More second-tier airlines are to be approved for international operations by the Civil Aviation Administration of China (CAAC) as part of a further liberalisation of the local air transport sector.

Government sources in China say the CAAC is working on the liberalisation measures that will be supported by improvements to the regulatory regime to speed up application and approval processes.

"Restrictions on market access for domestic carriers will be eased. It will be a major step forward in deregulation," says one source. "For example on the international services, for Chinese airlines there will be an establishment of a better mechanism for international air traffic rights." These rights will no longer be monopolised by the major airline groups, he says.

Although some second-tier carriers such as Hainan, Shanghai and Xiamen Airlines have been approved for limited international operations, international traffic rights are generally dominated by the country's "big three" airline groupings: Air China, China Eastern and China Southern Airlines. The sources say that as China has been progressively opening up its skies to additional services by foreign airlines in recent years, more second-tier domestic carriers such as Shenzhen Airlines have been demanding that they be given the same opportunities to compete as the major carriers.

Last year SIA Cargo, the cargo subsidiary of Singapore Airlines, became the first foreign airline to operate fifth freedom flights beyond China to the USA. It secured the rights through a new air services agreement that was forged between China and Singapore late in 2002. Since then many other foreign airlines have sought fifth freedom rights from China.

Also last year, the CAAC unveiled an open skies air services regime for the southern island province of Hainan that was seen as the first step towards an even broader liberalisation. The open skies regime for Hainan was the first of its kind for traditionally protectionist China and authorities in Beijing have said they will consider expanding it to other parts of the country.

Meanwhile, the CAAC has revealed that it is considering allowing no-frills airlines to be established in China. CAAC director Yang Yuan Yuan says the regulator is close to approving the three applications, although he will not identify the companies.

Low-fare airlines are only starting to come to Asia, and China is seen as a market with some potential for no-frills operations, given the bullish domestic growth forecasts for the years ahead. Yang says the number of passengers carried on Chinese airlines is expected to increase by nearly 20% this year over the 87.5 million passengers that were carried in 2003


Source: Airline Business