Around 34.9 million passengers used the airport during the year, of which 76% traveled on domestic routes, 20% on international routes, and 4% on Hong Kong and Macau routes.

The number of passengers traveling on domestic routes rose 41%, while passengers on both international routes and Hong Kong and Macau routes increased 51%.

The airline didn't give a reason for the increase, but the figures reflected a recovery from sharp falls in passenger numbers in 2003 due to the Severe Acute Respiratory Syndrome outbreak.

Aircraft takeoffs and landings at the airport rose 29% on year in 2004, it said. Of those, 78% were domestic flights, 18% were international and 4% were flights to Hong Kong and Macau.

The number of domestic flights rose 27% on year, international flights were up 38%, and Hong Kong and Macau flights increased 41%.

In 2004, the airport handled 668,690 metric tons of cargo and mail, up 1% from a year earlier.

-By Ruby Chan, Dow Jones Newswires; 852-2802-7002; ruby.chan@dowjones.com
-Edited by Sharon Buan [ 17-01-05 0506GMT ]

Airbus confirms in talks to sell A380s to China

TOULOUSE, France, Jan 18 (Reuters) - Airbus, confirming for the first time in public that it is negotiating to sell its new A380 superjumbo planes to China, said on Tuesday it hoped to finalise the talks by late March.

"I am very confident about a Chinese order by Easter," Airbus chief Noel Forgeard told reporters at a media launch for the A380, the world's largest civil jet.

Forgeard did not name the airline involved.

Easter falls on March 27 this year.

Airbus has previously said it is in talks with an Asian airline and industry sources said the potential buyer was Chinese.

Forgeard also said the first test flight of the huge A380 would be in early April. Airbus is keeping the precise date under wraps.

Wednesday January 19, 4:07 PM
Low-cost carriers a rising force in China's airline market

AP - Low-cost airlines will likely see business soar in the next decade in China - Asia's biggest domestic air travel market - finance company MasterCard International said in a report released Wednesday.

About 70 percent of China's 780 domestic routes are suitable for low-cost carriers, but the country's aviation industry has yet to capitalize on its potential, said the report, one of a series the company has released on Asian business trends.

China has a large airspace, a massive domestic market and easy connections with the rest of Asia, the report said.

"The real driver of change in the low-cost carrier industry is China," Yuwa Hedrick-Wong, MasterCard's economic adviser for the Asia Pacific region, said at a news conference on the report.

"When China starts to take the lead, the region will follow," Hedrick-Wong said.

The report estimated that low-cost carriers will account for 25 percent of the growth in air travel by 2013.

But it also pointed out numerous problems, chiefly a lack of basic transport infrastructure that is hindering investment in airlines, as well as an overly regulated market.

China has been on an airport-building binge and recently began accepting applications for new, privately owned budget airlines _ but low-cost air travel remains in its infancy.

"We are likely to see movement within China's low-cost carrier industry within the next 10 years," Hedrick-Wong said.

Shanghai Airlines says earnings more than doubled

SHANGHAI, Jan 20 (Reuters) - Shanghai Airlines , China's fifth-largest carrier by fleet size, said its 2004 profit more than doubled from 2003, when the travel industry was hit by Severe Acute Respiratory Syndrome, or SARS.

While not giving specific figures, the airline said in an unaudited results announcement on Thursday that profit would be more that twice as much as 2003's 91.9 million yuan ($11.10 million).

Earnings per share -- also unaudited -- would rise 50 percent year on year from 0.13 yuan per share in 2003, the airline said in a filing to the Shanghai Securities News.

In the third quarter of 2004, Shanghai Airlines' net earnings dropped 37 percent year on year, due to soaring oil prices. ($1=8.276 Yuan)

Air Canada to Introduce Non-Stop Service to Beijing From Toronto

MONTREAL, Jan. 20 /CNW-AsiaNet/ - Air Canada today announced that effective June 2, 2005 it will introduce non-stop service between Toronto and Beijing, further building its main Toronto hub with more non-stop flights to Asia and creating the first-ever direct link between eastern Canada and mainland China. Air Canada will operate four non-stop flights per week from Toronto to the Chinese capital, complementing its daily non-stop flights to Beijing and Shanghai from Vancouver, and twice daily Hong Kong flights including new non-stop service from Toronto.

In addition, in response to increased demand on its Vancouver-Shanghai route, Air Canada will replace its 189-seat Boeing 767-300ER service with larger 282-seat A340-300 aircraft during the peak demand season beginning June 1, 2005. With these new services, Air Canada is boosting seating capacity between Canada and China by 16 per cent and providing freight forwarders with 45 per cent more cargo tonnage from one year ago.

"China is the fastest growing aviation market in the world, and Air Canada's global network is well positioned to meet the needs of international travellers and freight forwarders. With the introduction of the first non-stop service to Beijing from our main Toronto hub, Air Canada is bringing the Americas that much closer to mainland China," said Duncan Dee, senior vice president of Air Canada, who was in Beijing on the occasion of Canada's trade mission to China this week. "Growing our non-stop services to China from both eastern and western North America provides customers more flexibility and choice. Combined with our major expansion of services throughout Latin America, also via our Toronto hub, Air Canada offers international travellers between Asia and South America the added convenience of avoiding U.S. transit visa requirements."

With an elapsed time of 13 hours 20 minutes westbound and 13 hours eastbound, Air Canadas new Toronto-Beijing service will save travellers more than three and a half hours in each direction compared to the Vancouver routing. Air Canada will operate the new route using 282-seat A340-300 aircraft. With a 10:00 departure from Toronto on Monday, Tuesday, Thursday and Saturday arriving in Beijing at 11:20 the next day, flight AC031 is timed to offer convenient morning connections from points throughout Air Canadas extensive global network, particularly in eastern Canada, the United States and Latin America. The eastbound flight, AC032, leaves Beijing at 13:20 on Tuesday, Wednesday, Friday and Sunday, and arrives in Toronto at 14:20 the same day, providing maximum connecting options throughout the Americas.

With the addition of Toronto-Beijing non-stop service, Air Canada will offer customers up to 13 non-stop flights per day in each direction between Canada and eight destinations in Asia. From its main hub in Toronto, the carrier operates non-stop flights to Hong Kong, Tokyo, Seoul and Delhi, the only non-stop link between North America and India. From its Pacific Asian gateway in Vancouver, Air Canada serves Hong Kong, Shanghai, Beijing, Tokyo, Osaka, Nagoya and Seoul with daily non-stop flights.

Air Canada has been ranked as the worlds safest airline, and in a 2002 survey of the worlds most frequent air travellers by travel information publisher OAG, Air Canada was voted best airline in North America for the second time in three years, and Air Canadas frequent flyer program, Aeroplan, was voted best in the world two years consecutively in 2002 and 2003.

Montreal-based Air Canada provides scheduled and charter air transportation for passengers and cargo to more than 150 destinations on five continents. Canada's flag carrier is the 13th largest commercial airline in the world and serves more than 27 million customers annually. Air Canada is a founding member of Star Alliance providing the world's most comprehensive air transportation network.

New airlines to take off for holidays
January 24, 2005

The mainland's fledgling private airline industry may take off in the first half, using busy holiday travel seasons to get their services off to a good start, state media said.

The first group of private airlines may begin operations during the week-long May Day public holiday, China Business Weekly reported Sunday, citing unnamed industry observers.

New rules by civil aviation authorities that took effect last week have set a low bar for entrants into the industry, allowing anyone with three planes to run an airline.

The rules, as reported earlier by China News Service, also permit foreigners to have up to 25 percent ownership in the companies.

At least three private-sector airline operators have received approval and plan to offer no-frills services, China Business Weekly said.

They include United Eagle Airlines in southwestern Chengdu, Air Spring in Shanghai and Okay Airways near Beijing, according to the paper.

It quoted United Eagle spokesman Hu Wenbin as saying the company's first three planes, all leased, could be in place before the end of the month.

Also suggesting an early start for the company, it placed an order of 350,000 metric tons of aviation fuel with China Aviation Oil last month, according to the paper.

United Eagle is likely to focus on offering cheap flights to the western frontier region, it said.

The main business for Shanghai-based Air Spring will be chartered flights and regional services within the mainland, according to the report.

Okay Airways will operate out of Binhai International Airport, about 200 kilometers from the capital, and will probably seek to carve out a niche for itself in the cargo business, the paper reported.

It cited unconfirmed reports that a fourth company, Huaxia Airlines, has also obtained approval to operate. The company is headquartered in southwestern Chongqing municipality.

No-frill carriers are spreading rapidly across Asia, with names such as Singapore's Tiger Airways, Malaysia's AirAsia and Thailand's Nok Air challenging established airlines.

Concerns have emerged in China that the industry will be crowded with large numbers of more or less qualified entrants, China Business Weekly reported.

The opening offered by the new rules could mean that eventually "every man and woman with deep pockets or financial backing from abroad" will want to set up an airline, it said.

The liberalization of a sector that a generation ago was still considered quasi-military is part of the mainland's struggle to meet demand for airline services, which is growing faster than the economy as a whole.

According to preliminary statistics from the civil aviation authorities, passenger volume topped 100 million last year, a rise of 38 percent from 2003.

AGENCE FRANCE-PRESSE

CHANGE THE NAMES..united eagle sounds so american...air spring sounds so chinese..and the okay airways sounds not ok...

China Aviation Indus To Focus On Competition - Analyst
24 January 2005
Dow Jones Chinese Financial Wire

China's tightly controlled aviation industry's reform process will focus on improving greater competition among airlines in 2005, Peter Harbison, managing director of Sydney-based Centre for Asia Pacific Aviation, or CAPA, said Monday.

'Changes in China's agenda include giving airlines freedom to choose routes and frequencies, set fares, and negotiate airport charges,' he said.

Last year, rapid liberalization and resurgent traffic growth dominated China's aviation industry, which bounced back after the SARS outbreak in 2003.

Chinese airlines' passenger growth rose 37% year-on-year to 120 million in 2004. Total profit by the country's airlines and airports last year was CNY8.7 billion - equivalent to the Chinese aviation industry's accumulated profit over the past 10 years.

The Chinese aviation authority expects the industry to grow 15% this year.

Budget airlines will also enter the mainland China market this year, Harbison said in a report issued at an aviation conference.

Starting with Qantas Airways Ltd.'s (QAN.AU) Singapore-based affiliate Jetstar Asia services to Shanghai, more budget airlines, including Singapore Airlines Ltd.'s (S55.SG) Tiger Airways, Thailand's Nok Air and Malaysia's AirAsia Bhd. (5099.KU), are expected to follow suit.

'While this will intensify pressure on yields, particularly to Southeast Asia, the pressures for new entry will also provoke liberalized access to new gateways,' Harbison said in the report.

Another challenge will be finding enough skilled personnel to accommodate demand, CAPA analyst Ian Thomas said.

China trains 900 pilots a year, less than half of the 2,000 pilots required to fly Chinese airlines' domestic and international routes.

As a result, Chinese airlines will increasingly need to send their pilots overseas for training in countries like the U.S. and Australia, Thomas said.

He also said the airlines would need to hire foreign crew to accommodate the airlines' growth. He said this will add to Chinese airlines' annual costs.

-By Abdul Hadhi, Dow Jones Newswires; 65/6415-4153; abdul.hadhi@dowjones.com
-Edited by Sharon Vong

Shenzhen Airlines dumps Boeing for Airbus over price: report

BEIJING, Jan 24 (AFP) - China's Shenzhen Airlines placed a one billion dollar order for 20 Airbus aircraft after its negotiations with Boeing fell through over pricing, state media reported Monday.

Shenzhen Airlines' purchase was part of a China National Aero-Equipment Import-Export Group contract signed with Airbus on December 6 in Beijing for 23 A320-series planes, the China Daily said.

All Chinese airlines make purchases through the state company.

Shanghai-based newspaper the Oriental Morning Post said Shenzhen Airlines, which has in the past only bought planes from Boeing, abandoned negotiations with the US company when they could not agree over pricing.

The report did not say when the negotiations took place.

A Shenzhen Airlines spokesman declined to confirm the report while an Airbus spokesman in Beijing said he was not aware of the order. Boeing was not available for comment.

China's commercial airline market is expected to be one of the world's largest in the coming years. Airbus has said it aims to raise its share of the Chinese fleet from some 25 percent presently to 50 percent soon.

British Airways Plans To Start Shanghai Flights
25 January 2005
Dow Jones International News

LONDON (Dow Jones)--British Airways Tuesday said that it plans to start flights this summer from London Heathrow to Shanghai in China, subject to approval by the Chinese authorities.

Robert Boyle, the airline's director of commercial planning, said: "We have flown to both Hong Kong and Beijing for many years and are keen to start services to Shanghai. The city is the powerhouse of the Chinese economy and, as the economy continues to grow, we believe there will be a great demand for our flights.

"Shanghai Pudong airport is due to open a second runway and we are talking to the Chinese authorities about securing take-off and landing slots in Shanghai for our flights. We hope to fly five times a week with a Boeing 777 aircraft."

British Airways said that its Shanghai plans have been boosted by the news that the British and Chinese governments have agreed to changes in travel visa rules which will make it easier for Chinese citizens to visit the U.K.

The airline flies currently from London Heathrow to Beijing four times each week with a Boeing 777 aircraft. This will increase to six times per week from June 2005.

British Airways flies also 17 times a week from London Heathrow to Hong Kong with a Boeing 747 aircraft, which will increase to 21 flights a week from June 2005.

Air China to buy 20 A330-200 aircraft from Airbus

HONG KONG, Jan 27 (Reuters) - Air China Ltd. , the country's biggest airline, said on Thursday it has agreed to buy 20 A330-200 aircraft from Airbus.

Air China said the catalog price for the planes was about US$2.86 billion, but said the total consideration for the deal was lower.

The airline said the aircraft will be delivered between mid-2006 and the end of 2008. The deal, which has been approved by its parent China National Aviation Holding Co., will be funded through cash from the company's operations and commercial bank loans.

The new planes "will principally serve routes to international destinations in Europe, Australia, North America and certain key domestic destinations such as Lhasa," Air China said in a statement.

Airbus -- controlled by European aerospace giant EADS -- and rival Boeing Co. are trying to tap into China's growth.

Both aircraft makers are trying to sell the country their latest and most expensive planes -- the Boeing 7E7 wide-body jet and the Airbus superjumbo A380.

Airbus CEO Noel Forgeard was quoted earlier this month as saying that China would probably buy the A380 soon, adding that he expected Air China to use the 555-seat double-decker jets for the 2008 Olympics in Beijing. Airbus is aiming to boost its share of China's commercial aviation market to 50 percent from a current 25 percent.

Boeing has predicted that China will become the world's second-largest commercial aviation market, behind the United States, within 20 years.

The company says China will need 2,300 planes over the next two decades as increasingly well-off Chinese take to the air.

