China has in principle approved the establishment of the country's first private airline, sources said.

"The new carrier is in the process of being established," confirmed a spokeswoman with the Guangzhou-based E & Net Communications Co Ltd.

The private company is now engaged in the information technology business and plans to expand into the airline sector, the spokeswoman said.

Other media reports said the private company will establish an independent regional airline company in Chengdu, the capital of Southwest China's Sichuan Province, with a registered capital of 100 million yuan (US$12 million).

The new carrier will mainly fly regional lines in the country's western areas, one report said.

"E & Net is busy preparing for the opening of the new company by taking a number of steps including business registration, air route planning and aircraft purchasing," the report said.

Aircraft and pilots of any new airline companies have to be approved by the CAAC meaning that the new company needs a long time to complete the entire process.

The reports said the new airline's maiden flight will take place this year.

E & Net is likely to join up with one of the three airlines already flying in the western areas - China Southern, Sichuan Airlines and Air China, said an industry analyst.

"The private company is unlikely to set up an independent carrier, because the three airlines already fly many routes in the area," the analyst said.

CAAC approval for private companies invest in aviation market suggests that China has been speeding up the opening process of the market, the analyst said.

The CAAC has also reportedly approved other two private companies' investment in the country's aviation industry.

CAAC Director Yang Yuanyuan said last year the government is considering opening the country's potentially huge aviation sector further to private investment.

To meet growing demand and impending competition from foreign airlines in China as the market opens further in accordance with its commitments to the World Trade Organization, the CAAC will step up the reform and opening of the nation's civil aviation sector.

Examination and approval procedures of domestic airline management will be streamlined in the coming year to ensure a fairer administration system can be established.

Market access will also be broadened and investors will be allowed to enter the sector by establishing new enterprises or using their shares in existing companies. Both international and domestic capital will be encouraged to enter China's civil aviation industry, Yang added.

"A policy is being mapped out on domestic capital, particularly that of private-owned enterprises, into the civil aviation industry so their rights and interests can be guaranteed."

Yang said that, while promoting the rapid development of the industry, the aviation authority has also placed great importance on the safe growth of the sector.

Airline companies should take full responsibility for security, and the government reserves the right to supervise their operations, he said.

Civil aviation management departments at all levels must strengthen air defenses to protect against terrorism.

(Xinhua News Agency February 6, 2004)