China Aviation Industry Corp I, China Eastern Airlines to jointly float new regional carrier with MA60 aircraft

The state-owned China Aviation Industry Corp I (AVIC I) announced on Wednesday 19 September that it will team up with China Eastern Airlines to form a Yuan1 billion ($133 million) regional airline that will fly Chinese-built planes.

The carrier will have an initial fleet of at least 10 MA60 aircraft, manufactured by AVIC I. It will begin operating in the first half of next year, and will be headquartered in western China. AVIC I will hold a 60 per cent stake, the company's senior vice-president Hu Wenming told the media at the Beijing International Aviation Expo, which opened on Wednesday.

AVIC I is also building a 90-seat passenger jet, presently called the ARJ21. The country's first homegrown regional aircraft to have international certification, AVIC1 hopes to begin deliveries in 2009, Hu said. It aimed to produce 30 ARJ21 aircraft annually from 2010, entering a market now dominated by Brazil's Embraer and Canada's Bombardier.

The ambitious company has the full backing of the Chinese government, which also has plans for a domestically built wide-bodied jet to reduce its reliance on Boeing and Airbus.

"Our long-term aim is to operate 100 regional aircraft made by AVIC I, and to play an important role in western China's economic development," Hu said. The regional airline is the first in China to be set up by an aircraft manufacturer, a rarity in the world aviation industry.

It is the most direct way that AVIC I can push its products in the market, analysts said. Having an airline of its own not only ensures ongoing orders for AVIC 1's MA60 and ARJ21 aircraft, it can help the company improve the aircraft's quality as it gets direct feedback on the performance and efficiency of its aircraft.

The letter of intent between the two players was signed at the end of August. Analysts said the carrier could attract more passengers by linking its trunk route network with the new feeder line to smaller destinations.

In its 20-year forecast on the aviation industry, AVIC I has forecast that the country would need an additional 3,365 airplanes by 2026, a figure similar to Boeing's forecast, which was issued on Tuesday. But it said the country would require 898 new regional aircraft during that period. Boeing's figure is only 340.

Less than 9 per cent of the operating fleet in China is regional aircraft. In the US and Europe, they account for more than 30 per cent. So there is plenty of room for development in China, Hu said.

AVIC I is assembling the 70- to 100-seat ARJ21 in Shanghai. The maiden flight of the turbo-fan regional jet is scheduled for March 2008 and it will be delivered to its first customer, Shandong Airlines, in the third quarter of 2009. So far, the company has 71 firm orders for the ARJ21 from domestic airlines, and 98 orders for the 50-seat turboprop MA60 from all around the world.