Shares of Air China have dropped 10 percent to HK$2.675 since the stock debuted in Hong Kong on Dec. 15.

(US$1=HK$7.8)

Thursday January 27, 6:59 PM
ANA to boost Japan-China flights in FY 2005

(Kyodo) _ All Nippon Airways announced Thursday a group business plan for the coming fiscal year, featuring an increase in flights to and from China.

For the year starting in April, ANA intends to boost the number of its round-trip flights by 28 to operate 140 flights per week between Japan and China, it said.

ANA said it aims to respond to business-related demand by operating new flights linking Hangzhou with Narita airport near Tokyo and Chubu Centrair International Airport near Nagoya.

ANA will also consider flying larger aircraft between Tokyo's Haneda airport and Seoul's Kimpo airport, a route that an increasing number of travelers take.

Air Europa plans flights to China starting May 22

MADRID, Jan 27 (AFP) - Air Europa, Spains's third largest airline, said Thursday it would begin flights to China on May 22, two per week from Madrid to Shanghai and two a week from Madrid to Beijing.

The announcement by Air Europa came during the Spanish International Tourism Fair that opened here Wednesday.

The new service was made possible thanks to an accord reached in late November between Spain and China to increase the number of weekly direct flights between the two countries to 21.

Air Europa, established in 1986, operates 32 aircraft.

Friday January 28, 11:08 PM
Chinese Airlines Order 60 Boeing Jetliners

http://us.news2.yimg.com/us.yimg.com/p/ap/20050128/capt.se10201282239.boeing_china_se102.jpg
This computer-generated image provided bythe Boeing Co. Friday, Jan. 28, 2005 shows the tail logos of the six Chinese airlines who have agreed to order 60 of Boeing Co.'s 7E7 jetliners. The $7.2 billion agreement is the largest firm order to date for the much-hyped plane, which Boeing renamed Friday as the 787 Dreamliner. From left, the tail logos of Air China, China Eastern Airlines, China Southern Airlines, Hainan Airlines, Shanghai Airlines and Xiamen Airlines are shown. (AP Photo/Courtesy Boeing Co.)

AP - Chinese airlines signed an agreement with The Boeing Co. on Friday to order 60 of its new fuel-efficient 7E7 jetliners in a deal the company hopes will boost orders for the plane worldwide.

The $7.2 billion agreement is the largest firm order to date for the much-hyped plane, which Boeing renamed the 787 Dreamliner on Friday.

The plane, which will be able to fly nonstop to China from a host of U.S. cities, will be delivered in time for the 2008 Olympics in Beijing, Boeing and Chinese officials said.

At a signing ceremony at the Commerce Department, U.S. and Chinese officials called the agreement an important milestone in trade relations between the two countries.

China has been criticized in recent months for a swelling trade gap with the United States. The U.S. trade deficit with China through November was more than $147 billion, the largest trade deficit the United States has with any nation.

The announcement also gives Chicago-based Boeing a boost in its competition with European rival Airbus SAS for business in China, the world's fastest-growing airplane market.

The intensity of that rivalry was illustrated Friday as China Southern Airlines _ one of the six airlines involved in the Boeing deal _ also signed an order in Paris for five Airbus A380 "superjumbos." The deal for the 555-seat A380 is worth $1.4 billion at list prices.

Boeing has emphasized the flexibility and fuel efficiency of the 787 Dreamliner, which seats 217 to 289 passengers with a range of up to 8,500 nautical miles. Boeing says the jet will be 20 percent more fuel-efficient than comparable planes now on the market.

Li Hai, president of China Aviation Supply Co., a government agency that oversees China's airlines, said in Washington that China respects both jet makers.

"We believe both Airbus and Boeing manufacture an excellent aircraft. The fact we are here today ... fully shows the confidence of Chinese airlines in Boeing's product," he said.

Alan Mulally, president and CEO of Boeing Commercial Airplanes, called the Chinese order "a real validation" of the 787's potential market, and said the order's progress would be "watched very carefully" by airlines around the world.

Aerospace industry analyst Richard Aboulafia said the Chinese order is welcome relief for Boeing, which had watched as Airbus received a host of significant orders in recent months.

"There was a real concern that (Boeing) would be increasingly marginalized, because of its aging product portfolio, and obviously the 7E7 is reinvigorating their market standing," said Aboulafia, of the Fairfax, Va.-based Teal Group.

The new plane "had a very strong appeal to the Chinese," Aboulafia said. "Right now there are very few direct flights to Beijing or Shanghai from the U.S. Most of them stop somewhere."

Other Chinese airlines ordering the planes are China Eastern, Air China, Hainan, Xiamen and Shanghai airlines.

The 787 Dreamliner is scheduled to go into service in 2008. It competes with the A350 that Airbus plans to put into service by 2010.

Friday's pact brings to 116 the number of firm orders for the 787, Mulally said, adding that Boeing has tentative orders for another 70 planes.

Boeing has said the 787 will be priced at about $120 million each, although airlines usually negotiate discounts for large orders. The plane will be assembled in Everett, Wash., about 30 miles north of Seattle.

Mulally said the new order should produce a "modest" boost in jobs in the Puget Sound region. The more significant value is winning the confidence of China, which he said conducts among the most thorough evaluations of airplanes in the world.

While politics plays a role in any action involving the two countries, "the most important thing (for an airline) is to pick an airplane that works for you and makes you successful," Mulally said.

The largest order by a single airline for the 787 was placed last spring, when All Nippon Airways of Japan ordered 50.

Posted: 30 January 2005 1139 hrs

Airbus, Boeing throw down the gauntlet for China

SHANGHAI : China's purchases of more than 11 billion dollars' worth of Airbus and Boeing jets last week highlights the increasing importance of the Chinese aviation market as the two rivals battle for supremacy of the skies.

On Thursday flag carrier Air China agreed to a long-rumored deal to buy 20 A330-200 aircraft from Airbus worth 2.86 billion dollars, prompting French Transport Minister Gilles de Robien to call it a "political victory."

Celebrations at Airbus were shortlived however as US-based Boeing trumped its European foe with its own multi-billion dollar deal to sell its new fuel-efficient 787 Dreamliner to six Chinese airlines.

Boeing, which formally renamed the jet the Boeing 787 Dreamliner, signed Friday a preliminary agreement in Washington with Chinese officials for 60 aircraft worth 7.2 billion dollars based on catalog prices.

Air China, China Eastern Airlines, China Southern Airlines, Hainan Airlines, Shanghai Airlines and Xiamen Airlines will have at least one of the new 200-plus seaters by the 2008 Beijing Olympics, the company said.

"The 787's advantages in efficiency, economics, environmental performance and passenger comfort are perfectly matched for China's growing, world-class aviation system," said Alan Mulally, president and chief executive of Boeing Commercial Airplanes.

Not to be outdone, Airbus too signed another breakthrough deal Friday, this time for its new giant A380 to be delivered to China Southern Airlines, one of the country's top three carriers.

At list price, the order for five of the 555-seater superjumbos, the first sold in China, tops 1.4 billion dollars in a deal Airbus parent European Aeronautic Defence and Space Company (EADS) has been waiting to sign for months.

Analysts said the see-saw announcements underscore the high-flying stakes between Chicago-based Boeing and its larger rival as they maneuver for orders in China, where annual economic growth of more than nine percent has ramped up demand for air travel.

"The competition between the two manufacturers is very intense," said Li Lei, an airlines analyst at Huaxia Securities.

With both manufacturers locked in a global dogfight for sales of their new jets, China, which is expected to build up a fleet of 2,800 craft over the next 20 years and become the world's second-largest commercial aviation market after the United States, is a key battleground.

"In the longer term, China is going to be a very big market. There's going to be demand for a lot of different types of aircraft," said Peter Negline, an analyst from JP Morgan.

Boeing currently has more than a 60 percent market share in China but has lost ground over the past decade to Airbus, which aims to raise the share of its jets in the Chinese fleet from around 25 percent to 50 percent in the near future.

"Currently, Airbus is developing more quickly in China than Airbus," Li said. "But I think that the domination of Boeing will not change in the short run."

Last year Airbus soared toward its goal, outpacing its US rival here with orders for 58 aircraft, but Boeing's newest agreement bodes well for the company as it seeks to overcome disappointing sales of the 787.

"The 787 is an aircraft that will arguably fit very well into the operating fleets of a number of the airlines in China," said Negline.

That would be good news for Boeing which last year fell well short of its goal of getting 200 firm orders worldwide for the Dreamliner by the end of 2004. It managed only 56, with a further 126 declarations of intent.

Airbus in the meantime, including deliveries to China Southern, has a total 154 global orders for its A380.

But to continue winning orders in China both manufacturers will also have to navigate the fickle winds of Sino-European and Sino-American politics, analysts said.

"In China, the purchases of planes is not decided only by the airline companies, it depends on the willingness of the government," Li said.

Chris Sendor, an aviation analyst at DBS Securities in Singapore, added: "I am sure China is going to spread the wealth as far as who they are going to buy from."

- AFP

China Eastern used to fly Madrid-Shanghai route..it was cancelled because it's unprofitable..

China Eastern says to buy 15 Boeing B7E7

HONG KONG, Jan 31 (Reuters) - China Eastern Airlines Corp. Ltd. said on Monday it will buy 15 Boeing B7E7 aircraft from Boeing Co. but terms have yet to be discussed.

The airline said the planes were part of an agreement that China's import agency signed with Boeing last week. The deal for 60 new wide-body aircraft is worth US$7.2 billion.

No financial details were available.

China Eastern's shares, which have risen 8 percent over the past three months, edged up 0.62 percent to HK$1.62 in mid morning trade on Monday.

Chinese Airlines Achieve Normal Flight Ratio of 83.18% Q4 in 2004
China Industry Daily News
2005-1-31

Chinese airlines achieved a normal flight ratio of 83.18 percent in the fourth quarter of last year, with luggage and goods error rates standing at 0.0423 percent and 0.0045 percent respectively, the General Administration of Civil Aviation of China announced on January 28.

During the fourth quarter, Chinese airlines operated a total of 309,486 flights, including 257,430 normal flights and and 52,056 that were classified as non-normal flights.

China's Sichuan Airlines topped others with a normal flight ratio of 87.23 percent. However, China's three largest airlines, China Southern Airlines, China Eastern Airlines and Air China, scored the lowest in normal flight ratios among China's nine airlines.

Meanwhile, China Eastern Airlines, China Southern Airlines and Air China topped all Chinese airlines in the number of complaints received, receiving 26, 27 and 19 complaints respectively. Shenzhen Airlines and Sichuan Airlines were complaint-free.

Shenzhen Airlines, Shanghai Airlines and Orient Airlines topped all Chinese airlines in luggage error ratio rates, with rates of 0.0729 percent, 0.069 percent and 0.0645 percent respectively. On the other hand, Hainan Airlines, China Southern Airlines and Xiamen Airlines had the lowest luggage error rates of 0.0052 percent, 0.0069 percent and 0.0399 percent respectively.

Traveling abroad popular for Spring Festival
31 January 2005
By Qian Chunxian

BEIJING, Jan. 31 (Xinhua) -- With only one week before China's lunar new year, it is a tradition to clean the house, prepare for food and purchase gifts. However, Zou Peiyuan, a law firm employee, bought airplane tickets for his family trip.

"It is the first time that our whole family spent the New Year' s eve on board," Zou said, "when we arrive in Australia, it will be the beginning of the Rooster year. Of course, it is summer time. "

Air hostess Li Yan of Air China will welcome the first sunlight of the new year on board for the third time. "We will prepare special meal and interactive program for passengers on that day. Cabin crew and passengers will have a very good time," she said.

She added when she spent her first new year working a flight five years ago, the seats were less than 40 percent filled. Most of passengers were business people who could not return home before the spring festival because of a heavy work load. They were all anxiously looking at their watches, she said.

According to Chinese tradition, the whole family will stay at home and having a reunion dinner on the new year's eve.

But in the past two years, the plane has become increasingly crowded, mainly with tourists.

Statistics from Beijing travel agencies indicated that the number of outbound tourists will reach 28,000 this year, hitting the record high. Shanghai, Guangzhou and other big cities all have similar numbers.

"It used to be a quiet period in the airport years ago, nowadays, however, it becomes even busier than ordinary days," said Xu Zhanxiang, who worked in Beijing Capital Airport for nearly 20 years. The outbound and domestic tourists shared the market by half.

The outbound visitors will fly to traditional destinations such as Australia, Japan as well as new destinations such as Mauritius, Kenya, Italy and France.

Up to 300 flights nationwide will be added from February 6 to 10 on average daily, in order to meet the demand of passengers. The total passenger volume is expected to reach 12.6 million during the spring festival, up 12.5 percent compared with the previous year.

China's airlines coordinate pricing to improve profits

BEIJING, Feb 2 (AFP) - China's major airlines are coordinating ticket pricing on key routes to improve profits, one of the airlines said Wednesday.

"Air China, China Eastern Airlines, China Southern Airlines and Hainan Airlines are our code-sharing partners, but we also cooperate on pricing, especially on trunk routes such as between Shanghai and Beijing," a Hainan Airlines official said.

"That has been going on for quite some time now and has helped us avoid a price war," said the official, who spoke on condition of anonymity.

Hainan is China's fourth largest carrier and is partly owned by US financier George Soros.

It was not clear whether the country's smaller carriers, such as Shanghai Airlines, Shenzhen Airlines and Shandong Airlines, were also involved.

China Eastern declined comment while Air China and China Southern could not be reached.

The Financial Times reported Wednesday that the government has been gradually easing controls on airline ticket pricing, leading to price-cutting by the major players in the past.

Chen Feng, chairman of Hainan Airlines' parent HNA Group, told the paper the government, which has pushed consolidation in the industry in recent years, was "encouraging" the cooperation on prices.

He said the agreements helped airline profits recover last year after being hit in 2003 by the Severe Acute Respiratory Syndrome outbreak.

According to preliminary statistics from the civil aviation authorities, passenger volume topped 100 million last year, a rise of 38 percent from 2003.

Industry analysts quoted by the newspaper said they were skeptical about the extent of the collaboration since China's carriers are competing for market share.

AirAsia to launch low-cost carrier venture in China by year-end: official

KUALA LUMPUR, Feb 2 (AFP) - Malaysia's AirAsia, Asia's biggest and pioneering budget carrier on Wednesday said it plans to launch a low-cost venture in China by the end of 2005.

"We have already began talks with a few potential partners. It is progressing well. We definately hope to begin operation by the end of 2005," a top company official told AFP on condition of anonymity.

The official said the Chinese business venture would be similar to the Thai AirAsia model.

Thai AirAsia is a joint venture between AirAsia, with 49 percent, and Thai telecommunications giant Shin Corp., owned by the family of Thai Prime Minister Thaksin Shinawatra, which holds 51 percent.

