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New curb on airline expansion

The Civil Aviation Administration of China has issued a new rule in a bid to prevent rapid overheating and expansion of the country's airline companies.


According to the new rule titled "Opinion on the Management of Establishment of Branches by Airlines", airlines must meet six criteria before they set up a new branch.


Previously, CAAC never intervened in airlines' expansions. However, under the new rule, airline companies must gain approval before they can set up a branch. The rule states that airports must not allow airlines to set up a branch at their venues unless there is sufficient capacity. Busy airports that receive more than 10 million passengers a year must not host over five airlines or airline branches. Airlines that have set up a company or branch solely dealing with freight can add one or two branches, those that possess five companies or branches must not set up new operational bases. Operational bases of airlines that have run for more than three years and account for a 10% share of their market may be turned into a branch.


In addition, CAAC says that airlines that apply to set up branches must have a fleet of more than ten aircraft and they can set up an additional branch for every ten additional aircraft. Airlines that own 50-100 aircraft can set up a branch for every eight aircraft. Those who have more than 100 aircraft can set up branches pro-rata to the increase in number of aircraft owned. Also each branch must have at least three aircraft and the necessary guaranties of airport service.


CAAC has explained that it drafted the rule to solve such problems as unbalanced layout of branches and insufficient management of airline branches. CAAC says that it will urge airlines to set up a branch in the northeast and northwest parts of the country as well as at less crowded airports.


(China Hospitality News February 24, 2009)