Military Exercises Result in Glut of Canceled Flights in China

(WSJ) Chinese aviation authorities asked airlines to reduce flight traffic by as much as 75% at two of the country's busiest airports Tuesday, the latest air-travel disruption because of military exercises along China's southeastern coast.

The air-traffic disruption delivered another blow to travelers already plagued by flight delays and cancellations. It also underscored the challenges faced by commercial airlines in China, where military flights are given precedence over civilian ones.

China's Air Traffic Management Bureau, a unit of the nation's aviation regulator, issued the restriction on two Shanghai airports—Shanghai Hongqiao International Airport, which mostly handles domestic traffic, and Shanghai Pudong International Airport—for flights between 2 and 6 p.m. Tuesday, said two airline officials based in Shanghai. More than a dozen smaller airports in eastern and southern China also halted flight arrivals and departures during the period, the air-traffic bureau said.

China's Ministry of National Defense coordinated the exercises, which it said were routine and designed to test the military's combat capability, according to a statement on the ministry's website. The ministry gave no details about the precise location or schedule of the drills.

The reduction is part of a three-week curb on flights through mid-August because of the drills. So far the restrictions have resulted in capacity reduction of as much as 25% at a dozen Chinese airports, including the two in Shanghai, airline officials said.

The aviation regulator said last week that "rainstorms, routine military exercises and other comprehensive factors" are behind widespread flight delays and cancellations in the second half of July. 

It has stopped applications for executive aircraft, additional scheduled flights and chartered flights at affected airports.

Eric Lin, an aviation analyst at UBS Securities, said the latest flight reduction is especially damaging for the air-travel industry in eastern China, which has already faced flight delays and cancellations caused by adverse weather conditions.

"The scale of the military drills and its duration is rarely heard of, and one that falls into a traditional peak season for air travel would definitely have an impact on airlines' profitability," Mr. Lin said.

The curbs have added pressure on China's already congested airspace for civil aviation. Shanghai-based China Eastern Airlines Corp. canceled 22 flights scheduled for Tuesday and Wednesday because of rainstorms and airspace restrictions, it said on its official Weibo microblog account Monday, adding to hundreds of flight cancellations since the middle of July. At the two Shanghai airports, a total of 135 departure and arrival flights were canceled and an additional 428 were delayed as of Tuesday afternoon, according to flight-tracking organization FlightStats.

On Monday, 119 flights were canceled at the two Shanghai airports, accounting for 30% of the 397 flights canceled at Asian-Pacific airports, according to FlightStats. An additional 1,116 departures and arrivals were delayed at the two airports on the same day, accounting for 16% of delays in the region.

Air travel in China is booming, with passenger traffic in the first five months up 12% from a year earlier after an 11% rise in 2013, even as the nation's economic growth slows. However, the nation's airports and airlines are among the worst in the world in getting flights off on time.

Aviation experts cite military control of China's skies and inefficient operations at Chinese airports among reasons leading to excessive delays. Roughly 20% of available airspace is allotted to civil aviation and the remainder is tightly held by the military, the aviation regulator has said. In the U.S., by contrast, there are few restrictions for general aviation usage on most airspace apart from that over major metropolitan areas.

Even without the latest curbs, flight delays and cancellations are common at many Chinese airports. 

Winnie Poon, former chairwoman of Dragonair's flight-attendants union, said it isn't unusual for a round-trip flight between Hong Kong and Shanghai—which usually takes about 2 1/2 hours one way—to return to Hong Kong three hours late.

Zhang Qihuai, a Beijing-based lawyer and frequent traveler, said the government should balance the interest of China's military exercises for defense purposes with ordinary people's lives. "Military drills should not disrupt ordinary people's travel plans," he said.

Mr. Zhang, who has in the past altered travel plans to Shanghai several times because of persistent delays and cancellations, said he would consider making further changes because of the traffic curbs. "I would opt for the high-speed train instead of traveling by air if I really have to travel to Shanghai," he said.

Analysts estimate the traffic curbs will reduce China Eastern's revenue by 1% to 2% on an annualized basis. Other Shanghai-based airlines such as Spring Airlines Co., China's biggest budget carrier, and Hong Kong-based Dragonair, a China-focused unit of Cathay Pacific Airways Ltd., will also be affected by the traffic restrictions, they say.

James Wang, an official at China Eastern, said aviation regulators notified the airline of the traffic curbs. 

"We were told that airspace over eastern China is occupied by other users at some time slots, and we have adjusted our flight schedules and alerted our customers accordingly," he said, without elaborating. 