The official said the planned China carrier would be based in southern China where most of the Malaysian business interests are located.

"We will mount flights to China from Thailand and Malaysia," he added.

Last December, AirAsia announced it would buy 40 Airbus aircraft and exercise the option to buy another 40 A320 jets, adding that it would launch flights to China by March to maintain its position as Asia's leading budget airline.

The new aircraft would be introduced gradually into AirAsia's fleet, including its Indonesian and Thai subsidiaries, with the first due for delivery in January 2006.

AirAsia chief executive Tony Fernandes said previously that Chinese authorities had given AirAsia preliminary approval to fly to China and it expected to start flights by March.

The airline is in the midst of securing approvals to fly to key Chinese cities such as Xiamen, Chengdu, Guangzhou, Chongqing and Hainan from Bangkok through its subsidiary Thai AirAsia.

Fernandes said the first destination in mainland China would likely be Xiamen. AirAsia already flies to Macau, the former Portuguese colony.

Analysts said AirAsia's entry into China would boost its revenue given strong trade ties and the 2008 Olympic Games in Beijing.

Malaysia was China's seventh-largest export market last year, while the mainland was Malaysia's fourth biggest.

Launched as a budget carrier in December 2001 with just two aircraft, AirAsia has defied the sceptics to become a significant player.

AirAsia currently has 26 Boeing 737 aircraft which will be phased out as the Airbus aircraft arrive.

AirAsia is targeting markets within three hours flight time of its hub, which gives it access to a 500 million population in SouthEast Asia, with operations in Malaysia, Thailand and prospectively in Indonesia.

It is also looking to India and the Philippines.

Air Mauritius offers to provide services during Chinese New Year
02 February 2005

Text of report by Mauritius newspaper L'Express web site on 2 February

Mauritius is one of China's most favoured destinations, says yesterdays edition of the China daily.

Besides traditional destinations such as Australia and Japan, the Chinese now favour Mauritius, Kenya, Italy and France, said the article.

Forecasts by Beijing travel agents predict that some 28,000 Chinese will spend New Year's day abroad. This is a record number. Other megapolis, such as Shanghai and Guangzhou, also expect a record number of departures for the New Year celebrations.

In order to deal with the growing number of travellers, some extra 300 internal flights have been planned between 6 and 10 February when the number of passengers will rise to 12.6m.

During his recent visit to China, Prime Minister Paul Berenger said that it is possible for this country to authorize Air Mauritius to serve Shanghai, Beijing and Canton from Hongkong. It is now up to Air Mauritius to decide on destination it would like to serve.

Vinci sells interest in Beijing airport

PARIS, Feb 4 (Reuters) - French construction giant Vinci has sold its 3.4 percent stake in Beijing airport operator BCIA through a sale on the Hong Kong stock market, it said on Friday.

The sale, which brought Vinci some 41 million euros after tax, will have no impact on its results, and came as part of an investment strategy that involves relinquishing minority stakes in airport firms in which it has no operational role, it said in a statement.

The sky's the limit for aviation in China
Hainan Airlines has eight 7E7s on order
By MURE DICKIE
02 February 2005
Financial Times

When the southern Chinese island province of Hainan decided to set up an airline in 1993, it could muster only Rmb10m (USDollars 1.2m) in initial investment - not enough, as one history of the company relates, "to buy even half an aircraft wing".

Hainan Airlines has come a long way since then. Last week, the carrier, now the core of China's fourth largest airline group, placed an order for eight new Boeing 7E7s with a list price of USDollars 960m.

That deal - part of a package of orders for 60 7E7s from Chinese airlines - offers only a hint of the ambitions harboured by Shanghai-listed Hainan Airlines and its parent HNA.

Chen Feng, HNA's ebullient chairman, says that in the next five to seven years the group wants to expand its fleet from 104 aircraft to about 200 - acquiring up to 20 new aircraft a year.

"We have two goals," Mr Chen says. "The first is to establish a high-quality aviation brand for the Chinese people and the second is to create a world-class company for China."

Such ambitions rest in part on the belief that China's newly consolidated aviation market is poised for a sustained period of expansion of more than 20 per cent a year, as the country's economic development sends annual income per head above USDollars 1,000.

Hainan Airlines has become the only regional airline that can significantly challenge the dominance of the country's three big airline groups, Air China, China Southern and China Eastern.

It has done so in part by being early to tap domestic stock markets to increase its capital base and by attracting investment from the likes of George Soros, the billionaire financier, who holds a 14.8 per cent stake in the listed company.

HNA is now preparing a big restructuring that will merge Hainan Airlines with other carriers acquired during a wave of government- sponsored consolidation in the sector. And Mr Chen is hoping to attract new investors through a private placement, while also considering a possible overseas listing for HNA's airline operations.

He is also optimistic that HNA can avoid the kind of loss-making pricing that has undermined Chinese airlines in the past.

HNA still faces considerable challenges, however. The group is still much smaller than the three big airlines. Even by Mr Chen's count, HNA has only 12 per cent of the market compared with Air China's 23 per cent, China Southern's 21 and China Eastern's 19 - an imbalance that could make it relatively vulnerable if price pacts break down.

Some observers are critical of a lack of clarity about the operations of the group, which also operates hotels and airports. Hainan Airlines was recently rapped by regulators for failing to disclose a transfer of Rmb440m to a trading company in Shaanxi Province.

Such complaints suggest that HNA might be wise to make disclosure a more prominent part of its much vaunted corporate culture.

After all, Mr Chen puts great store by the cultivation of moral values among HNA staff.

All group employees are required to read a 253-page tome on "Chinese traditional culture", edited by Mr Chen.

And Mr Chen, a high-profile member of China's ruling and atheist Communist party, is eclectic in his approach to corporate governance. Along with the words of the sages, HNA also looks to US corporate trend-setter General Electric for inspiration.

"HNA's corporate culture is a harmonious combination of east and west," he says. "It has the essence of traditional Chinese culture and also has the western 'Six Sigma' management method."

Air China Considers Lease of Super-Jumbo A380

BEIJING, Feb 4 Asia Pulse - Airbus China claimed yesterday that national flag carrier Air China could become another operator of the super-jumbo A380 of the European aviation giant, which recently won a big deal from China Southern Airlines.

Airbus China President Laurence Barron told China Daily yesterday that Air China is negotiating the lease of two of the double-decker jets with the International Lease Finance Corporation (ILFC).

"We expect a deal to be hammered out between the two sides, so that at least two airliners can use the A380 to serve the 2008 Beijing Olympics," Barron said.

ILFC has ordered five A380 passenger planes and five A380 freighters from Airbus.

According to the executive, Airbus and Air China enjoy close and sound business ties, as the Chinese flag carrier placed orders for 20 A330-200s in January and six A319s last year.

"These are all near-term transactions. We are also talking about other long-term deals with Air China, including the possible purchase of the A380 double-decker."

But the possibility of Air China directly purchasing the A380 remains unclear.

"It is still early to talk about the possibility. Our priority now is to wait and see whether the negotiations between ILFC and Air China can bear fruit," Barron stressed.

Air China remained tightlipped on the issue yesterday. "So far, I have not received any notice about the possible deal on the A380, no matter whether it is about leasing or purchasing," said Wang Yongsheng, Air China's press officer.

Another official from Air China's marketing department said on condition of anonymity that the carrier still remains hesitant about purchasing the A380.

Barron admitted that the possibility of China Eastern Airlines purchasing the A380 may also take quite some time.

"It may take some time for China Eastern to make a decision. But we believe airlines such as China Eastern will be interested in the giant plane, as their international business develops further in the future," Barron said.

For the time being, carriers like China Eastern still find it reasonable to operate their international long-haul routes using the Airbus A340.

But as the market further expands, they will come to the conclusion that larger and more efficient transport planes are essential to fly more passengers and to cope with more intense competition, Barron explained.

The Airbus regional manager also believes that the freighter version of the A380 will be successful in China since the country is in desperate need of more cargo capacity.

But since the A380 freighter will not be available for delivery until 2008, most of the attention is now on the passenger version.

"Anyway, it (the A380 freighter) will be an ideal cargo transporter and it is quite feasible for it to be operated on China routes," Barron said.

Airbus last month unveiled the A380, the world's biggest civil aircraft, in Toulouse. Shortly afterwards, the European aircraft manufacturer announced it received orders for five super-jumbo A380 planes from China Southern Airlines.

(XIC)

Boeing forecasts weekly flights between China, Europe to quadruple in 20 yrs
7 February 2005

BEIJING (AFX) - Weekly flights between China and Europe will more than quadruple over the next 20 years on robust demand for inter-continental air traffic, Boeing Co vice-president Randy Baseler, said.

There were 26 Europe to China city pairings, with 406 weekly flights, in 2003, a figure that will grow to 114 and 1,674 respectively by 2023, Baseler said in a statement.

'In my mind, the potential for new city pairs and frequency of flights between China and the world is virtually unlimited,' he said.

China has 12 cities with a population of five mln or more, as compared to just five metro areas each for Europe and North America, Baseler said.

Boeing last month signed a preliminary deal with six Chinese airlines for 60 787 jets, also known as the 7E7, with a listing price of 7.2 bln usd.

The jets, to be delivered from 2008, will seat between 200 to 300 passengers and consume 20 pct less fuel than existing planes of comparable size.

Chinese carriers that placed initial orders for 787s include flag carrier Air China, China Eastern Airlines, China Southern Airlines , Hainan Airlines, Shanghai Airlines and Xiamen Airlines.

(1 usd = 8.3 yuan)

China's Shenzhen Airlines to Purchase Its First Airbus 320

BEIJING, Feb 8 Asia Pulse - Shenzhen Airlines, based in Shenzhen City in south China's Guangdong Province, has signed an agreement with Airbus on the purchase of an Airbus 320, the first to be recruited into its fleet.

An official with the Shenzhen Airlines said the newly-purchased aircraft has more than 150 seats, which will be reduced to about 130 after it is delivered at the end of April this year.

Cutting the number of seats will enlarge the space between seats that will make passengers feel comfortable, the official said.

Launched in 1992 and becoming operational in 1993, Shenzhen airline company now has eight Boeing 737s. The airlines flies more than 30 domestic air routes linking Shenzhen with Beijing, Shanghai, Wuhan, Nanjing, Harbin, Chengdu and Haikou, among others.

(XIC)

Low-Cost Air Travel in China May Be About to Take Off
By Mei Fong
8 February 2005
The Wall Street Journal

IT TAKES three days for Tang Ronghua to journey by bus from the bustling coastal city of Wenzhou, where she works at a shoe factory, to the green farmlands of her hometown, Nanchong. She describes a nightmarish trek: the constant search for "toilets" by roadside bushes, the sweaty aroma of hundreds of bodies packed in close proximity, the fares that take a 40% bite out of her monthly salary, which amounts to about $120.

But this year, for the first time, the 23-year-old migrant worker took to the skies for the Chinese New Year holiday, which starts tomorrow. She paid the equivalent of $94 for a comfortable, 2 1/2-hour flight on Sichuan Airlines that took her close to home. Cleaving through the clouds was "just like science fiction," Ms. Tang recalls after arriving in Nanchong. She wonders how close she was to the moon.

Air travel in China, long a luxury enjoyed mainly by well-to-do or business travelers, is set to become more affordable for average Chinese over the next few years, industry analysts say. Recent plane-buying sprees by China's state-owned airlines have increased capacity, and competition is growing from low-cost, no-frills private airlines. At the same time, rising incomes are making it possible for more Chinese to fly.

Few expect JetBlue-style discounting to come to China's heavily regulated airline industry anytime soon. Still, foreign carriers are taking note of the popularization of air travel: Companies such as UAL Corp.'s United Airlines, Northwest Airlines Corp. and Japan's All Nippon Airways are increasing international routes from China and launching promotions for Chinese tourists. A China-U.S. aviation agreement last year will more than double the number of U.S. airlines allowed to serve China and quadruple weekly flights between the countries during the next few years.

The less expensive fares are a boon for inhabitants of the country ranked fourth in the world by area, where epic journeys by rail and road still are the norm and less than 10% of the population travels by air. Ms. Tang and thousands of other migrant workers are taking their first plane ride ever this holiday season. Many are taking advantage of deep discounts from regional airlines targeting travelers celebrating the start of the Year of the Rooster.

Private airlines also are poised to begin offering cheaper fares soon. Last year, the Civil Aviation Administration of China (CAAC) began allowing private companies to operate domestic flights; some may start flying early this year. Okay Airways, of Beijing, which has studied the business models of European budget carriers such as easyJet, says it will start services in March. United Eagle Airlines, based in the southwestern city of Chengdu, plans to offer cheap flights in western China; it has signed jet-lease contracts and is awaiting aircraft delivery.

China's new plane purchases by new and incumbent airlines are expected to boost seat capacity 15% during the next two years, industry analysts say. Last month, China's state-owned airlines collectively bought 60 Boeing 787s, the largest order for Boeing Co.'s new medium-haul jet.

The record for service and profitability in China's aviation industry has been "horrid," says Kevin O'Connor, head of transport research at CLSA Asia-Pacific Markets, Hong Kong. "But that's changing quickly." Indeed, China's aviation industry last year notched $1.04 billion in profit, equivalent to the sector's cumulative profit for the previous 10 years, according to CAAC. China's planes now fly at about 70% of capacity, compared with only 50% five years back. Aircraft usage averages about 10 hours a day, up from eight hours or less five years ago, Mr. O'Connor says.

Adding to the flying frenzy is the start of direct flights between Taiwan and China, the first nonstop commercial air traffic between the two sides in more than five decades. The services are set to run only for three weeks during the Chinese New Year holiday, but industry officials hope they could open a door to more-regular flights, at least during peak periods. China and Taiwan have had little official contact since splitting amid civil war in 1949, but business and cultural ties are flourishing.

Eager to impress, normally staid airlines on both sides of the Taiwan Strait have jazzed up in-flight meals and stitched up new flight-attendant outfits. Air China, China's international flag carrier, even is offering some unusual in-flight entertainment: saxophone-playing stewards.

Hector Yeh, the Taiwanese owner of a dumpling company, noticed the difference. On a flight from Taipei to Shanghai on Shanghai Airlines, Mr. Yeh dined on pot-stewed pork and Taiwanese-style noodles while waited on by attentive female flight attendants dressed in elaborate gold-and-red cheongsams, traditional, form-fitting Chinese dresses.

"They all took initiative," he says. "They were polite, and gentle. . . It was great. Normally it's nothing like that."

China's airlines don't have as much flexibility to adjust fares as their counterparts in other parts of the world. The government to some extent still regulates how much domestic airlines can raise or cut ticket prices. In addition, a shortage of pilots and the high cost of jet fuel make it difficult for airlines to make significant cost cuts, says Michael Chan, transportation analyst at BOC International, the Bank of China's investment arm.

