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Aircraft buying grounded amid financial woes

By Cui Xiaohuo (China Daily)
Updated: 2008-12-10 07:30

The government Tuesday asked airlines to suspend purchase of new planes from foreign manufacturers in order to cut operation costs and maintain a balance between demand and supply.

The global financial crisis has led to a drop in the number of domestic and overseas travelers and largely reduced the need for new aircraft and causing a loss to the aviation industry.

The Civil Aviation Administration of China (CAAC) said it "encourages" airlines to cancel or defer taking delivery of new planes next year, and asked them to make best use of their existing fleets of more than 2,000 planes.

New airlines will not be approved before 2010, the CAAC said. But it will continue waiving more taxes and fees for airlines and make gasoline more affordable for them.

It asked airlines to cut spending by merging with or acquiring others. But it said it would spend 10 billion yuan ($1.45 billion) on air safety facilities.

Li Xiaojin, an economist specializing in the aviation industry, said an airline could save up to 900,000 yuan ($130,950) a month by not buying a new aircraft.

Earlier, the China Aviation Industry Corporation estimated that China would need 3,110 new planes in the next two decades.

Airbus China said on Tuesday that its 440 aircraft, about one-tenth of its worldwide orders, would be ready for delivery to Chinese airlines in the next couple of years. They include 160 planes, deals for which were inked in the presence of President Hu Jintao and visiting French President Nicolas Sarkozy in November last year.

The world's other major aircraft maker, Boeing, did not say how many planes Chinese airlines had placed orders for.

Zhong Ning, a CAAC official, said the move is aimed at maintaining 10 percent growth in the aviation industry next year.

"The country aims to have a GDP growth of at least 8 percent next year, so the aviation industry, which has usually grown at 2 percentage points more than the GDP, will have to contribute," she said.

The aviation industry as a whole lost 4.3 billion yuan ($626 million) in the first 10 months of this year, with 70 percent of the aviation firms losing money, experts said last month.

Such is the financial pressure that Beijing-based Okair Airlines, a private carrier, had to suspend operations on Nov 6.