He said the airline cut its number of flights by less than 25% but declined to disclose the exact percentage.

Zhang Wuan, a spokesman at Spring Air, said that it also received notices from aviation authorities about the traffic restrictions.

"It definitely has an impact on our business during the travel peak," he said. However, he said that regulators' decision to give earlier notices about the restrictions could enhance transparency to the public and alert travelers so they could adjust their plans.

And unless such large-scale flight reductions become regular, they aren't likely to affect China's demand for air travel, which is expected to grow in a range of 9% to 10% in the foreseeable future despite the nation's economic slowdown, said UBS's Mr. Lin.

Source: Wall Street Journal by Joanne Chiu

Ctrip’s Hotel Booking Growth Seen Extending 35% Rally

(Bloomberg) Ctrip.com International Ltd. (CTRP) will extend its rally after reaching a record last week as China’s biggest travel website boosts its share of the hotel reservation market at the expense of smaller competitors, JG Capital says.

American depositary receipts of Ctrip rose 13 percent to $67 last week, pushing the year’s gain to 35 percent. The shares are outperforming a 6.6 percent year-to-date increase in online travel company Qunar Cayman Islands Ltd. (QUNR) and a 1.9 percent drop in Elong Inc. (LONG), whose top shareholder is Expedia Inc. The Bloomberg China-US Equity Index for the most-actively traded  Chinese companies in the U.S. advanced 6.3 percent last week, the most since December 2011.

Henry Guo of JG Capital says Ctrip’s investments in mobile products and marketing are helping it benefit from China’s rising incomes and growing middle class which boost demand for travel reservations and packaged tours. The Shanghai-based company is expanding its hotel booking business where transaction volume jumped 67 percent last quarter while Elong reported a 43 percent increase.

“Ctrip’s fast growth in the hotel segment shows it’s grabbing market share from Elong, and that explains its big rally over the past few months,” Guo, a San Francisco-based analyst at JG Capital, said by phone July 24. “I am bullish on China’s travel sector for its long-term growth outlook.”

Guo has a buy rating on the stock with a $70 price target. The company reports second-quarter earnings on July 30. Ctrip’s ADRs retreated 1.4 percent to $66.05 as of 10:01 a.m. in New York, halting a six-day advance.

Mobile Spending

Ctrip stepped up investments in mobile Internet and new products as mobile devices surpassed desktop computers to become the most important hotel booking platform, Chairman and Chief Executive Officer James Liang said on a May 7 conference call.

The company will report revenue of $270 million for the April-June period, up 33 percent from a year earlier, 11 analyst estimates compiled by Bloomberg show. The average projection is 5.4 percent higher than it was six months ago.

While Ctrip’s second-quarter operating profit may drop 5 percent from a year earlier to $30.3 million, it will grow 8 percent this quarter and 32 percent in the last three months of the year, according to the average of seven analyst estimates compiled by Bloomberg.

Chinese hotel revenue per available room increased 7 percent in May, the highest since 2010, according to a Bloomberg Intelligence note. This may indicate a return of higher domestic leisure and business travel offsetting a corruption crackdown that’s crimped lavish official spending, the report said.

Costly Innovation

Ctrip’s new products and features have come at a price as development expenses for the first quarter surged 65 percent from a year earlier, according to a company statement in May.

Rising competition in the web-based travel sector has “depressed” Ctrip’s operating margin, a measure of profitability, according to Michael J. Olsen, an analyst at Piper Jaffray Cos.. Ctrip said its adjusted operating margin narrowed to 12 percent in the first quarter from 23 percent a year earlier.

“It’s unclear when the intensifying competitive China travel environment will abate,” he wrote in a note dated June 26. “We have modeled margins below the 20 percent level for the next several quarters.”

Olson has a neutral rating on the company ADRs and a price target of $50.

Ctrip faces less competition from smaller rivals in the transportation ticketing business, where it posted 71 percent growth for the first quarter. High volume in both hotel booking and transport ticketing is likely to continue and Ctrip’s margins will improve in the second half of the year, according to Tian X. 

Hou, the founder of TH Capital LLC, a research firm focusing on the Chinese Internet sector.

“Its volume will keep going up at a very fast pace driven by investments in product and branding,” Hou, who has a buy rating, said by phone from Beijing July 24. “We expect the operating margin to start improving from the third quarter as investments stabilize.”

Source: Bloomberg News by Belinda Cao

China's airline regulator warns of flight delays

(Xinhua) China's airline regulator on Saturday issued an orange alert for massive flight delays in eastern and central China, saying the traffic capacity of some routes may drop as much as 65 percent.

