geoff dixon - Orient Aviation

CHINA
Airlines, Zhuhai Airlines, Guangxi Airlines,
Guizhou Airlines and Sichuan Airlines. It also
has a 49% investment in China Post Airlines.
All these interests provide strong support to
the airline.
CHINA EASTERN AIRLINES
Shanghai-based China Eastern Airlines
Corporation Limited is the lead airline in
the third grouping that also includes China
Northwest Airlines (based in Xian) and
Yunnan Airlines (based in Kunming).
In June, 2005, China Eastern’s shareholders
approved a plan to buy the core
business and assets of China Northwest and
Yunnan Airlines for 985.69 million yuan
(US$121.7 million).
The restructuring will be completed by
the end of the year. Other projects, such as
the design of new uniforms, re-painting
of aircraft, the setting up of a frequent
flyer programme and, most importantly,
the re-organisation of management, were
completed earlier.
Air China
Airline World Ranking
(Based on Revenue)
Rank in Airline Top 100
(Based on RPKs)
2001 * 2002 2003 2004 2005
(June)
39 28 29 23 N/A
35 29 24 19 N/A
FRESH ENERGY
The three competitive groupings have
been busy since the consolidation on
streamlining their resources, re-organising
their businesses and establishing a modern
enterprise system.
The northwest-northeast-south triangle
route network for China Southern Airlines,
the so-called ‘Blue Sky Triangle’, has taken
shape, covering the length and breadth of
China.
To support the network, in the first half
of 2005 China Southern invested more
than one billion yuan in establishing a
subsidiary company in the Beijing Airport
Industrial Zone covering an area of 100,000
sq. metres.
In September, 2004, at Beijing Capital
International Airport’s Terminal One,
China Southern became the first carrier
in the country to own and operate its own
dedicated terminal thus creating greater
opportunities to expand its international
services and provide greater efficiency at
the airport.
Air China and China Eastern have also
established triangle networks, which have
accelerated the pace of development of
domestic and international airline business.
Meanwhile, Air China announced in March
2004 a plan to establish a Shanghai base at
Pudong.
China Eastern is growing rapidly and
now operates 176 aircraft to 90 cities with
No. of Aircraft 70 118 129 135 160
Net Profit
(US$ million)
*Not consolidated
159 domestic and 62 international routes
(including 12 international cargo services).
It has 48 aircraft on order, including 12
A330s, eight A321s, eight B737-700s and
two B747 freighters.
Air China has ordered 39 new aircraft
and China Southern around 70, including
five A380s.
TRANSFORMING THE
GOVERNMENT FUNCTION
Today, the CAAC is no longer the
operator of airlines and airports in China.
It is fulfilling the role of regulator. From
November, 2002, the airline groupings and
three civil aviation service groups came
under the umbrella of the state-owned
Assets Supervision and Administration
Commission of the State Council.
The CAAC continued to implement the
reform programme until July, 2004, at which
time the last airports in Gansu Province,
were transferred to local government.
Today, the direction of the CAAC’s role
has basically changed. Instead of managing
airlines it is playing an important role in safety
management, market management, air traffic
management, macro control and foreign
N/A 13.5 11.2 307.9 112.6
relations issues related to the industry.
The “Functions and Responsibilities of the
CAAC” as published on its web site include
focusing on research and investigation,
formulation of industry policies, guidance
and supervision.
The CAAC has achieved the main
goals of its reform programme; separating
government from the enterprises, reorganising
assets, breaking monopolies
and encouraging competition on a moderate
scale, upgrading safety, improving service,
raising benefits and strengthening supervision
of the industry.
In this short period China’s civil aviation
industry has leapt from sixth place in the
world in 2001 to third in 2004, with an
average 20.4% annual increase in revenue
tonne kilometres flown.
However, it must be said that while
reforming and restructuring an organization
and its assets may not be easy, it is even more
difficult to establish a new company culture.
The big issue is harmonisation. It needs time
and a lot of hard work.
Because of this there is still a long way to
go: for the government, airlines, airports and
others in China’s civil aviation industry.
34 ORIENT AVIATION DECEMBER 2005-JANUARY 2006