"There's lots of growth and volume," Mr. Chan says. But "the biggest problem is whether all these airlines can manage costs and make money."

Airfares already have fallen since CAAC eased strictures on fare-pricing in 2003. Now China's state-owned airlines can discount fares as much as 40% without applying for official approval.

With competition heating up, airlines are looking for new ways to increase market share. The Chinese New Year holiday is a good time to do so. An estimated 430 million people will be on the move during this period, more than the combined population of the European Union countries. Some smaller airlines are tapping a previously scorned market: poorly paid migrant workers, many who traditionally could afford only one hometown visit a year, by train or bus.

Sichuan Airlines is offering a 65% discount to factory, construction and other migrant workers on some routes during the holiday. It has cut airfares from Beijing to Chengdu, capital of Sichuan province where many migrants originate, to a level comparable to train fares, about $70. Shenzhen Airlines is offering migrant workers discounts of 60% to 72% on 20 routes, while Xiamen Airlines is selling tickets from vans parked at train stations, hoping to attract would-be rail travelers.

With wages rising, some of China's 100 million migrant workers are getting affluent enough to be desirable customers, says Xiamen Airlines spokesman Huang Shaohui.

One such customer is Luo Yuan, a 20-year-old factory worker who paid the equivalent of $175 -- five times what she would have paid for rail fare -- for a roundtrip air ticket from Beijing to her hometown in Chongqing city in southwestern China.

Dressed in a new coat trimmed with fur, she nibbles on cookies and sips a Coke while waiting for her evening flight at Beijing's Capital Airport last weekend. She had arrived at the airport 10 hours earlier, unsure of what to expect for her first plane trip. She puts on a show of bravado as she prepares to board her three-hour flight. "If you're afraid, you shouldn't fly," she says.

Cui Rong in Beijing, Jason Dean in Taipei and James T. Areddy in Beijing contributed to this article.

HNA Group Wants to Launch Price Union
8 February 2005

HAINAN, February 08, SinoCast -- It is said that HNA Group (Hainan Airlines Group), one of the listed airlines companies in China, is trying for launching a price union with other main airline companies in China, but the information hasn't obtained confirmation from the main airline companies.

Rumors said that Air China, China Southern, China Eastern and HNA Group are setting the prices of the air tickets for some main lines so as to increase their profits, but the information hasn't obtained confirmation from Air China, China Southern and China Eastern.

Price wars put great pressures on airline companies, and the price union adopted by the aviation industry in 2003 generated some profits for the airlines, said Chen Feng, chairman of the HNA group.

Insiders said that the price union was unpractical under the market economy. In order to win passengers, airlines will not sell their tickets at fixed prices.

UPS opens three centers in China, plans 20 more

NEW YORK, Feb 9 (Reuters) - United Parcel Service Inc. on Wednesday said it has opened three new warehouse and distribution centers in China and plans to open facilities in 20 more cities to further expand its network in China.

The newest facilities, in the manufacturing centers of Shanghai, Suzhou and Futian, increase to more than 40 the number of logistics and distribution centers operated in China by UPS Supply Chain Solutions, or logistics, business.

UPS said it plans to open 10 more facilities in China this year and another 10 in 2006.

UPS, while experiencing an unexpected drop in its core U.S. package business, has had robust growth in its international and logistics businesses as global trade surges.

UPS is also boosting its express delivery operations in China as it proceeds with the takeover of that business from its Chinese partner, Sinotrans.

By the end of 2005, UPS will have direct control over its international express operations in 23 business locations across China covering more than 200 cities, which account for more than 80 percent of China's gross domestic product.

"The aggressive expansion of our logistics infrastructure allows our customers greater and quicker access to more of China than ever before," said Bob Stoffel, senior vice president, UPS Supply Chain Group in a statement.

The company said its logistics facilities in China are designed primarily to distribute textile and apparel, high tech, automotive and consumer goods for both export and import.

UPS shares closed Tuesday at $74.08.

Liberalisation to increase China demand for long-range aircraft
Annette Chiu in Seattle
17 February 2005
South China Morning Post

Increasing liberalisation of China's aviation sector will boost the country's demand for long-range 200 to 300-seater aircraft as more second-tier cities open up to international services, according to Boeing.

The United States aircraft maker estimates that by 2023, China will need 560 long-range twin-engined jetliners, which is what the company is marketing to airlines with its 777 and 787 series.

Randy Baseler, a vice-president of marketing at Boeing Commercial Airplanes, said more than 50 Chinese cities would be operating direct air services to the US by 2023, up from 15 in 2003, while weekly frequency would jump to 784 flights from 172.

"China will become a big economy like the US in 15 to 20 years. There's no reason not to believe the traffic demand is growing with the emerging middle class in the country," Mr Baseler said before the launch ceremony of Boeing's 777-200LR in Seattle on Tuesday. "Chinese people are doing business with the rest of the world and point-to-point traffic is growing."

China made its largest commitment to Boeing's long-range mid-size aircraft last month when the China Aviation Supplies Import and Export Group, the official agent for aircraft purchase, ordered 60 787s which seat up to 259 passengers on long-haul flights.

The aircraft will be distributed among Air China, China Eastern Airlines, China Southern Airlines and three regional carriers - Hainan Airlines, Shanghai Airlines and Xiamen Airlines, which are making use of a more liberalised aviation regime to tap into the international market.

"China will be a large market for 777 and 787 aircraft," Mr Baseler said.

While marketing of the 787 Dreamliner has been at full pace, Tuesday was reserved for the new version of Boeing's 777 model - the 777-200LR. It is the world's longest-range twin-engined commercial aircraft and can carry 301 passengers up to 9,420 nautical miles with fuel cost per seat 23 per cent lower than the Airbus A340-500.

Pakistan International Airlines (PIA) and Taipei-based Eva Air were the launch customers for the new aircraft, which cost US$125 million.

PIA director Sughra Junejo, which will take the first delivery in January next year, said the new aircraft would be used on routes between Karachi and Chicago, New York and Houston. She said it would reduce the flight time between Karachi and Houston by six hours to 141/2 hours.

A spokesman for Eva Air said it would take its first 777-200LR in 2008 but had yet to decide on its route deployment.

Although Boeing and Airbus have a similar projection on traffic demand and aircraft sales in the next 20 years, they have different views on demand for the largest aircraft in the market.

Boeing says the market will need 535 aircraft with more than 400 seats while Airbus puts the number at 1,250. Both expect sales of commercial aircraft will reach US$2 trillion in the next 20 years, while passenger and cargo demand will grow about 5 and 6 per cent respectively.

Mr Baseler said Boeing might develop an advanced model of the 747, to carry up to 450 passengers - a product viewed as a direct competitor to Airbus' 542-seat A380 launched at the end of last year.

He said a decision would be made in the middle of the year.

Business Daily Update
February 17, 2005
Emirates to Launch Dubai - Beijing Direct Flights

Emirates Airline of the United Arab Emirates plans to open direct flights between Dubai and Beijing in early 2006 to meet the demand for 2008 Beijing Olympics, said Emirates Greater China & Northeast Asia manager Liu Rongzhu. The first non-stop route between to the Chinese mainland connected Dubai with Shanghai beginning last April. "I believe more foreign international airlines will tap China's aviation market, along with China's increasing opening to overseas tourism and businesses," said Liu. "Emirates will develop more aviation services with China in the future." Emirates has been serving China with passenger flights to Hong Kong since 1991.

Baiyun airport accelerates Phase II construction
17 February 2005
Business Daily Update

Guangzhou's huge new airport in southern China will be engaged in major construction work starting next month, Xinhua reported.

The second phase construction project for Baiyun International Airport, which began operations in August, is expected to be completed by 2009 and come into operation the year after.

Once the project is completed, the airport would be able to handle 80 million passengers a year, up from 27 million now, according to an industry symposium held in Guangzhou, capital of the southern province of Guangdong.

By the end of the decade, the airport is also expected to be capable of processing 2.5 million tons of cargo, up from one million now, it said.

Baiyun International Airport, built at a cost of 19 billion yuan (US$2.3 billion), has so far opened 83 domestic and 28 international routes, and it plans to add another 15 international flights this year.

China industry: Flights between China and the US to become more frequent
7 January 2005
Economist Intelligence Unit - ViewsWire

The number of flights between the US and China will expand significantly in March, forcing Chinese airlines to compete against their much larger US competitors on US-China routes

Under a landmark agreement signed in late July last year by Norman Mineta, US transportation secretary, and Yang Yuanyuan, minister of the Civil Aviation Administration of China (CAAC), the number of carriers allowed to fly between the two countries is to double, and the number of weekly flights to increase fivefold, by 2010. Expansion started on August 1st last year, with a second major round scheduled for March. Liberalisation will continue on an incremental basis through the remainder of the decade, when, according to Mr Mineta, the countries will have reached bilateral co-operation just shy of an “open skies agreement”.

The agreement has been as well-received by US airlines as it has been criticised by their Chinese counterparts. The reasons are obvious. US airlines, which make significantly more on international routes than on domestic ones, are eager and ready to expand. In contrast, Chinese airlines are losing money on international services and, with much smaller fleets (and smaller planes), will anyway find it difficult to grow their services. Chinese capacity -- of everything from planes to runways to cargo handling facilities -- lags far behind that in the US. China has fewer than two dozen cargo planes capable of transpacific routes, for example.

The markets reacted accordingly. Following the announcement of the bilateral air services agreement, US share prices of major carriers with services to China, including United Airlines and United Parcel Service (UPS), rose significantly, while share prices of China Southern and China Eastern, the only listed Chinese airlines offering flights to the US, plummeted. Analysts expected then-unlisted flag carrier Air China, which operates nearly half (or 22) of all China-US flights, to suffer the most.

Fast take-off

Under the July agreement, each country will be able to approve a total of nine passenger and cargo carriers to operate 249 flights between China and the US each week. Under a previous agreement, signed in 1999, the countries were limited to just four carriers and 54 flights each. The 2004 deal will add 111 all-cargo and 84 passenger flights, allow carriers to fly to any destination in the other country, and remove all limits on code-sharing. Previously, Chinese airlines were restricted to 12 US destinations and US airlines to just five in China; code-sharing was only slightly less restricted.

In August 2004, in the first stage of the deal, each side was allowed to add 14 passenger flights between the two countries. The US was also allowed to approve an additional all-cargo airline for US-China service, while China was allowed to add one passenger or all-cargo airline.

The US Department of Transportation (DOT) was quick to dole out the new flights. United Airlines and Northwest Airlines, the only US passenger carriers already approved to fly to China, were each allowed to add seven weekly passenger flights from August 1st. United says it will add a non-stop Chicago-Shanghai flight, while Northwest has already added a Detroit-Guangzhou route, becoming the first US passenger carrier to fly to the Guangdong capital.

The next month the DOT announced that, effective immediately, Polar Air Cargo would be the fourth US carrier to provide all-cargo services between the US and China, and that it would share 21 new weekly all-cargo flights with the three others -- FedEx, Northwest Airlines and UPS. Polar, FedEx and UPS each added six flights, with three cargo flights allotted to Northwest (in addition to the seven passenger flights it gained in August).

Slow ascent

Chinese airlines, meanwhile, have announced no changes to pre-July flight schedules. This is because they lack the capacity and the financial wherewithal. The country’s three passenger airlines -- Air China, China Eastern and China Southern -- and one cargo airline -- China Cargo Airlines, an arm of China Eastern -- offering services to the US manage a total of just 48 flights each week. That is six fewer than was allowed under the 1999 bilateral agreement, and just over half the number now allocated to US carriers.

China is also dragging its heals on approving another airline to fly US routes. Under the deal, it could have added either a passenger or an all-cargo airline to serve the US in 2004. Hainan Airlines, China’s fourth-largest passenger airline, has applied for CAAC approval to add services to the US. Already operating international routes, it is a strong contender. Meanwhile on the cargo side, Air China Cargo -- set up by Air China, Beijing Capital International Airport and Hong Kong-based (though China-owned) CITIC Pacific in late 2003 -- is eager to compete with China Cargo Airlines on routes to the US.

The US airlines’ lead over their Chinese counterparts in transpacific flights will widen further in March, when the bilateral agreement allows for the addition of another passenger carrier as well as seven passenger and 18 cargo flights. The race is on in the US to be the next approved airline, which will be granted the seven new passenger flights. The DOT has said it will choose one of the applicants -- probably American Airlines, Continental Airlines or Delta Air Lines (though Hawaiian Airlines and North American have also applied) -- in time for that airline to start services on March 25th. The bidding has become heated on the DOT website, with each company claiming, among other things, to be better located geographically (American would fly from Chicago, Continental from Newark and Delta from Atlanta).

Why the risk?

The US has predictably jumped at the chance to expand into the Chinese market, adding carriers and flights as soon as the new agreement has allowed. But China has not responded in kind. Surely the Chinese authorities could have seen this coming, so why agree to allow such fast-paced liberalisation?

The move, though controversial in China, was necessary. The country’s international air transport system, and air cargo services in particular, remains woefully inadequate. For example, the vast majority of international air cargo -- what is not carried by China Cargo Airlines or in the bellies of Chinese passenger flights -- is handled by foreign airlines. Yet the government has strictly limited the number of those flights. (Foreigners will remain significant players under the new deal, however, and will be allowed to establish cargo hubs in China by 2007.) Meanwhile, the demand for air cargo services is climbing quickly. The CAAC expects China’s air cargo volume to expand by 10% a year, to reach 4.7m tons by 2010.

Of particular concern to China is that services connecting to the US are far short of where they should be. Last year the US took in some US$92.5bn-worth of Chinese exports, a year-on-year increase of 32.2%. Keeping goods flowing to the US, China’s largest export market, is crucial. Clearly, to continue expanding as a global exporter, air services must be similarly expanded.

But while the health of the economy in general and manufacturers in particular has been put before the immediate comfort of local airlines on the one hand, on the other hand these plans for liberalisation are intended to increase the fortitude of Chinese carriers over the long term. This will be possible with the support of other government policies. Access for foreign investment and participation in the sector has been greatly expanded since 2002, for instance, assuring that overseas financing and expertise will be available to assist with the transformation of China’s aviation sector. Moreover, the government has announced that it is easing restrictions on purchases of cargo planes, which could help solve the capacity problem and encourage the creation of other all-cargo carriers. It will be a tricky period for China’s air carriers. But by 2010, after facing off against the world’s largest airlines, they should emerge as stronger competitors.

SOURCE: Business China

Monday February 21, 4:31 AM
China's first private airline may take off next month

BEIJING (AFP) - China's first private airline could start operations as early as next month depending on the go-ahead from authorities.

Okay Airways is preparing to operate from its base at Binhai International Airport in Tianjin municipality near Beijing and has set its sights on a maiden flight on March 5, the Economic Observer reported.

"We plan to lease three Boeing 737s," Han Jing, a ranking executive with the company, told AFP. He declined to comment on the report that operations could begin in March.