"The airspace in east China will be quite busy on Saturday," the Civil Aviation Administration of China (CAAC) said in a statement, noting at least 23 airports will be affected, including those in Shanghai, Nanjing, Nanchang, Hefei, Zhengzhou and Wenzhou.

The CAAC said in an earlier statement that "rainstorms, routine military exercises and other comprehensive factors" were behind widespread flight delays and cancellations.

In Shanghai, the air traffic's busy hours will last between 8 a.m. to 12 p.m. and between 3 p.m. to 7 p.m. on Saturday, reducing air traffic capacity by 65 percent.

During the same period, the civil flight handling capacity in airspace above the Zhengzhou area will drop by 60 percent, according to CAAC.

During busy hours, flights will be unable to land at airports in the cities of Linyi, Xuzhou, Lianyungang, Huai'an, Yancheng, Changzhou, Yangzhou and Nantong, while flights departing for airports in Nanchang, Ganzhou, Jiujiang, Yichun, Jinggangshan, Jingdezhen, Wuyishan and Wenzhou will not be allowed to take off.

At least 14 flights operated by six airline companies in Shanghai were canceled as of noon on Saturday.

The CAAC is seeking to address the issue by setting up temporary air routes and allowing airlines to alter flight plans, according to the previous CAAC statement.

The CAAC also banned applications for business jet flights, additional flights and charters at the affected airports.

Source: xinhua via china.org

China imposes airline-like restrictions on bus passengers in Xinjiang capital

(Reuters) - China has banned bus passengers in the capital of western Xinjiang region from carrying items ranging from cigarette lighters to yogurt, state media said on Friday, in the latest effort by authorities to prevent violent attacks.

The new rules in the capital Urumqi, similar to restrictions usually imposed by airlines, reflect how nervous officials are about trying to contain outbreaks of violence in the region, home to the Muslim Uighur minority.

Xinjiang has been beset by violence for years, blamed by the government on Islamist militants and separatists it says are bent on establishing an independent state called East Turkestan.

Fires have erupted on buses in various parts of China, including in two eastern cities, Hangzhou and Guangzhou. Authorities have blamed those incidents on arsonists, not militants.

The local government in Urumqi, a city of three million, issued new rules after a transport security meeting, barring passengers from bringing on board liquids, lighters and unknown powders "to strike a severe blow on all forms of criminal activity on public buses," the state-run Legal Daily said.

Banned substances include gasoline and firecrackers, but also drinking water, cooking oil and yogurt.

Restrictions on liquids have been in force for several years on aircraft, aimed at preventing militants from bringing on board sophisticated, hard-to-detect explosives.

The Legal Daily said at least two security guards would conduct hand checks and bag searches at every bus stop on 154 Urumqi bus routes and stop passengers with banned items from boarding.

"Bus drivers have two roles - while successfully carrying out their regular tasks they will also conduct security checks on suspicious individuals," the newspaper said.

Such searches are already carried out at subway stations in many cities, but implementing the ban on packed and heaving buses could prove more challenging.

Rights advocates say heavy-handed policies in Xinjiang, including restrictions on Islam and the Uighur people's culture and language, have contributed to unrest. Authorities reject those assertions.

About 200 people have died in unrest in Xinjiang in the past year, including a suicide bombing that killed 39 people at a market in Urumqi in May. Some 200 died in riots pitting Uighurs against Han Chinese in the city in 2009.

Source: Reuters 

China Eastern Airlines tests in-flight Wi-Fi

(Xinhua) A Chinese airline on Wednesday tested a program to allow passengers to use in-flight Wi-Fi, paving the way for the technology's application in China's booming aviation market.

The satellite-based Wi-Fi service was made available on a flight operated by China Eastern Airlines, the first test of the service on a Chinese commercial flight. The test service was launched on an Airbus A330 servicing the Shanghai-Beijing route, and the first trial flight took off on Wednesday morning.

The aircraft is installed with devices that rely on satellites to transmit signals, boasting broader bandwidth and greater stability compared with communication via base stations, Zhang Chi with China Eastern Airlines told Xinhua.

The trial is an important step for in-flight Wi-Fi service to win approval from the country's aviation regulators, who have yet to issue licenses for its commercial use. The trial will help collect data and passenger feedback for setting standards and rules, Zhang said.

Though in-flight Wi-Fi has already been available on carriers outside of China, the country's airline passengers, who number 360 million per year, have been eager to use their smartphones during flights.

In 2011, Air China tested Wi-Fi intranet on one flight, which only allowed passengers to access the airline's network. Earlier this month, another flight on the same airline piloted Wi-Fi service to allow limited internet access.

