Grounded – Private Airlines Stifled by State-owned Players

The aviation industry in the PRC has been flourishing in recent years. The growth of the industry is partly due to the continuous positive prospects of the country's economy, and partly to new regulations issued in 2005. Promulgated by the State Council, the Opinions on Supporting and Guiding the Development of the Private Economy¹ opens the door to private capital players, permitting them to enter the aviation sector in the PRC. The government's aim for this regulation was to limit monopolies in the industry while promoting private economic development. Since then, more than 10 private domestic airlines have been established, competing with the large state-owned carriers.

Yet problems emerge as the number of airlines increases in the PRC. While there is widespread acknowledgment of the growth of the Chinese aviation industry, little has been reported to highlight private airlines' development in the country. In fact, facing competition from the giant state-run airlines, private airlines often struggle to stand out.

Of course, one of the significant forces behind the rapid development of the aviation industry is the improvement of living standards in the PRC. As more Chinese now travel abroad for leisure or business, an airline's safety and creditability do make a difference for travellers when it comes to choosing an airline. The liberalization of flights in 2005 has increased the number of airlines slightly, easing the surging demands of air passengers. However, the highly regulated environment creates barriers for small-scale private airlines to grow.