Okay Airways expects to engage in air cargo and express services, passenger charter services and ground distribution, the China Daily newspaper said.

With Okay Airways seemingly just weeks away from take-off, the civil aviation authorities are preparing regulations on the use of private capital in the nation's airline sector, the newspaper reported.

"The draft version of the regulation has been completed," said Ma Zhen, deputy director of the aviation authorities' Department of Policy and Regulations.

"While helping to widen the investment channels, the regulation will also aim to limit monopolies over the civil aviation sector," Ma said.

No details have emerged yet about how much private capital the government plans to eventually allow into the civil aviation industry, the newspaper said.

However, Ma said the civil aviation authorities would still strive to ensure dominance by state-owned enterprises in the sector.

Okay Airways is not the only company trying to take advantage of the eased entry to the nation's rapidly expanding aviation industry.

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

The liberalization of a sector that a generation ago was still considered quasi-military is part of China's struggle to meet demand for airline services, which is growing faster than the economy as a whole.

According to preliminary statistics from the civil aviation authorities, passenger volume topped 100 million last year, a rise of 38 percent from 2003.

China Eastern Airlines Jan passenger numbers 1.29 mln, down 4.75 pct yr-on-yr
21 February 2005

HONG KONG (AFX) - China Eastern Airlines Corp Ltd, one of the mainland's big three carriers, said it carried 1.29 mln passengers in January, down 4.75 pct year-on-year.

But on a month-on-month basis, the airline's passenger numbers grew 3.56 pct last month, it said.

The airline did not give any explanation for the year-on-year drop in passenger numbers in January.

The passenger load factor -- the percentage of seats filled to total seats available -- fell 4.5 percentage points year-on-year in January to 58.95 pct, and declined 2.73 percentage points from December.

Meanwhile, the overall load factor, including cargo operations, eased 2.41 percentage points on a yearly basis to 55.28 pct in January, and fell 3.76 percentage points month-on-month.

US airlines battle for key routes
John Hughes
February 23, 2005

Lorance Hockert, a New York lawyer, flies to Beijing three times a year on Air China. Until now, he's had no other choice for the 13½-hour direct flight.

"I'd rather take a domestic carrier," says Hockert, a founding partner at Hockert, Warnock & Donnelly who helps US companies set up in China. He'll consider switching to Continental Airlines if the Houston-based carrier wins the right to start direct New York-Beijing flights.

Continental, American Airlines and 11 other US carriers are battling for new flights to China as they aim to tap rising demand for travel to the world's fastest-growing major economy.

The US Transportation Department will award 26 new weekly round-trip flights to as many as seven airlines as soon as this week, with services starting this year and next.

Growth on routes to China may be a bright spot for US airlines as they struggle to survive. The industry recorded US$33 billion (HK$257.4 billion) in losses between 2001, the year of the September 11 terrorist attacks, and 2004, as fuel prices rose and growing domestic competition forced down fares. China's air traffic probably grew 32 percent in 2004, more than double the global average, according to the Montreal-based International Air Transport Association.

"The fastest-growing market in the world right now is China," says Bill Hochmuth, senior research analyst at Minneapolis-based Thrivent Financial for Lutherans.

"For the airlines that can funnel passengers either into or out of China, it would be a huge coup."

Only two US airlines now offer passenger flights to the mainland: United Airlines, which operates daily direct flights to Beijing and Shanghai from Chicago and San Francisco; and Northwest Airlines, which flies daily from eight US cities to Beijing and Shanghai and six times weekly to Guangzhou, all via Tokyo.

By contrast, eight US carriers operated 315 weekly flights to Japan as of last August, according to the Transportation Department.

The United States is adding flights to the mainland under a 1980 aviation agreement that the two nations updated in July. Flights to Hong Kong are governed by a separate agreement.

American Airlines, the world's largest carrier, proposes to start a 14½-hour direct Chicago-Shanghai flight as more Americans travel to the fastest growing US export market.

China's economy expanded 9.5 percent last year, more than twice the pace of the United States.

"You've had tremendous growth in the demand for air travel to China and not much growth in supply," says Henry Joyner, senior vice-president of planning at American Airlines, which doesn't currently fly to China.

"We've been pushing very hard to get our foot in the door."

More flights to China will help underpin growth in the United States, where corporate profits and economic growth are increasingly dependent on trade with China, says Charles Hunnicutt, assistant transportation secretary to former US President Bill Clinton.

"China is the future in terms of the engine for economic growth," says Hunnicutt, who is now a lawyer at Robins, Kaplan, Miller & Ciresi in Washington.

"It's not just the airlines and not just the large companies. Whole communities have an interest in this."

United and Northwest are both competing for the new routes.

United proposes to add passenger services between San Francisco and Guangzhou, initially via Tokyo, and Northwest is applying to connect its cargo routes to Guangzhou and Xiamen, according to documents the carriers filed with the Transportation Department.

New contenders for passenger flights include American Airlines; Continental, which proposes routes from Newark to Beijing and Shanghai; Delta Air Lines, which aims to serve Beijing from its Atlanta base; Hawaiian Holdings, which is offering San Diego-Shanghai flights via its Honolulu base; and North American Airlines, applying to fly from Oakland, California, to Shanghai and Guangzhou via Honolulu.

Cargo carriers competing for flights include Memphis-based FedEx and Atlanta-based United Parcel Service.

Higher profits on routes to China would offer US airlines a reprieve from money-losing routes at home.

American Airlines' proposed seven weekly Chicago-Shanghai flights would carry an estimated 136,552 passengers in their first year, the carrier said in its application to the Department of Transportation - 78 percent in economy class, 15 percent in business class and 7 percent in first class.

That would generate an estimated US$215 million in annual ticket sales, based on fares United charged for Chicago-Shanghai flights departing in February and returning a week later. While that's a tiny share of American's US$18.6 billion in total 2004 revenue, long-haul international flights are more profitable than domestic routes.

US-China routes are especially valuable because the governments restrict flights between their countries, says Scott Yohe, Delta's senior vice president of government affairs. The 26 new flights being awarded will take the number of weekly US-China flights to 133, still less than half the number to Japan. Another 116 will be added by 2010 under the July agreement.

"There are only so many opportunities to fly to China from the United States," says Yohe. "There is a scarcity there that translates into an asset that has value."

BLOOMBERG

Hmmm.....so airlines like Deer Jet are owned by the government?

Wednesday February 23, 6:55 AM
American, Continental Win China Route

AP - American Airlines and Continental Airlines on Tuesday won tentative government approval to begin nonstop passenger service from the United States to China, defeating Delta Air Lines Inc. for the right to serve a growing travel market.

American, a unit of AMR Corp., said it would begin flying from Chicago to Shanghai in April 2006, while Continental Airlines Inc. said it would fly between Newark, N.J., and Beijing but did not announce a date.

UAL Corp.'s United Airlines and Northwest Airlines Corp. already fly between the two countries.

The announcements by American and Continental came after the Department of Transportation proposed granting them authority for the flights. The agency also awarded new cargo service to four carriers: FedEx Corp., Northwest Airlines Corp., Polar Air Cargo and UPS Inc.

The agency said it would issue a final decision on the awards after reviewing comments on its proposals. The comments are due March 4.

China and the United States signed an aviation agreement last July to expand service between the two countries and drop most restrictions on each other's airlines. The pact increases the numbers of passenger and cargo flights allowed by Chinese and U.S. carriers in stages over the next six years, rising from the current 54 per week to 249. The deal is intended to ease shortages of seats that have prompted complaints from tourists and business travelers.

Other carriers that applied to become new entrants in the U.S.-China passenger market in either 2005 or 2006 were Delta, Hawaiian Airlines and North American Airlines. Evergreen International Airlines, Gemini Air Cargo and World Airways applied for the all-cargo flights.

American's chairman and chief executive, Gerard J. Arpey, expressed gratitude after the Fort Worth-based carrier was picked over the other carriers.

"For more than five years, we have wanted to fly to China and have believed that American's service will provide the strongest possible competition in this growing marketplace," Arpey said in a statement. "This award for new service starting in 2006 will be a big breakthrough for us in the Asian market."

American had lined up significant support in Congress, especially among lawmakers from Texas and Illinois. The flights will link China to Chicago's O'Hare Airport.

Larry Kellner, Continental's chairman and CEO, said nonstop flights to Beijing from the New York area would be a boon to business travelers. Continental launched daily service between Newark and Hong Kong in March 2001.

Delta did not immediately return a call for comment. Hawaiian spokesman Keoni Wagner said "we're disappointed, but China remains an aspiration of ours."

Dan McKinnon, president of privately-held North American, said his airline was the only low-cost carrier in the bidding but that regulators seemed more concerned with American's ability to offer competition against United on the Chicago-China route.

Strong US economy encourages Asia/Pacific airlines to add capacity - CAPA
22 February 2005

SYDNEY (AFX) - The strengthening US economy is fuelling passenger and cargo demand, prompting several Asia/Pacific carriers to add capacity to New York, including Air India, Cathay Pacific, and Qantas, the Center for Asia Pacific Aviation (CAPA) reported.

The Sydney-based aviation industry consultancy said New York, seen as key premium market, is a priority route for several carriers rolling out inflight services upgrades, such as inflight connectivity.

CAPA said new aircraft equipment is also allowing Asian carriers to serve New York non-stop, with Singapore Airlines, Emirates Airlines and Thai Airways now going head-to-head with ultra-long haul services.

It said US carriers are also looking more closely at Asia, as they expand international routes in response to tough market conditions domestically.

The firm noted Continental Airlines has won new daily services rights to China available from next month under the recently expanded US-China bilateral air services agreement.

Continental plans to launch a non-stop B-777 service to Beijing from New York-Newark.

According to the US Department of Transportation (DOT), 'the most serious service deficiency is the lack of US-carrier nonstop service to China from New York, which represents by far the largest US-China market in this proceeding.'

On Tuesday DOT selected Continental Airlines and American Airlines as new entrants in the US-China air market, as well as awarding new weekly cargo services to four carriers currently serving the market.

The draft decision covered Continental Airlines providing a daily Newark-Beijing passenger service, effective from March 25 this year, and American Airlines providing a daily Chicago-Shanghai service effective from March 25, 2006.

Federal Express, Northwest Airlines, Polar Air Cargo and United Parcel Services were each awarded three weekly freighter services, effective March 25, 2006.

Continental Airlines said it commended DOT for opening the door to new competition between the US and China.

'Business travellers will appreciate how easy and convenient it is to use Continental to access Beijing's thriving network of high-tech industries and manufacturing plants,' Continental Airlines chairman and chief executive Larry Kellner said in a statement.

American Airlines also welcomed it being chosen to service the China/US route, saying that for more than five years it has wanted to fly to China.

'This award for new service starting in 2006 will be a big breakthrough for us in the Asian market,' the airline's chairman and chief executive Gerard J. Arpey said in a statement.

Delta "bitterly disappointed" over losing China flights bid
23 February 2005

ATLANTA (AP) - Delta Air Lines has lost a bid to begin making nonstop flights to China.

Instead, the government awarded passenger flight rights to Continental and American airlines.

The U.S. Department of Transportation announced the tentative awards Tuesday, which also gave UPS, FedEx, Northwest Airlines and Polar Air approval for more cargo flights. The Transportation Department gave the flight rights under terms of an updated U.S.-China air treaty.

The agency said it would issue a final decision on the awards after reviewing comments on its proposals. The comments are due March 4.

But for now, Atlanta-based Delta is left as the only one of the five largest airlines without nonstop flights to the world's most populous nation.

"We're bitterly disappointed," Delta spokesman John Kennedy said.

Beijing flights would have given the struggling airline another major Asian destination and a foothold in a travel market with huge potential.

Kennedy noted Chicago will eventually have three daily flights to China as a result of the government's decision, while Atlanta will have none.

"We are at a loss to understand why the DOT has chosen to increase service at an already established gateway while totally ignoring their own precedent of opening new gateways to underserved areas of the country," he said.

Delta said it plans to challenge the decision.

Currently, Northwest and United are the only U.S. carriers with nonstop flights to China. American plans to operate its new flights from Chicago, while Continental will fly from Newark, N.J.

The Transportation Department said it chose Continental because the Houston-based carrier proposed to begin offering daily nonstop flights to China from the East Coast a year earlier than Delta would have. New York is the largest U.S. market for flights to China, the agency said.

American Airlines, which is based in Fort Worth, Texas, beat out Delta with its application to fly from Chicago to Shanghai starting next year because it increases competition with United and Northwest airlines and serves a larger market than Delta's proposal.

Delta remains a smaller player in Asia, with flights to Tokyo and Mumbai, India. It also sells seats aboard China Southern flights between Los Angeles and Guangzhou, China.

China and the United States signed an aviation agreement last July to expand service between the two countries and drop most restrictions on each other's airlines.

The pact increases the numbers of passenger and cargo flights allowed by Chinese and U.S. carriers in stages over the next six years, rising from the current 54 per week to 249. The deal is intended to ease shortages of seats that have prompted complaints from tourists and business travelers.

Delta stalls, UPS gains in China sky sweepstakes
RUSSELL GRANTHAM, DAVE HIRSCHMAN
23 February 2005
The Atlanta Journal - Constitution

For Atlanta travelers, it looks like today's version of the slow boat to China --- a connecting flight --- is still the only way to get there from here.

Delta Air Lines lost its bid to begin nonstop flights between Atlanta and China, with the government instead awarding new passenger flight rights to Continental and American airlines.

"We're bitterly disappointed," Delta spokesman John Kennedy said. Beijing flights would have given the ailing airline a marquee Asian destination and a toehold in a travel market with huge potential.

While Delta lost out, Sandy-Springs-based UPS got three additional cargo flights to China from other U.S. cities, which will boost its total to 21 per week.

The U.S. Department of Transportation announced the tentative awards Tuesday. In addition to UPS, FedEx, Northwest Airlines and Polar Air also got approval for more cargo flights. The DOT doled out the flight rights under terms of an updated U.S.-China air treaty.

Atlanta-based Delta is the only one of the five biggest airlines without flights to the world's most populous nation. Delta unsuccessfully sought approval for flights to China from New York and Cincinnati in 2000.

Northwest and United are the only U.S. carriers with nonstop flights to China, from Chicago and San Francisco. American plans to operate its new flights from Chicago, while Continental will fly from Newark, N.J.

Kennedy noted Chicago will eventually have three daily flights to China as a result of the government's decision, while Atlanta will have none.

"We are at a loss to understand why the DOT has chosen to increase service at an already established gateway while totally ignoring their own precedent of opening new gateways to under-served areas of the country," the Delta spokesman said.

Delta said it plans to challenge the decision.

