Hainan Airlines Co, China's fourth largest carrier, said yesterday it plans to establish an airline company with a registered capital of 771.58 billion yuan (US$92.96 million) in southwest China's Yunnan Province.

The company will invest 2.93 million yuan (US$353,000) and provide three Fairchild Dornier planes valued at about 374.14 million yuan (US$45.08 million) to the new company, Shilin Airlines Co.

Hainan Airlines' affiliate, Shanxi Airlines Co, will invest 47.07 million yuan (US$5.67 million) and provide a Boeing and a Dash-8 aircraft for the new company, while Yunnan Shilin Tourism Aviation Co will invest 1 million yuan (US$120,000).

Officials at the three companies were not available for comment.

But an industry expert said the aim of Hainan Airlines in establishing a new airline company was to tap the huge tourism resources in Yunnan to increase the company's profits.

"Hainan Airlines will have to establish a new company before it can fly regional routes in Yunnan to tap tourism resources," said the expert, who declined to be named.

The further opening of the country's aviation sector to private investment and increasing government support for regional aviation were good reasons for Hainan Airlines' plan, he said.

"China's civil aviation markets are presenting great attraction to domestic and foreign investors," he said.

Adam Brown, Airbus vice president for the Customer Affairs Division, said passenger traffic on China's airlines would grow at an annual rate of more than 20 per cent in 2004 and 2005.

"It would grow at a more normal secular rate of an average of 8.1 per cent per year to reach almost 500 billion revenue passenger-kilometres -- nearly five times its present level -- by 2022," he said.

Air travel will be driven by continuing robust growth in gross domestic product and personal income, he said.

It will also be driven by deregulation of ticket prices, privatization of airlines, less restrictive bilateral air services agreements with other countries, and the increasing number of visas being issued to outbound tourists.

Further stimulus to travel will be provided by the Beijing Olympic Games in 2008, the Shanghai Expo in 2010 and the Guangzhou Asian Games in 2010, Brown said.

An additional driver will be the planned free-trade zone between China and the Association of Southeast Asian Nations, he said.

Between 1980 and 1998, demand for air travel on China's domestic air routes, fed by a sharp increase in disposable income, multiplied about 20 times, growing at an average of 18 percent per year compared with average annual growth of 8.9 percent for all modes of transport, he said.
 
(China Daily July 29, 2004)