Okay Airways and Shanghai Auspicious, two private Chinese airlines, are proposing a link-up which will give the fledgling private carriers much-needed weight in an otherwise State-dominated market.

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 air firms 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 certain 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 flight 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's 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 more quickly 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 around 3 million tons of cargo.

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

(China Daily August 8, 2006)