Based on the principal of mutual benefit, the General Administration of Civil Aviation of China (CAAC) will authorize more international flights to China this year, even though domestic airlines do not have the capacity to operate all the extra quotas.

The expansion will mainly concentrate on major cities in Europe and North America, while a few major cities in Africa and South America are also on the enlarged list.

Yang Yuanyuan, minister at the CAAC, told an annual aviation industry working conference in Beijing: "We have given too much thought in the past to the relatively poor operational capabilities of domestic airlines and acted slowly in authorizing more quotas.''

This conservative policy directly led to some international air routes being poorly served, especially during peak transport seasons. Passengers had to book tickets to European countries several months ahead of travelling, which aroused large-scale complaints.

"We are going to authorize more flights along international air routes this year, even though domestic airlines have no planes to operate the increased quotas,'' Yang said. In the long term, the competition will help upgrade the management of domestic airlines, he added.

In another development, Yang said domestic airlines would enjoy greater freedom in the near future to set ticket prices.

The CAAC and State pricing regulators will announce a standard ticket price scheme. On that basis, domestic airlines will be able to adjust their ticket prices with greater freedom, according to the season or booking dates.

"We have submitted the draft regulation to the State Council, and it is expected to be available in the first half of the year,'' Yang said.

The new measures are expected to stimulate China's aviation market and encourage more people to fly, he said.

However, the supervision of ticket prices will not be loosened under the new ticket policy.

Yang said domestic airlines that sell ticket for less than the average operational cost would still be severely punished.

The CAAC was given back control over ticket prices in 1999, when cut-throat ticket discounting brought heavy deficits for the whole industry.

The administration later set the maximum discount at 20 per cent.

"We encourage rational market-based competition but cut-throat competition will never be allowed here,'' Yang warned.

Regarding foreign investment in China's aviation market, Yang said his agency would do its best to create positive market conditions for investors.

All sectors in China's aviation industry had opened to foreign investment by late last year, and the CAAC recommended a series of profitable aviation industry projects to worldwide investors.

Yang said Chinese State-owned enterprises and Chinese and foreign private enterprises would also be encouraged to invest in the aviation sector. A detailed regulation on investment by Chinese firms is expected to be released in the first half of this year, he said.

"All the rights that foreign investors enjoy will be open to domestic enterprises without reservation,'' he said.

CAAC statistics showed that Chinese airlines carried 84.25 million passengers last year, up 9 percent over 2001.

The whole industry had an overall turnover of 101.8 billion yuan (US$12.3 billion) last year and made a net profit of 770 million yuan (US$93 million).

(China Daily January 24, 2003)