Sooner was better

The DOT said it chose Continental because the Houston-based carrier proposed to fill "the most serious service deficiency" in the nation by offering the only daily nonstop flights by a U.S. carrier to China from the East Coast a year earlier than Delta would have. The agency said New York is the largest U.S. market for flights to China.

American, based in Fort Worth, Texas, edged out Delta with its application to fly from Chicago to Shanghai starting next year because it increases competition with United and Northwest, and serves a larger market than Delta's proposal, according to the DOT.

Kennedy said Delta will continue to pursue flying rights to China. "We believe we had the superior case," he said. "The [passenger] feed through Atlanta dwarfs any other city."

Delta is a bit player in Asia, with flights to Tokyo and Mumbai, India. It also sells seats aboard China Southern flights between Los Angeles and Guangzhou, China.

For UPS, the three added flights will build on an already lucrative business for the cargo shipper.

China is the world's fastest growing air cargo market, and UPS started flying its own planes to China in 2001. It now has 12 flights a week, with authority to boost that to 18 this year.

Profitable routes

UPS officials said they initially expected each China route to bring in about $50 million in revenue, but actual performance has surpassed that.

UPS' overseas profits topped $1 billion for the first time in 2004, with China exports skyrocketing 125 percent and Asia exports surging 34 percent.

The shipping company's international ambitions used to focus on Europe. More recently it shifted to Asia, where UPS has begun next-day deliveries throughout much of the region and long-range flights to Europe and the United States.

UPS paid $100 million to buy out a portion of Chinese state carrier Sinotrans and will run its own operations in China's largest cities by the end of the year. UPS' logistics subsidiary, Supply Chain Solutions, is expanding services to corporate clients there.

The biggest challenge to UPS and FedEx is the U.S.-China trade imbalance. Cargo planes are typically full of electronics, consumer goods and high-end textiles on eastbound flights, but they are nearly empty or loaded with relatively low-value air freight flying west.

John Wheeler, a UPS spokesman, said the company is counting on a growing Chinese middle class to fuel future demand for U.S. exports.

"We're telling our customers that we'll be in a position to help them sell their products in China as the middle class there grows," he said.

Lufthansa to launch non-stop daily flights to Guangzhou

SHANGHAI, Feb 24 (AFP) - German airline Lufthansa said Thursday it will launch a non-stop daily service between Germany's financial centre of Frankfurt and the southern Chinese city of Guangzhou to strengthen its position in the Asian market.

Lufthansa currently serves Guangzhou with a daily service from Munich via Shanghai, but the new non-stop route beginning in late March would shave five hours off the journey time.

The carrier also plans to add new services to other Asian destinations including three new weekly flights from Frankfurt to Hyderabad in India.

It would also add two extra flights to its five weekly flights from Frankfurt to Nagoya in Japan, the company said.

Business Times - 25 Feb 2005

Beijing's airport says Jan passenger traffic rose 18%

HONG KONG - Beijing Capital International Airport Co on Friday said passenger traffic at the Chinese capital's airport rose 18 per cent in January compared to the same time last year.

Around 2.92 million passengers used the airport during the month, of which 79 per cent travelled on domestic routes, 18 per cent on international routes and the rest on Hong Kong and Macau routes.

The number of passengers travelling on domestic routes rose 21 per cent and passengers on international routes were up 11 per cent. But those travelling on Hong Kong and Macau routes fell 10 per cent.

The Hong Kong-listed airport didn't give a reason for the changes.

Aircraft takeoffs and landings at the airport rose 12 per cent on year in January, it said. Of those, 79 per cent were domestic flights, 18 per cent were international and the rest were flights to Hong Kong and Macau.

The number of domestic flights rose 11 per cent on year, international flights were up 18 per cent, and Hong Kong and Macau flights increased three per cent.

In 2004, the airport handled 60,557 metric tons of cargo and mail, up 44 per cent from a year earlier.

Copyright © 2005 Singapore Press Holdings Ltd. All rights reserved.

China's Okay Airways Receives Its First Boeing 737-900
27 February 2005

SHANGHAI (Dow Jones)--China's Okay Airways Company Ltd. has received its first Boeing 737-900 airplane, Boeing Co. (BA) said in a statement posted on its Web site.

Okay Airways is China's first private airline and is expected to begin operating early next month, Boeing said in a statement dated Friday. Okay Airways has received its business license as a public aviation carrier from the Civil Aviation Administration of China, Boeing said.

Boeing said the new airline will begin with charter passenger services, domestic air cargo, and mail transport and express service from its base in Tianjin, a city in eastern China.

The Chinese airline has an agreement to sublease two 737-900s from Korean Airlines, the statement said. The airplanes are owned by Boeing Capital Corp, it said.

Okay Airway's 737-900s will be used primarily in passenger service, initially for routes such as Tianjin to Kunming, Changsha, Zhang Jiajie, Guilin, Hohhot, Taiyuan, and Harbin, Boeing said.

China's air industry is dominated by three major state-controlled international carriers - Air China, China Southern Airlines Group and China Eastern Airlines Group.

Beside the three major carriers, China's domestic air industry is serviced by various regional airlines usually backed by the provincial or municipal authorities.

Earlier this month, the state-owned China Daily reported that the CAAC was expected to issue a license to Okay Airways to operate as the country's first private line.

Three other airlines are expected to follow Okay Airways as private carriers: Shanghai-based Spring International Airlines, Chengdu-based Eagle Airlines, and Huaxia Airlines in Gansu Province, the newspaper said.

Pakistan Int'l Airlines to Expand Services to China

ISLAMABAD, Feb 28 Asia Pulse - Pakistan International Airlines (PIA) has decided to expand its air service to China, serving the growing number of passengers on the Islamabad-Urumqi route.

The flight operation on this route will start within the next couple of months, with one or two flights to be offered per week.

The airline is now in a process of setting up its office in Urumqi in Xinjiang province and making other necessary arrangements.

Under an agreement, PIA is entitled to increase the maximum passenger and cargo flights to China to fourteen per week from the present four per week.

(PPI)

INTERVIEW: UPS Eyes China As Logistics Growth Driver
By Jeffrey Ng
27 February 2005

HONG KONG (Dow Jones)--With a stagnating domestic package business in the U.S., Atlanta-based United Parcel Service Inc. (UPS) is looking to China's burgeoning logistics market as a source of sustained future growth.

"Our plan in China is really aggressive," said Daniel Chen, managing director for strategic planning and development for UPS in China, noting that the company has committed over US$600 million in the past three months for investment in China.

"We are ahead of many players here in the field in terms of expanding and building up infrastructure," he said.

Of the total capital expenditure earmarked for China, some US$500 million will be used to expand infrastructure by building 20 new warehouse and distribution facilities over the next two years. This will bring the total number of such centers to 60 by the end of 2006, said Chen.

UPS also plans to invest US$100 million in expanding a joint-venture express delivery company with Sinotrans Group, one of China's biggest express parcel operators.

When the deal is concluded, UPS will own that company, making it the first foreign company to have a wholly-owned operation in the express parcel business in China once Beijing has relaxed ownership rules in this sector at the end of the year under the World Trade Organization.

Once that happens, said Chen, UPS will have wholly-owned operations in 23 locations in China covering 200 cities.

UPS's expansion in China follows a banner year for the company's China operations in 2004, when its export volume in that market doubled, reflecting the country's surging economy.

In China, a hotly contested market, UPS measures the turnover in packages handled under export volume and doesn't provide actual shipment figures.

Chen expects business volume from China to grow at a faster rate in 2005 than in previous years.

"We grew 100% last year while growth in the year before was between 50% and 60%," said Chen.

"So if you take that trend and project it onto this year the growth could be as high as 200%."

In China, UPS provides international parcel express and logistics services. Its main clients are multinational and foreign companies operating in China.

Chen said UPS' future expansion in China may involve acquisitions of either international or local companies.

His bullish outlook for UPS' business in China contrasts with its sluggish operating environment in its home market, the U.S., where the company derives the bulk of its revenue. UPS reported a mere 1.3% on-year rise in fourth-quarter earnings from its overall operations, down from 20% in the third quarter, due to competitive pressures.

In an attempt to turn around its business in the U.S., UPS plans to cut expenses by about US$200 million this year and accelerate marketing to medium-sized companies.

Chen said another avenue for growth in China will soon be available to UPS. Foreign package companies, which are so far only allowed to service international shipments, will be able to offer domestic delivery services in China under the WTO.

"Basically, the entire market will be open and there will be a lot of opportunities," Chen said.

-By Jeffrey Ng, Dow Jones Newswires; 852-2802-7002; Jeffrey.Ng@dowjones.com

China flights are airlines' $100 million brass ring New routes mean big bucks
Marilyn Adams
1 March 2005
USA Today

New China routes should yield at least $100 million each in first- year passenger revenue for struggling American and Continental airlines, and provide a strategic advantage for years to come.

Washington, D.C.-based consultant Mo Garfinkle, a longtime adviser to U.S. and Chinese airlines, says the decision by the U.S. Department of Transportation last week to award the China routes was the most valuable such decision in more than a decade.

"To be a global carrier, one must be in China," said Garfinkle. "The value of China (to U.S. airlines) will eventually exceed the value of Heathrow," the London airport considered the gateway to Europe.

Revenue estimates reflect the airlines' projections of initial passenger traffic in DOT filings and current airfares between the countries.

In 2004, American lost $761 million; Continental $363 million.

No. 1 American and No. 5 Continental now join No. 2 United as the only U.S. carriers authorized to fly non-stop to mainland China. Northwest flies to China through Tokyo.

No. 3 Delta Air Lines, whose application for a new route was denied, is the largest U.S. carrier without China flights.

Continental won the right to offer the first daily, non-stop flights on what someday is expected to be one of the world's busiest routes: New York City to Beijing, China's capital.

Continental will start flights from Newark Liberty Airport this summer. Air China, which offers the only non-stop New York-Beijing service now, flies four days a week from New York's John F. Kennedy airport.

"This is a huge deal for us," says Jim Compton, Continental's marketing chief.

With fares on domestic routes flat or down, Continental plans to expand international flying capacity 20% this year, including its China service.

American will fly non-stop to Shanghai, China's largest city, from Chicago's O'Hare Airport in March 2006. It will compete against United on the same route.

"Some of our biggest customers, like Wal-Mart and Motorola, were telling us they needed more convenient flights to China," said Henry Joyner, American's senior vice president for planning. "Access to China will be an advantage to those who have it as long as flights are restricted."

The DOT says the travel market between New York and Beijing is almost three times as large as the Chicago-Shanghai market.

At a time when most big airlines are desperate for profits, China is a valuable prize.

As the USA's top Asian trading partner, China's economy is exploding, and travel between the USA and China has been growing 20% a year or more -- faster than anywhere else.

A treaty signed last July by the U.S. and China gradually expands the number of airlines and flights between the two countries.

DOT last week chose American and Continental from among several applicants for the passenger routes.

The agency divided rights for 12 weekly flights among FedEx, Northwest, Polar Air Cargo and UPS.

All four currently operate cargo flights to China.

Awww..........I want my Beloved Delta to fly to China as well. God, I'm so happy for China. They're gonna make the world even more prosperous than it is.

China flights are airlines' $100 million brass ring
New routes mean big bucks
Marilyn Adams
01 March 2005
USA Today

New China routes should yield at least $100 million each in first-year passenger revenue for struggling American and Continental airlines, and provide a strategic advantage for years to come.

Washington, D.C.-based consultant Mo Garfinkle, a longtime adviser to U.S. and Chinese airlines, says the decision by the U.S. Department of Transportation last week to award the China routes was the most valuable such decision in more than a decade.

"To be a global carrier, one must be in China," said Garfinkle. "The value of China (to U.S. airlines) will eventually exceed the value of Heathrow," the London airport considered the gateway to Europe.

Revenue estimates reflect the airlines' projections of initial passenger traffic in DOT filings and current airfares between the countries.

In 2004, American lost $761 million; Continental $363 million.

No. 1 American and No. 5 Continental now join No. 2 United as the only U.S. carriers authorized to fly non-stop to mainland China. Northwest flies to China through Tokyo.

No. 3 Delta Air Lines, whose application for a new route was denied, is the largest U.S. carrier without China flights.

Continental won the right to offer the first daily, non-stop flights on what someday is expected to be one of the world's busiest routes: New York City to Beijing, China's capital.

Continental will start flights from Newark Liberty Airport this summer. Air China, which offers the only non-stop New York-Beijing service now, flies four days a week from New York's John F. Kennedy airport.

"This is a huge deal for us," says Jim Compton, Continental's marketing chief.

With fares on domestic routes flat or down, Continental plans to expand international flying capacity 20% this year, including its China service.

American will fly non-stop to Shanghai, China's largest city, from Chicago's O'Hare Airport in March 2006. It will compete against United on the same route.

"Some of our biggest customers, like Wal-Mart and Motorola, were telling us they needed more convenient flights to China," said Henry Joyner, American's senior vice president for planning. "Access to China will be an advantage to those who have it as long as flights are restricted."

The DOT says the travel market between New York and Beijing is almost three times as large as the Chicago-Shanghai market.

At a time when most big airlines are desperate for profits, China is a valuable prize.

As the USA's top Asian trading partner, China's economy is exploding, and travel between the USA and China has been growing 20% a year or more -- faster than anywhere else.

A treaty signed last July by the U.S. and China gradually expands the number of airlines and flights between the two countries.

DOT last week chose American and Continental from among several applicants for the passenger routes.

The agency divided rights for 12 weekly flights among FedEx, Northwest, Polar Air Cargo and UPS.

All four currently operate cargo flights to China.

http://bbs.sjtu.edu.cn:8000/PIC/1109786564322270.jpg
China's Okay Airways Receives Its First Boeing 737-900
27 February 2005

SHANGHAI (Dow Jones)--China's Okay Airways Company Ltd. has received its first Boeing 737-900 airplane, Boeing Co. (BA) said in a statement posted on its Web site.

Okay Airways is China's first private airline and is expected to begin operating early next month, Boeing said in a statement dated Friday. Okay Airways has received its business license as a public aviation carrier from the Civil Aviation Administration of China, Boeing said.

Boeing said the new airline will begin with charter passenger services, domestic air cargo, and mail transport and express service from its base in Tianjin, a city in eastern China.

The Chinese airline has an agreement to sublease two 737-900s from Korean Airlines, the statement said. The airplanes are owned by Boeing Capital Corp, it said.

Okay Airway's 737-900s will be used primarily in passenger service, initially for routes such as Tianjin to Kunming, Changsha, Zhang Jiajie, Guilin, Hohhot, Taiyuan, and Harbin, Boeing said.

China's air industry is dominated by three major state-controlled international carriers - Air China, China Southern Airlines Group and China Eastern Airlines Group.

Beside the three major carriers, China's domestic air industry is serviced by various regional airlines usually backed by the provincial or municipal authorities.

Earlier this month, the state-owned China Daily reported that the CAAC was expected to issue a license to Okay Airways to operate as the country's first private line.

