Two of China's private airlines, Okay Airways and Shanghai Auspicious, are planning a link-up that will give the fledgling private carriers much-needed clout in an otherwise State-dominated sector.

Shanghai Securities News yesterday quoted Okay President Liu Jieyin as saying his airline will buy a stake in Auspicious Airlines, while Zhejiang Junyao Group, which owns Shanghai Auspicious, will purchase a 30 percent share in Okay.

If the cross-shareholding proceeds, the two private airliners will be able to improve their competitiveness and be in a better position to deal with high oil prices.

Okay and Shanghai Auspicious will engage in strategic cooperation in areas including capital supply, the renting and purchasing of planes, human resources, flight routes, marketing and sales, said Liu.

Junyao Group's further foray into the aviation industry and the possible cross-shareholding reflects Chinese private enterprises' ambitions in the country's largely monopolized aviation sector, analysts said.

"But private airliners are still too small to have an impact on China's aviation market, which is dominated by State-owned giants such as Air China, China Southern Airlines and China Eastern Airlines," said Li Shurong, an aviation industry analyst at Shenyin Wanguo Securities.

Okay, for instance, only runs a couple of rented planes flying obscure routes. It is mainly engaged in air cargo and express delivery services, while it also operates some chartered flights and land-based distribution services.

China's aviation industry has been growing at a rate much faster than the country's GDP. According to official statistics, it posted a turnover of 26 billion-ton kilometers last year, provided transportation services for 138 million people and delivered about 3 million tons of cargo.

Private enterprises were only recently allowed into the previously State-monopoly sector, as part of authorities' efforts to introduce market mechanisms into the sector.

Tianjin-based Okay Airways became Chinese mainland's first private airliner in early 2005. Since then, 14 private airlines followed suit, including Spring Airlines and East Star Airlines, both based in Shanghai.

Shanghai Auspicious is the latest private airliner to be approved by the General Administration of Civil Aviation of China (CAAC). It is expected to start operations next month from Shanghai's Pudong Airport, targeting business travelers.

Junyao Group was started by the legendary entreprenuer Wang Junyao from East China's Zhejiang Province. Wang started a private charter route from Changsha to Wenzhou in 1991.

(China Daily August 8, 2006)