China Aviation Industry Corp I (AVIC I) has entered into a joint venture with China Eastern Airlines for a regional carrier that will begin operating in the first half of next year, a senior AVIC I executive said yesterday.
The regional airline will be headquartered in western China, with AVIC I holding 60 percent of its stakes, AVIC I Senior Vice-President Hu Wenming said.
The carrier will have a registered capital of 1 billion yuan ($129 million), and an initial fleet of at least 10 MA60 aircraft, manufactured by AVIC I.
"Our long-term aim is to operate 100 regional aircraft, made by AVIC I, and to play an important role in western China's economic development," Hu said at the Aviation Expo/China 2007 that opened in Beijing yesterday.
The regional airline is the first in China to be set up by an aircraft manufacturer, a rarity in the world aviation industry.
It's the most "direct" way AVIC I can push its products in the market, analysts said. "Having an airline of its own can ensure stable orders for AVIC I's MA60 and ARJ21 aircraft. It can help AVIC I improve the aircraft's quality, too, by receiving feedback on their performance more directly and efficiently," CITICS China Securities aviation analyst Li Lei said.
AVIC I and Shanghai-based China Eastern Airlines signed a letter of intent at the end of August to set up the regional carrier.
Officials of China Eastern, the country's third largest airline, were not available for comment on the joint venture.
Analysts, however, said the carrier could attract more passengers by combining its mature trunk line network with the new feeder line service.
Releasing its 20-year forecast on the aviation industry yesterday, AVIC I forecast that the country would need an additional 3,365 airplanes by 2026, which is similar to Boeing's forecast issued on Tuesday.
AVIC I, however, said the country would require 898 new regional aircraft during that period, while Boeing's figure was only 340.
"Less than 9 percent of the operating fleet in China are regional aircraft. But in the US and Europe, they account for more than 30 percent. There is plenty of room for development in China," Hu said.
AVIC I is assembling the 70-100 seat ARJ21 in Shanghai. The maiden flight of the turbo-fan regional jet is scheduled for March 2008 and it will be delivered to its first customer, Shandong Airlines, in the third quarter of 2009.
AVIC I has received 71 orders from domestic airlines. And 98 orders have been placed for the 50-seat turboprop MA60 from around the world.
(China Daily September 20, 2007)