Three other airlines are expected to follow Okay Airways as private carriers: Shanghai-based Spring International Airlines, Chengdu-based Eagle Airlines, and Huaxia Airlines in Gansu Province, the newspaper said.

China allows El Al Airlines to more than double weekly cargo flights
02 March 2005

BEIJING (AFX) - China's aviation authority has signed a memorandum of understanding (MOU) with El Al Airlines allowing the Israeli carrier to more than double its weekly cargo services to China, the regulatory body said.

Under the MOU signed between the General Administration for Civil Aviation of China (CAAC) and El Al, the carrier can boost its weekly cargo flights to China to 17 from seven, the official monthly industry journal said.

China will also consider opening up more destinations in the northeastern and western provinces to the Israeli carrier, it added.

CAAC has signed several bilateral air service agreements with its major trading partners, including the US, Germany, Australia and Hong Kong, since last year.

The landmark agreement signed with the US last July allows five additional airlines from each country to serve each other's markets by 2010, up from the existing four, with the number of weekly flights by each side rising to 249 from 54.

Air Canada to fly non-stop from Toronto to Beijing
March 3, 2005

BEIJING (AFP) - Flag carrier Air Canada will start non-stop flights from Toronto to China's capital Beijing from June 2, Chinese state media reported.

It will be the first non-stop air route linking the eastern part of Canada with China, Xinhua news agency said, citing the Canadian company.

The Beijing-Toronto flight will take 13 hours, four hours less than an existing route that takes passengers via Vancouver, according to the agency.

The new route will also make it easier for Chinese to go to South America, as flights to that continent via Toronto will be four to 10 hours faster than traveling via Europe, Xinhua reported.

Beijing sets limit on new aircraft purchases
Elaine Chan in Beijing
4 March 2005
South China Morning Post

China's aviation regulator yesterday said the mainland would cap the number of new aircraft purchases this year at 136 to avoid straining existing facilities.

But Yang Yuanyuan, director-general of the General Administration of Civil Aviation of China (CAAC), said while that number was large enough the cap did not translate into an outright ban on new purchases.

"Based on these [136 planes], any increase would have to be strictly controlled as there is an accommodation problem as far as how much our airports and public works management can handle," he said in Beijing yesterday.

Increased demand for air travel on the mainland has encouraged more aircraft purchases by domestic carriers such as China Eastern Airlines and China Southern Airlines. It has also boosted prospects for Airbus and Boeing, which have looked to the mainland market as a major source of growth.

CAAC reported that 112 million passengers and 2.7 million tonnes of freight were carried by mainland airlines in the first 11 months of last year, an increase of almost 42 per cent and 27 per cent respectively over the previous year.

Boeing said last month that demand for 200 to 300-seat aircraft would grow as more second-tier Chinese cities opened up to international services.

In January, officials sealed an agreement with the United States to buy 60 of Boeing's much-hyped 7E7 Dreamliners for a total of US$7.2 billion.

The aircraft, which has up to 300 seats, would be distributed among Air China, China Eastern, China Southern and three regional carriers - Hainan Airlines, Shanghai Airlines and Xiamen Airlines. The Boeing deal followed a US$1.4 billion purchase by China Southern of five Airbus A380 "super jumbos" and a US$1.7 billion deal by Air China for 20 of the 290-seat A330s.

Mr Yang said that if more aircraft purchases were approved this year, it likely would be for bigger planes.

In its annual report this year, CAAC said consolidation for mainland airlines and airports to help the industry compete better internationally was a major priority. Another was ensuring carriers improve safety standards.

Last year, Beijing slashed the value-added tax on aircraft imports by 33 per cent. Tax for imported aircraft with a load capacity larger than 25 tonnes was cut to 4 per cent from 6 per cent.

Shanghai to open air route to Uzbekistan
3 March 2005
Xinhua's China Economic Information Service

SHANGHAI, March 3 (CEIS) -- Shanghai will soon add an air connection with Tashkent, capital of Uzbekistan.

Ilyasov Rafik, general manager with Chinese office of the Uzbekistan Airways, announced here on March 2 that new twice-a-week flights between Shanghai and Tashkent will debut in April.

Meanwhile, the current flight between Beijing and Tashkent, which was opened some 12 years ago, will include Shanghai on March 9.

Rafik called the flights the "silk road of the air," saying they would greatly strengthen cooperation between the two nations in politics, economy, culture and tourism.

The official said that as a member of the Shanghai Cooperation Organization, Uzbekistan enjoys sound relations with China.

Local sources said Uzbekistan will soon set up consulate general in Shanghai and reach an agreement with the Chinese government on accommodating Chinese tourists.

FedEx to make decision on China hub - claim
4 March 2005
Airline Industry Information

Parcel shipping company FedEx is to make a decision on an Asian cargo hub in China by the end of the year.

The decision is to be made after the launch of the first direct FedEx connection between Europe and the Chinese mainland and it would help the company establish a firm hold in Asia, Reuters reported.

FedEx also said that it had been given tentative US approval for adding three weekly flights from China "shortly after" 25 March 2006.

Sunday March 6, 2:04 PM
Malaysia Airlines launches route to China's Xian

KUALA LUMPUR (AFP) - National carrier Malaysia Airlines said it will mount two weekly flights between the Malaysian capital Kuala Lumpur and Xian in China from this month.

Malaysia Airlines in a statement said a two-class configured Airbus A330-200 aircraft would be used on the route, providing a total weekly capacity of 458 seats in each direction, from March 15.

Xian becomes Malaysia Airlines eighth scheduled service destination in China after Hong Kong, Guangzhou, Beijing, Shanghai, Xiamen, Chengdu and Kunming.

"The new link is in line with Malaysia Airlines' continued effort to strengthen its market presence in China," it said.

With the addition of Xian, the carrier operates 66 weekly flights between Malaysia and China.

Malaysia Airlines on Monday announced its net profit for the nine months to December rose 30.1 percent to 216.90 million ringgit (57 million dollars) on higher air traffic demand.

It said short-haul regional travel was likely to gather pace as new low cost carriers expand their operations.

INTERVIEW-China's Hainan Air back in profit in 2004

BEIJING, March 6 (Reuters) - China's Hainan Airlines Co. Ltd., part owned by financier George Soros, climbed back into the black in 2004 and is looking at doubling its fleet size to 200 aircraft by 2010, the group's chairman said on Sunday.

The group's listed unit, the carrier based on the sun-drenched resort island of Hainan, had made a 2004 net profit of 200 million yuan to 300 million yuan ($24 million to $36 million), group chairman Chen Feng told Reuters in an interview.

It lost 1.27 billion yuan in 2003 because of the effects of the deadly flu-like Severe Acute Respiratory Syndrome, which ravaged China's airline industry in the first half of 2003.

"We had an exceptional year," the ebulient executive said seated in a hotel room in Beijing, where he was attending the annual meeting of parliament.

Revenue last year had been 8 billion to 9 billion yuan, up from 5.33 billion in 2003, he said.

The company was currently restructuring after absorbing three smaller carriers, and the airline would change its name to Grand China Air by the end of the year, Chen said.

Part of the seven-year restructuring plan, begun last year, would be the opening of more routes and the addition of new aircraft.

"We're too small," said Chen. "We want 200 aircraft. If we're too small there's not much we can do."

That would represent big potential orders for aircraft makers Airbus SAS and Boeing Co.

Hainan Air has China's fourth-largest fleet of civil aircraft, just over 100 aircraft. China Southern Airlines Co. Ltd., China Eastern Airlines Ltd. and Air China are all bigger.

Hainan Air was also is talking to foreign and domestic strategic investors, he said, and could not rule out an overseas listing as part of the reorganisation. He gave no details.

Chen added that Hainan Air had already won approval to start flights to the United States, though he was coy on when those would begin or what other international routes it was eyeing.

"We'll fly to wherever we're allowed," he said with a laugh.

Once mainly a domestic airline, Hainan Air has spread its wings to include Bangkok, Kuala Lumpur and even Budapest.

But Chen ruled out looking overseas for acquisitions. The airline had said it was going to buy a U.S. carrier.

"The domestic market is so good. Why should we go shopping overseas?" said 52-year-old Chen, who took his first flight when he was 15, in a Soviet-era biplane. "The U.S. market is too terrible anyway."

($1=8.276 yuan)

Hainan Air in talks with strategic investors
March 7, 2005

Hainan Airlines, whose biggest shareholder is US financier George Soros, is in talks with foreign and domestic investors as it seeks capital to expand, chairman Chen Feng said.

The company plans to announce a "major capital restructuring plan" this year that will include a private placement of shares to strategic investors, Chen said, without naming the investors.

Hainan Air and other mainland airlines are expanding as rising incomes and trade growth spur demand for leisure and business travel. China's air passenger traffic is likely to grow 7.3 percent annually until 2023, faster than the global average of 5.2 percent in the same period, Boeing forecasts.

"Introducing strategic investors will help increase working capital, lower costs and debt, and help the development of the company," Chen said.

Hainan Air's B shares have dropped 30 percent in the past year, compared with a 21 percent decline in the Shanghai composite index. The company's yuan-denominated A shares are down 36 percent in the past year.

Hainan Air, based on the southern island of Hainan, operates more than 500 routes in China and flies to Asian cities such as Seoul, Hong Kong and Osaka. The company started services to the Hungarian capital Budapest in August and said the same month that it may start flights to the United States as early as this year as part of plans to expand outside Asia.

The company reported net income of 127.7 million yuan (HK$120.4 million) for the first nine months of 2004, rebounding from a 950.4 million yuan loss a year earlier, when the SARS epidemic damped travel demand. Sales jumped to 6.1 billion yuan, from 3.6 billion yuan a year earlier.

Hainan Air has "largely completed" an operational restructuring and is now focused on new investment, Chen said. He forecast China's aviation industry will grow by 18 percent annually for the next five years.

The company will receive part of a 60-plane, US$7.2 billion (HK$56.16 billion) order for Boeing's 7E7 planes that will be shared between six Chinese carriers, spokesman Lu Guangwei has said. China's government-owned airlines may buy 2,293 aircraft over the next 20 years worth US$183 billion, Boeing said.

Hainan Air's shares plunged on January 31 after the company said it misreported 2002 and 2003 results because of accounting errors.

BLOOMBERG

Air Europa to Begin Direct Flights Between China, Spain in May

BEIJING, March 8 Asia Pulse - The Spanish-based Air Europa announced here Monday that it will open direct flights from Beijing to Madrid on May 23, and direct flights from Shanghai to Madrid on May 25.

The direct flights will further promote bilateral tourism by reducing flying hours and provide more convenience for passengers, said Jose-Pedro Sebastian de Erice, Spanish ambassador to China.

He said Spanish embassy and consulate in China will provide easier and more convenient visa-issuing procedures, such as on-line application system.

The new route will also enable Chinese passengers to transfer to north Africa and South America via Madrid. Airline company will provide free accommodation for them, said Daniel Li, China area representative of Air Europa.

Air Europa now flies to countries in Europe, Africa and South America. Last year the number of inbound travelers and foreign currency tourism income in Spain ranked the second in the world.

(XIC)

Xiamen Airlines To Purchase 15 Boeing Aircraft
07 March 2005
(From THE ASIAN WALL STREET JOURNAL) By Bruce Stanley

BEIJING -- Xiamen Airlines, a regional carrier based in southeastern China, has committed to buy 15 Boeing 737-800 aircraft in a deal valued at around $615 million.

The planned purchase marks another success for Boeing Co. in China, where the Chicago-based aerospace company and its chief rival Airbus of Europe are locked in a struggle to dominate one of the world's fastest-growing aviation markets. Boeing, which announced a milestone sale of 60 Boeing 787 Dreamliners to Chinese airlines on Jan. 28, predicts that China will need 2,293 new commercial aircraft over the 20-year period ending 2023.

The average catalog price for a 737-800 is $65.5 million, but few airlines pay the full sticker price. Airlines and manufacturers alike usually are reluctant to disclose actual purchase prices. However, Xiamen Airlines President Wu Rongnan disclosed that his company is paying $41 million for each plane including engines, suggesting a discount of 37%.

Boeing spokesman Mark Hooper couldn't confirm the sale or its specific details but said that a discount of this size 'wouldn't necessarily be unusual.'

Xiamen expects to take delivery of the 737-800s next year and in 2007 as part of an effort to upgrade its fleet. The airline has signed a letter of intent for the purchase and expects to complete a sales contract with Boeing later this year, Mr. Wu said.

Xiamen flies 29 planes, all of them Boeings. It plans to use the new short-range 737-800s on domestic routes as well as flights to Southeast Asia, Mr. Wu said.

China-based airlines must obtain permission from the Civil Aviation Administration of China for purchases of aircraft. Mr. Wu said Xiamen already has obtained approval for the 15 Boeing 737-800s as part of a CAAC-approved package of 40 new planes that it aims to buy during the five years ending in 2010.

Xiamen Airlines is owned 60% by China Southern Airlines, based in Guangzhou, and 40% by a state-owned enterprise in Xiamen.

Tuesday March 8, 5:23 PM
Hong Kong's Dragonair and Air China expand code-share deal to include Beijing

AP - Dragonair, Hong Kong's No. 2 carrier, said Tuesday it has expanded a code-sharing agreement with Air China Ltd. so that they can sell seats on one another's flights to Beijing.

Under the new agreement, effective March 27, passengers flying with Dragonair will be able to take any of the six daily Air China flights to Beijing in addition to the eight flights operated by Dragonair, the airline said.

"The expanded code-share agreement provides even greater flexibility and choice to our customers," said Dragonair's Chief Executive Stanley Hui.

The two airlines' current agreement already covers the southwestern cities of Chengdu and Chongqing and the northern cities of Dalian and Tianjin, providing their passengers with more flight options on those routes.

Dragonair has been enhancing its co-operation with Chinese carriers as it faced keen competition from Hong Kong's biggest carrier, Cathay Pacific Airways, on routes to Beijing.

Cathay only got back into the mainland China market in late 2003 after a 13-year absence, posing a threat to Dragonair, which has long specialized in services between Hong Kong and the mainland.

The airline resumed cargo operations in Shanghai in January and in the southeastern city of Xiamen last month.

CAAC caps new aircraft purchases for 2005
08 March 2005
Business Daily Update

China's aviation regulator will cap the number of new aircraft purchases this year at 136 to avoid straining existing facilities, announced the director-general of the General Administration of Civil Aviation of China (CAAC) Yang Yuanyuan.

But the cap did not translate into an outright ban on new purchases.

"Based on these (136 planes), any increase would have to be strictly controlled as there is an accommodation problem as far as how much our airports and public works management can handle," Yang said.

Increased demand for air travel on the mainland has encouraged more aircraft purchases by domestic carriers such as China Eastern Airlines Corp and China Southern Airlines Co Ltd. It has also boosted prospects for Airbus and Boeing, which have looked to the mainland market as a major source of growth.

