The Civil Aviation Administration of China has frozen airline capacity this year. New aircraft purchases are barred and about 40 aircraft are to be withdrawn from service.

The official China Daily newspaper says the CAAC is trying to combat industry losses caused by overcapacity by imposing the ban. Wang Zhi, CAAC's director of planning, science, technology and restructuring, says capacity will stay level this year, as the 40 withdrawals will be balanced by the delivery of 43 aircraft in 1999.

From Boeing, Chinese airlines expected the delivery of one 747-400, two 777s, three 757s, 15 737s and two MD-90s. Airbus Industrie is to deliver an A340 and 19 A320s, while two Chinese-produced XAC Y-7s will be handed over.

Aircraft that reach retirement age will be grounded, expiring leases will not be renewed and the sale of aircraft to foreign airlines will be encouraged, as will short-term leasing out of aircraft, says Wang. Some older passenger aircraft will be converted to freighters, starting with a Boeing MD-11 in August.

The CAAC also plans to freeze capacity on routes with less than 75% average load factors, and reduce it on routes with load factors below 60%.

The Asian economic crisis has taken a severe toll on traffic growth in China, with the growth rate slipping from levels up to 30% before 1996, to 1.8%last year. The government recently announced a cut of more than 50%in civil aviation spending for this year as part of an effort to restore profitability.

Source: Flight International