=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SF Gate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2004/02/06/f= inancial0816EST0023.DTL ---------------------------------------------------------------------- Friday, February 6, 2004 (AP) Telecommunications firm planning China's first private airline ELAINE KURTENBACH, AP Business Writer (02-06) 05:16 PST SHANGHAI, China (AP) -- Chinese regulators have given preliminary approval for a private airline to be set up in the southwestern city of Chengdu, state-run media reported Friday -- a tiny step toward ending the government's monopoly on passenger air transport. The official Xinhua News Agency said it would be "China's first private airline." Staff at Guangdong Yinglian (Eagle) Telecommunications, a communications venture based in southern China, confirmed the company plans to set up an airline based in Chengdu, the capital of Sichuan province. But they said the company's office there had yet to be founded. Xinhua, citing a report in the newspaper China Business Times, said Frid= ay that the airline planned to begin low cost services this year, linking west China with Shanghai. It said civil aviation authorities last year approved "in principle" a plan for founding a private airline named "Eagle United." An official with the market operations and management department of the General Administration of Civil Aviation confirmed that "there is such a plan." The official, who wouldn't give his name, would not comment further. By allowing a new, privately funded airline to take off, China would be accelerating the opening of its state-controlled civil aviation market. In 2002, China merged nine airlines into three as part of a state-ordered consolidation of the industry intended to create several big, world-class carriers. Together, those state-owned airlines control about 80 percent of the domestic passenger market. The trend has been toward fewer rather than more airlines, noted Derek Sadubin, an analyst with the Center of Asian Pacific Aviation. But the airline's planned location in a city in the far southwest -- an inland region that the government wants to develop quickly -- made the plan more "credible." "Allowing a new airline would indicate the government is taking seriously the need to have new, private investment in civil aviation, Sadubin said. Eagle United will not get off the ground until aviation authorities approve its aircraft purchases, pilot qualifications and flight routes. Until now, China has allowed only limited private investment in the airline industry. Several airlines, including China Southern Airlines and Shanghai-based China Eastern Airlines, have shares listed on domestic and international stock exchanges. In 2002, China Eastern Airlines Wuhan Co., based in the central city of Wuhan, was reorganized in an arrangement that allowed an 18 percent share investment by private company Shanghai Junyao Group Co., among other, state-owned companies. Chinese carriers expanded rapidly after the breakup of the monopoly carrier CAAC in the early 1980s, but increased capacity led to losses when a slowing economy cut into air travel. Rising fuel prices and steep fare discounts caused severe losses, but the 2002 restructuring has produced significant improvements. The airlines are now better prepared for what is expected to be a period of huge growth. According to industry estimates, passenger traffic is expected to soar to 140 million people by 2010, up from 84.3 million in 2002. =20 ---------------------------------------------------------------------- Copyright 2004 AP