Airbus Sees China Plane Orders At US$230B In Next 20 Yrs
08 March 2005

HONG KONG (Dow Jones)--Airbus (ABI.YY) said Tuesday it expects China will need to place orders totaling US$230 billion to meet demand for 1,790 passenger and cargo aircraft over the next two decades.

"Air transport will become even more essential as a facilitator of China's strong economic growth than in the past, both in passenger and freight traffic," Laurent Rouaud, Airbus vice president for market forecasts & research, told a news conference on airline industry trends.

Rouaud said China's demand for small twin-aisle aircraft is expected to be 440 planes over the next 20 years.

Chinese carriers have increasingly divided their purchases between Airbus and Boeing Co. (BA) after years of dominance by Boeing. China is expected to have the fastest-growing demand for passenger jets over the next 20 years, becoming the world's No.2 market after the U.S.

Over the next 10 years, Airbus expects passenger traffic in China to rise 9.1% a year and the country's freight traffic to increase 9% annually.

Rouaud said the trend will necessitate aircraft in all market segments and, from Airbus's perspective, the 100-seater A318 to the 555-seater A380.

"Air traffic and aircraft demand could be further stimulated by the low-cost carriers in the region," he said.

Globally, Airbus expects airlines to require more than 17,300 new aircraft between 2004 and 2023.

Airbus is a joint venture between European Aeronautic Defence and Space Co. (5730.FR) and BAE Systems PLC (BA.LN).

BCIA to expand its Tianjin airport
11 March 2005
Business Daily Update
China Daily Information Company

Beijing Capital International Airport Group (BCIA), one of the top airport operators in the country, will invest 1.86 billion yuan (US$224.73 million) to expand its subsidiary airport in Tianjin, Xinhua News Agency reported.

The project, scheduled to begin in the first half, includes a new 60,000 square meter terminal, a 60,000 sq m parking lot and the expansion of an existing runway.

The move will allow the Tianjin airport to handle nine million passengers, 250,000 tons of freight and 66,000 aircraft movements per year by 2015.

BCIA is also the parent of Beijing Capital International Airport Co Ltd.

The battle for parcel supremacy
China represents the largest and most exciting opportunity in decades for package delivery companies
By ANDREW WARD
09 March 2005
Financial Times

Whenever David Abney looks up from his desk on the executive floor of United Parcel Service's headquarters in Atlanta, he sees a large map of China mounted on the wall. "I have it right in my line of sight," he says. "It reminds me and visitors to my office of the size of the place and the opportunity it provides for us."

As president of the package delivery company's international business, Mr Abney is quick to stress that Europe, South America and the rest of Asia are also important markets. But the fact that only China is granted its own map shows where his priorities lie.

"China is the largest and most exciting opportunity in the 30 years I've been with UPS," he says. "It's not a case of 'should we' or 'can we'. If you're going to be a global company in future you absolutely have to be a player in China."

Over the past few months, UPS has committed an additional Dollars 600m of investment in China as it vies with rivals FedEx, DHL and TNT for leadership of the market. The increased spending will expand the company's distribution network and secure full control of its express delivery joint-venture in the country.

China is becoming an increasingly important source of growth to UPS as the US market slows. The company's export volume out of China more than doubled last year, compared with a 23 per cent increase in the whole international business and 6.6 per cent in the US.

"In the past, UPS has relied on its domestic package business to drive growth," says Satish Jindel, president of SJ Consulting, a transport consultancy. "But last year's weak performance in the US showed it must focus more on international business - especially in China."

UPS is expanding in the country on two fronts. The first is its traditional package business, shuttling small parcels between China and the rest of the world. The second is supply chain services, handling the export of larger-scale cargo from Chinese manufacturers to overseas markets.

Last December, UPS agreed to pay Sinotrans, its Chinese partner, Dollars 100m to take full control of their express delivery joint venture when Beijing relaxes foreign ownership rules at the end of this year. The deal will make UPS the first foreign company in the sector to wholly-own its Chinese operation. "Having full control will give us more flexibility in making investments and long-term strategic decisions and will give our brand a stronger presence," says Mr Abney.

Meanwhile, the supply chain management business announced plans last month to increase its number of Chinese warehouses from 40 to 60 within two years. The facilities distribute goods such as textiles, technology and auto parts for import and export.

However, Kurt Kuehn, UPS's senior vice-president of sales and marketing, says building a network inside China is only half the challenge. Just as important is connecting it to the rest of the world. "Anyone can build a warehouse in China," he says. "But it's useless unless you can get the goods to market in North America and Europe."

UPS believes it offers a more comprehensive global service to Chinese customers than any of its rivals. FedEx lacks the international freight-handling capability that UPS secured through its acquisition of Menlo Worldwide Forwarding last year, while DHL and TNT are relatively weak in North America. "We have the best network in the US and a powerful presence in Europe, so we can connect China to the rest of the world better than our more regionally-focused competitors," says Mr Kuehn.

DHL and FedEx, however, both have important advantages over UPS. DHL, owned by Deutsche Post, was the first foreign package delivery company to enter China in 1986 when it formed its own joint-venture with Sinotrans.

While UPS and FedEx are limited to international deliveries in and out of China, DHL is the only one allowed to make domestic shipments. This will soon change as World Trade Organisation rules force Beijing to liberalise but DHL's 37 per cent share of the local market will be difficult to catch. FedEx, meanwhile, has had the best air access to China since its acquisition of Flying Tigers, an international cargo airline, in 1989. The company will this month increase its number of weekly flights to the coun try to 23, compared with UPS's 18. Both companies were recently awarded an additional six landing slots in China with the promise of a further three each next year, following an aviation agreement between Beijing and Washington. "We fly into three different Chinese cities: Shenzhen, Beijing and Shanghai," says David Cunningham, FedEx's senior vice-president for Asia-Pacific. "Nobody else does that." In addition to its direct flights between the US and China, FedEx connects China to the rest of Asia through its Subic Bay hub in the Philippines and this month launched a service from Shanghai to Frankfurt - the first direct cargo service between China and Europe.

The battle for dominance in China is part of a global parcel war raging between the package delivery giants, with DHL challenging UPS and FedEx in North America, while the US pair take on DHL and TNT in Europe.

But the companies understand that they cannot win their battles elsewhere in the world without a strong presence in China.

A CORPORATE CULTURE TO DIGEST One day in January this year, a Chinese delegation visited the Atlanta headquarters of United Parcel Service to negotiate a business deal over a lavish Chinese meal. The meeting was a disaster as UPS executives committed a series of cultural gaffes that risked causing grave offence to their guests. Blunders included using first names instead of the formal titles favoured by Chinese businessmen and handing out clocks as gifts - a symbol of impending death in China. Fortunately for UPS, the meeting was a role-playing exercise designed to familiarise its executives with Chinese business culture. About 100 company officials attended the etiquette lesson, organised by Chinese-born Shiao Dong Han, UPS's director for international retail services. Participants learned about the importance of building personal relationships with their Chinese counterparts before getting down to business. They were also advised to always leave a little food uneaten when dining in China because a clean plate implies hunger. Despite the executives' disastrous performance, Mr Han said UPS's corporate culture was well-suited to business in China because the company puts a premium on hard work and loyalty - qualities that are valued by the Chinese.

China Eastern Airlines Feb Passengers Up 15% To 1.32 Mln
11 March 2005

HONG KONG (Dow Jones)--China Eastern Airlines Corp. (CEA), one of China's major state-controlled airlines, said Friday its passenger numbers rose 15% on year in February to 1.32 million.

China Eastern didn't give a reason for the on-year increase.

The number of domestic passengers of the Shanghai-based carrier rose 2% from February last year, while international passengers increased 56%.

The passenger load factor - the percentage of seats that were filled - was 65% in February, up from 59% in January.

The freight load factor was 48%, down from 52% in January.

Shanghai Pudong airport passes test on new runway
12 March 2005
Xinhua

SHANGHAI, March 12 (CEIS) -- The second runway of the Shanghai Pudong airport has passed the test on March 11, and is ready for operation, said an official with the airport.

The new runway, 2,260 meters east to the present runway, 3,800 meters long and 60 meters wide, is built to accommodate the AirbusA380 superjumbo, the world's largest commercial jet.

The runway is also equipped with a sophisticated blind landing system that will allow planes to land even in heavy fog.

Operation of the new runway will relieve congestion because of soaring flight traffic in this commercial hub of China.

Opened in 1999, Pudong's present runway is operating at capacity, handling nearly 500 flights per day carrying more than 35 million passengers last year.

China's First Private Airline Teams With Foreign Pilots
By Federica Bianchi Of DOW JONES NEWSWIRES
13 March 2005

BEIJING (Dow Jones)--Daniela Schmidt's newly obtained commercial pilot license appeared to be of little use after Swissair went bankrupt four years back leaving hundreds of experienced pilots competing for jobs at struggling European airlines.

But China's fast developing economy has given the 25-year-old Swiss a new opportunity as she becomes the country's first foreign female commercial pilot at a newly launched private airline.

For the startup Okay Airways Co., based in the northern port city of Tianjin, the move to recruit young, but eager foreign fliers gives it a chance to compete in the domestic aviation industry, now dominated by three state-backed behemoths.

Schmidt followed her Dutch boyfriend to China last year even though she didn't speak or read Mandarin and had never visited the country.

"I didn't think I could find work in China," Schmidt told Dow Jones Newswires. "But China is giving me an opportunity to fly that I wouldn't have otherwise."

Schmidt is the only woman among a maiden group of six foreign pilots that Okay Airways, China's first privately-held airline, has recruited as co-pilots amid a shortage of native Chinese pilots.

The pilot deficit comes as growth in China's air travel is expected to stay robust.


Big Job Market For Foreign Pilots In China

Airbus (ABI.YY) estimates China's will need to order 1,790 passenger and cargo aircrafts, or US$230 billion worth of planes, in the next 20 years. Over a 10-year period, China's passenger and freight traffic should rise around 9% annually, based on Airbus estimates.

"China is short of captains and co-pilots. We offer young foreign pilots an opportunity to grow," Okay Chairman and President Liu Jie Yin told Dow Jones Newswires. He estimated China will be short some 8,000 pilots in the next 10 years.

The small foreign trainee group at Okay Airways includes one Chinese-Canadian, one Swiss and four Hong Kong citizens, between ages 25 and 30. They have one thing in common: they have obtained a pilot's license in their home countries but can't find work there.

"A lot of trained pilots in the West can't find an opportunity to put some experience under their belt, while we in China are short of co-pilots, captains and even technicians," Liu said.

That makes pilots, who have finished their training, but need more practice to improve their skills, a good fit for China's aviation industry, Liu said, adding that he intends to recruit more foreign pilots in coming months.

But the strategy is also about cost for startup carriers like Okay Airways, which - with just six leased Boeing Co. (BA) 737 aircrafts - is entering a market controlled by giants led by Air China, China Southern Airlines Co. (ZNH) and China Eastern Airlines Corp. (CEA).

Low Cost Carriers Look For A Role In China

Experienced foreign pilots, a common feature of Middle Eastern airlines like Dubai-based Emirates Airlines (EA.YY), are too expensive for China's smaller airline companies.

These young Okay pilots will take a pay cut. They will receive a salary of about CNY20,000 ($2,415) per month, higher than the CNY11,000 that Air China offers its co-pilots, but well below any European standard.

But Schmidt's enthusiasm is undimmed for a chance to take to the skies. "I would fly for less, as long as I can fly," she said. "It's been my goal since I have been 15."

Schmidt's debut as a pilot at the controls is expected in two months, after she completes the training on a Boeing 737-900, the first airplane that Okay has leased from South Korea.

On Friday, when Okay Airways' maiden flight takes off from the northern city of Tianjin to Kunming in the south - one of four routes the airline is licensed to fly - Schmidt will be in the cockpit watching.

The new airline is an experiment altogether. After restructuring China's aviation industry in recent years, Beijing gave the nod last year to allow small private airlines to set up in response to the growing passenger and route demand.

But regulatory restraints may limit the potential of these start ups.

Okay is the first to receive a license from the General Administration of Civil Aviation of China. Another three, Shanghai-based Spring International Airlines, Chengdu-based Eagle Airlines and Huaxia Airlines in the Gansu province, are awaiting their licenses.

One major hurdle is the difficulty of leasing or buying a plane at an affordable price because the Chinese government controls the total number of aircraft brought in the country and makes it hard for a small company to plan its future orders.

Also, the aviation regulator hasn't tailored rules on low cost airlines that would let them pay lower airport fees and flying routes are assigned, not approved, by the regulator.

- By Federica Bianchi, Dow Jones Newswires
- Edited by Costas Paris

China's First Private Airline Teams With Foreign Pilots
By Federica Bianchi Of DOW JONES NEWSWIRES
13 March 2005

BEIJING (Dow Jones)--Daniela Schmidt's newly obtained commercial pilot license appeared to be of little use after Swissair went bankrupt four years back leaving hundreds of experienced pilots competing for jobs at struggling European airlines.

But China's fast developing economy has given the 25-year-old Swiss a new opportunity as she becomes the country's first foreign female commercial pilot at a newly launched private airline.

For the startup Okay Airways Co., based in the northern port city of Tianjin, the move to recruit young, but eager foreign fliers gives it a chance to compete in the domestic aviation industry, now dominated by three state-backed behemoths.

Schmidt followed her Dutch boyfriend to China last year even though she didn't speak or read Mandarin and had never visited the country.

"I didn't think I could find work in China," Schmidt told Dow Jones Newswires. "But China is giving me an opportunity to fly that I wouldn't have otherwise."

Schmidt is the only woman among a maiden group of six foreign pilots that Okay Airways, China's first privately-held airline, has recruited as co-pilots amid a shortage of native Chinese pilots.

The pilot deficit comes as growth in China's air travel is expected to stay robust.


Big Job Market For Foreign Pilots In China

Airbus (ABI.YY) estimates China's will need to order 1,790 passenger and cargo aircrafts, or US$230 billion worth of planes, in the next 20 years. Over a 10-year period, China's passenger and freight traffic should rise around 9% annually, based on Airbus estimates.

"China is short of captains and co-pilots. We offer young foreign pilots an opportunity to grow," Okay Chairman and President Liu Jie Yin told Dow Jones Newswires. He estimated China will be short some 8,000 pilots in the next 10 years.

The small foreign trainee group at Okay Airways includes one Chinese-Canadian, one Swiss and four Hong Kong citizens, between ages 25 and 30. They have one thing in common: they have obtained a pilot's license in their home countries but can't find work there.

"A lot of trained pilots in the West can't find an opportunity to put some experience under their belt, while we in China are short of co-pilots, captains and even technicians," Liu said.

That makes pilots, who have finished their training, but need more practice to improve t