Source: xinhua via want china times

Crash Puts Taiwan's Air Safety in Spotlight

The deadly crash of a Taiwanese commuter plane Wednesday has brought back into focus the island's air safety after years of improvement following a series of accidents.

A turboprop aircraft operated by TransAsia Airways Corp. crashed while trying to make its second landing attempt at Penghu's Magong airport off the coast of Taiwan, killing 48 people and injuring nearly a dozen others.

The incident came just days after the world reeled from one of the worst air disasters, involving a Malaysia Airlines jet that went down in Ukraine, killing all 298 people aboard, the second disaster for the carrier in five months.

Wednesday's crash of the European-made ATR-72 was TransAsia's third fatal accident involving that aircraft type since 1995, though the carrier's safety record had improved in recent years.

Over the past decade, Taiwan's other airlines have also made substantial gains in safety, following major overhauls to turn around an industry battered by several major crashes in the 1990s and early 2000s, with many involving the island's biggest carrier, China Airlines Ltd.

Before this week's crash, there had been no major fatal accidents for Taiwanese airlines since May 2002, when a Boeing 747 jet operated by China Airlines broke apart about 20 minutes into its flight from Taipei to Hong Kong, and crashed into the sea northwest of Penghu, killing all 225 people on board.

John Chang, a senior vice president at China Airlines' regional unit Mandarin Airlines, said he believes the TransAsia crash was an isolated incident caused in part by adverse weather conditions.

"While we still need to look into the reasons for the second landing attempt, I don't see that there are any systemic problems in our air safety regulatory system," he said.

He said the island's aviation regulator has boosted efforts to supervise airlines to ensure flight safety, leading to a substantial improvement in industry standards.

China Airlines invested heavily to refurbish its image, which had been left tarnished by a poor safety record. In 1998, the airline brought in Germany's Technik AG to overhaul its operations and set new training and safety standards for the airlines.

It also implemented a new system to evaluate crew performance to identify potential threats and minimizing safety-related risks.

TransAsia's ambitious expansion plans are likely to be hurt by Wednesday's crash of Flight 222. The Taipei-based airline is expanding and plans to start a low-cost carrier that would among the island's first.

Marc Wang, an aviation analyst at KGI Securities, said the crash will likely deal a blow to TransAsia's expansion drive and its fundraising capability to fund its fleet expansion.

The reason, according to an official at Taiwan's Civil Aeronautics Administration, is that an airline involved in a major crash would usually be banned from participating in international route allocations for a year.

That means TransAsia might not receive permission to operate on new international routes in the foreseeable future, said the official, who declined to be named.

"The incident would put TransAsia at a competitive disadvantage in competing with its Taiwanese peers for more air rights to expand its cross-strait flights and other international services," Mr. Wang said.

The cross-strait route between the island and mainland China—is one of the most profitable for Taiwan's airlines because of growing economic ties between the two regions and China's easing of travel restrictions to the island.

Founded in 1951, TransAsia, a smaller carrier compared with larger rivals China Airlines and EVA Airways Corp., has sought to aggressively expand its network beyond domestic Taiwan routes. 

TransAsia's Taipei-traded shares ended Thursday down 5.5%.

"Our top priority is to do everything we can to help the victims and their family members and that we will cooperate with the authorities in carrying out investigation into the incident," said a TransAsia spokeswoman Thursday when asked about the possible restrictions to the airline's expansion plans after the crash.

The carrier, which operates a fleet of Airbus and ATR Turboprop planes, last year promoted Singaporean Hsu Yi-Tsung, a former executive at budget carrier Jetstar Asia, to lead the airline's overseas push.

TransAsia last year got approval from Taiwan's aviation regulator to launch a low-cost airline that would operate flights within a five-hour radius of island, joining an already crowded market.

In 2013, China Airlines also unveiled plans to launch a budget carrier, hoping to link neighboring tourist and business hot spots when it starts service in the fourth quarter of this year.

Source: Wall Street Journal by Joanne Chiu

Taiwan’s TransAsia Air Reports Plane Crash, Unknown Fatalities

(Bloomberg) Forty-seven people are dead after a TransAsia Airways Corp. (6702) passenger plane crashed while trying to land at an airport on Taiwan’s outlying Penghu Islands, a safety official said.

Flight GE222, a twin-engine ATR-72 turboprop, crashed on its second approach to Magong Airport amid heavy rain at about 7:20 p.m. local time yesterday. Eleven people were injured, said Sherry Liu, an investigator at Taiwan’s Aviation Safety Council.

