Andrzej Jeziorski/SINGAPORE

China is halving its investment in the civil aviation industry to 11.1 billion yuan ($1.3 billion) this year as its airlines struggle with financial losses, the official Xinhua news agency says.

Liu Jianfeng, Minister of the Civil Aviation Administration of China (CAAC) says that the country will invest 6.3 billion yuan on infrastructure and 1.94 billion yuan on new aircraft, with the last 3 billion yuan earmarked for "technical upgrading", according to local reports. Last year, investment totalled a record 23.64 billion yuan.

Liu says that profit should be the industry's main goal in 1999. Measures adopted to achieve this will include standardising air fares, controlling new aircraft acquisitions, limiting "irrational price competition" and adjusting networks and schedules to eliminate "redundant" routes.

All but four of China's 30-plus state-owned carriers were in the red last year. The four profitable airlines were Sichuan Airlines, Xiamen Airlines, Xinjiang Airlines and China Yunnan Airlines.

Because of excess capacity, it may suit the carriers if the government starts cutting aircraft purchases, says one Hong Kong-based analyst. "They need more air traffic control and better infrastructure, but it seems that people in the [airline] industry in China just want a couple of years of consolidation."

Infrastructure projects targeted this year include the estimated $400 million upgrade of Beijing's Capital International Airport, the $1.12 billion construction of Pudong International Airport in Shanghai, and the $500 million construction of Haikou Meilan International Airport on Hainan Island. Work on Wujiba Airport in Kunming, in the south-western Yunnan province, should end this year, while the construction of New Baiyun Airport in Guangzhou will begin soon.

Chinese carriers recorded a 1.8% increase in passengers traffic in 1998, with cargo volume up 11.6% to 1.39 million tonnes.

Source: Flight International