The nation's top civil aviation authority plans to allow a privately funded company to operate an air transportation business as it widens market access to the sector.

This marks an important step by China to allow private capital to enter the civil aviation market. Three others are waiting in the line.

According to a document provided by the General Administration of Civil Aviation of China (CAAC), the administration is considering giving an operating licence to Okay Airways Co Ltd.

Okay Airways is expected to become the first private carrier, thanks to the nation's policy support.

A regulation on the introduction of domestic private capital into civil aviation industry will be unveiled sometime this year, a CAAC official said.

"The draft version of the regulation has been completed," said Ma Zheng, deputy director of the CAAC Department of Policy and Regulations.

He said the regulation will provide legal support for the private capital into the sector.

Checking monopolies

"While helping to widen the investment channels, the regulation will also aim to limit monopolies over the civil aviation sector," Ma said.

China began to ease its control over private capital entering the industry early last year. It had suspended the approval of the air transport companies since 1994.

At a recent national working conference, CAAC Administrator Yang Yuanyuan said private investment is encouraged into the sector.

"While ensuring the State-owned capital dominate the sector, privately owned capital should be restricted to a certain extent," Ma said.

But he gave no details about the percentage of private capital the new regulation will allow into the sector.

Okay Airways, funded by three private companies and three people from Beijing and Shenzhen in South China's Guangdong Province, has registered capital of 300 million yuan (US$ 36.3 million).

It is expected to engage in air cargo and express services, passenger charter services and ground distribution services.

Sources close to the Okay Airways said the company will start passenger flights before entering air cargo services, its planned core business.

The administration is seeking proposals from related regional administrations and airports on the issue, as a necessary procedure before issuing a licence in accordance with the existing regulation on licensing a public air transport enterprise.

Headquartered in Beijing, the airline's home base is installed in Binhai International Airport in neighbouring Tianjin Municipality. It has three Boeing 737 aircraft and a 76-member staff.

An official surnamed Li from the company said preparatory work is in full swing but he refused to give an expected date for take-off.

However, the Beijing-based newspaper Economic Observer quoted an anonymous source from the Binhai International Airport as saying the company plans to kick off its virgin flight on March 5.

Besides Okay Airways, CAAC has given a nod to three other private operators to start airlines.

They are Shanghai-based Spring International Airlines, Chengdu-based Eagle Airlines and Huaxia Airlines in Gansu Province.

Low-cost modes

All of them were reported to have vowed to adopt low-cost modes to airline operations.

Liu Jieyin, president of Okay Airways, told the Economic Observer that his company has seen it as a major task to pave the way for the low-cost aviation market in China.

"The fledgling low-cost airlines in Southeast Asian countries will pose great challenges to us since they are trying to enter the nation's vast market," Liu said.

Liu's company plans to reduce costs by managing aviation oil futures, adopting a flexible way to deploy its fleets, air routes and flights.

(China Daily February 21, 2005)