Chinese Local Governments Boost Regional Service

By Bradley Perrett
Source: Aviation Week & Space Technology
May 06, 2013
Credit: Tiajin Airlines

Economics and skills shortages may be stacked against regional commercial aviation in China, but subsidies are leaning its way. A trend toward wider use of smaller airliners by carriers set up at the behest of provincial and city governments is helping to overcome obstacles that have long impeded regional aviation here.

These new airlines are frequently flying thin, unprofitable routes with standard narrowbody airliners of around 150 seats, points out Guan Dongyuan, president of Embraer's Chinese business. Even if the services cannot make money with regional jets, at least the trip cost will be lower and the losses smaller, he says, noting demand for small airliners from such carriers.

The same factors augur well for local demand for the Bombardier CRJ and the CSeries jets and perhaps the ATR 72 and Bombardier Q400 turboprop airliners. For nationalist reasons, the Brazilian and Canadian aircraft may face competition from indigenous Comac ARJ21 regional jets and Avic MA60 turboprops, but not the Mitsubishi Aircraft MRJ.

Since 2009, provinces and large cities have subsidized major airlines and national aeronautics group Avic to set up local subsidiaries. Their aim is to support local economic development. The first result of this trend was Tianjin Airlines, which operates 50 Embraer 190s. More such carriers have been cropping up country-wide, although not always with regional aircraft.

Hebei Airlines, set up with backing from the Hebei provincial government, has four Embraer 190LRs in service and three on order, part of a fleet that also includes Boeing 737s, according to Aviation Week data. Henan Airlines, backed by the Henan provincial government, operated E-190s before it was grounded after crashing one in 2010. The long-established branch company that China Southern Airlines operates in the sparsely populated Xinjiang region is leasing 20 E-190s that CDB Leasing Co. bought on its behalf. In that case, the backing is not clear.

When local governments demand and subsidize the operation of uneconomic routes, they push aside strong barriers to the growth of Chinese regional commercial aviation.

Guan believes the greatest problem is the national shortage of pilots and technicians. Major airlines opt to use their scarce skilled personnel in running large aircraft on heavily trafficked routes, often with just one or two flights each way. “In 2011 there were 1,300 air routes in China; 70 percent had fewer than 300 passengers a day each way,” says Guan.

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