Monopoly in China's civil aviation still strong despite reforms

After more than three decades of economic reforms, the civil aviation sector in China is still monopolized by the nation's six leading civil aviation groups in many areas, including air routes, booking systems, ground services, aviation fuel and aviation supplies.

However, reform in the opening of lower airspace has accelerated after the third plenary session of the 18th Communist Party of China as the Civil Aviation Administration of China plans to set up a team to lead the reform.

China's aviation industry was reformed in 2002, when three air transport firms civil aviation groups — China National Aviation Holding Company (Air China), China Eastern Airlines Corporation Limited and China Southern Air Holding Company (CSAH) — as well as three aviation services groups — China TravelSky Holding Company, China Aviation Oil Holding Company and China Aviation Supplies Group Corporation — were established.

Reforming the civil aviation sector has been a slow process, with some saying that certain market concentration had helped maintain ideal aviation safety standards for many years.

Tian Baohua, a member of the policy consulting team of the Ministry of Transport, however, stated that safety was not an excuse for slow reform in the civil aviation industry.

Tian, who is experienced in drafting reforms for the industry, said the sector had tried to reform a couple of times, but the reforms were abandoned or suspended due to external factors.
China Aviation Supplies has monopolized the procurement of air-related materials.

In other countries, airline companies have the power to decide the timing and volume of their procurement while purchasing aircrafts. Both state-owned and private airlines in China, however, have to make such purchases through China Aviation Supplies as the government is of the view that centralized procurement can reduce prices.

An executive at a state-owned airline said that centralized procurement was sometimes more expensive, however. China's airline companies use the "world's most expensive fuel" as the aviation fuel supplies, pipelines and refuel channels are controlled by China Aviation Oil.

As for IT solutions for the travel industry, TravelSky is the dominant provider in China. A report in 2000 showed that TravelSky charged 5.50 yuan (US$0.90) per ticket sold by domestic airline firms, which earned the company 330 million yuan (US$54.1 million) in 1999, based on a total capacity of 60 million (US$9.8 million) that year.

In contrast, airlines in other countries can choose freely which IT solution provider they want to work with.

Source: Want China Times