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Private funds to enter airline industry
By Cao Desheng (China Daily)
Updated: 2004-08-16 22:19

Private capital will soon get legal support to enter the nation's civil aviation sector, a senior official at the General Administration of Civil Aviation of China (CAAC) revealed Monday.

A regulation on the introduction of domestic capital into the civil aviation industry will be mapped out within this year, said Ma Zheng, deputy director of the CAAC Department of Policy and Regulations.

"The draft version of the regulation has been completed and will be soon submitted to State Council for examination and approval," said Ma.

The introduction of multiple investment entities aims to increase the sector's capital sources and provide a momentum for the fledging aviation market, Ma told China Daily.

The nation began to ease its controls over private capital entering the industry early this year.

Yinglian Aviation Co Ltd, funded by Guangzhou-based E & Net Communications Co Ltd in South China's Guangdong Province, was approved by the CAAC in February.

Registered as the nation's first airline company backed by private capital, Yinglian is gearing up for take-off.

It is recruiting civil aviation professionals from across the country.

At the same time, the airline is negotiating booking planes with some aircraft manufacturers, company spokesman Cao Haiquan said.

Headquartered in Chengdu, Sichuan Province, the airline has plans to launch its flights early next year, the spokesman said.

Following "Yinglian," the Shanghai-based travel agency Spring International and Beijing-based Qili Logistics Co Ltd, in collaboration with two other private companies, also got a permit from CAAC in May to establish an airline.

This is the first time that CAAC has relaxed the policy on market access since 1994, when it suspended the approval of the air transport companies, insiders say.

In January, CAAC Director Yang Yuanyuan told a press conference that his administration would further open up the air transport market and air service market and remove barriers to market access.

The initiatives of various investors hoping to invest in civil aviation industry must be protected, he noted.

"In fact, the civil aviation industry has boasted a multitude of investment entities, including central government, local government, listed companies, private enterprises and joint ventures," Ma said.

State-owned capital must dominate the sector, while private-owned capital should be restricted to a certain extent, Ma said.

But he refused to disclose the percentage of private capital that the new regulation will allow into the sector.

Experts hailed the introduction of private capital into the monopolized industry as a progress in the sector's reform.

The move will help break the monopoly of State-owned aviation enterprises and introduce competition, hence contributing to the overall growth of the industry, said Lin Yueqin, an economist at Chinese Academy of Social Sciences.

"Investors must have a vision about the risks that their investment will bring about while availing themselves of the good opportunities the favourable policy offers, " the expert said.

Since the aviation industry involves public securities, investors must improve their software construction, including management of company staff, command of technical standard for safety control as well as co-ordination with their counterparts both from home and abroad, Lin said.

Meanwhile, private airlines should also explore an industry chain centering on their mainstay industry by expanding air service industries, he advised.

"This is just a beginning for private enterprises to enter the high-risk industry, and it is still too early to predict the long-term impact of their investment on the aviation sector," Lin said.

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