The plane carried 54 passengers, two pilots and two cabin crew on the flight from southern Taiwan’s Kaohsiung International Airport, said Alison Kao, a spokeswoman for the Taipei-based airline. Two of those on board were French nationals, she said.

TransAsia, which was founded in 1951 as Taiwan’s first private civilian airline, flies eight ATR-72 aircraft, mostly for domestic and short-haul international flights. In December 2002, a TransAsia ATR crashed into the sea, killing the two pilots, according to AviationSafetyNetwork, an accident-information website.

After the initial missed approach, the pilot performed a so-called go-around maneuver, Liu said. Air crew follow a set of procedures when aborting a landing, working off a checklist to ensure the plane clears the runway and avoids other aircraft and ground obstacles before re-entering the airport traffic pattern.

Departure Delayed

Flight GE222 was delayed and departed at about 5:35 p.m. yesterday, according to the airline’s website. It was scheduled to depart at 4 p.m. for the 35-minute trip northwest to Penghu, according to the airline’s website.

Television images from the crash site showed firefighters hosing down piles of twisted metal in the rain near the airport as rescuers carried people away in stretchers. Nearby homes were damaged, Sanlih Television reported.

President Ma Ying-jeou was saddened by the crash, Taiwan’s most serious aviation-safety incident in recent years, according to a statement from his office late yesterday. He called for support for victims’ families and a comprehensive investigation.

Offices and schools across Taiwan were closed yesterday for Typhoon Matmo, which unloaded heavy rains and knocked out power to about 500,000 homes. Penghu is situated in the Taiwan Strait, off the western coast of Taiwan’s main island.

The pilot of Flight GE222 had been flying for 25 years and had almost 30,000 flight hours, while the co-pilot had been flying about 2 1/2 years with approximately 3,000 hours, Kao said. Both are Taiwanese, she said. The ATR-72 was 13 years old, she said.

A flight recorder has been found, Civil Aeronautics Administration Deputy Director-General Lee Wan-lee said. The turboprop was built by Avions de Transport Regional, a joint venture between Airbus Group NV (AIR) and Finmeccanica SpA. (FNC)

Source: Bloomberg News by Tim Culpan

12 airports in eastern China affected by military drills for one month

(Want China Times) From July 20 to August 15, twelve airports in eastern China are being affected by military drills that will see a 25% reduction of flights.

The airports affected are Shanghai Hongqiao International Airport, Shanghai Pudong International Airport, Nanjing Lukou International Airport, Hangzhou Xiaoshan International Airport, Hefei Xinqiao International Airport, Jinan Yaoqiang International Airport, Wuxi Sunan Shuofang International Airport, Ningbo Lishe International Airport, Qingdao Liuting International Airport, Lianyungang Baitabu Airport, Zhengzhou Xinzheng International Airport, and Wuhan Tianhe International Airport. Passengers have been pre-warned of inevitable delays.

The People's Liberation Army started the drills codenamed Firepower 2014 Shandan on July 15 in Shandan county, Gansu province. One brigade taking part in the drills is an air defense unit stationed in Tibet. This is the first time the PLA has sent a brigade stationed in Tibet to conduct live ammunition maneuvers at low altitude.

Ten army brigades stationed in Nanjing, Shenyang, Guangzhou, Beijing, Chengdu and Jinan, and their long distance rockets, artillerymen, air defense units will move between six stations and operate under the complex electromagnetic environment around the clock for three months.

Source: Want China Times

Exorbitant refund kickbacks industry practice for China's travel sites

(Want China Times) China Network Television's recent blasting of online travel agency website Ctrip and its pricing tactics is actually a reflection of what has become a common practice to help the industry survive, reports the Guangzhou-based 21st Century Business Herald.

CCTV found the popular travel booking site charges more than 40% commission for refunding a travel package costing 1,057 yuan (US$170), with the main item being a round-trip plane ticket from Qingdao to Beijing. Airlines, in comparison, typically charge 5% commission for refunding plane tickets returned before takeoff or 10% after takeoff.

In addition to plane tickets, the travel package service offered by Ctrip also includes hotel accommodation and admission tickets for travel sites. The website charges 947 yuan (US$152.50) for the plane ticket, a markup of 87 yuan (US$14) over the actual price of 860 yuan (US$138.50), on top of the exorbitant commission for refunding.

Ctrip alleged that the commission for plane ticket refunding is actually collected by ticket agents, rather than the website.

At the end of 2013, Ctrip opened up its platform to travel agencies and ticket agents for sales of travel products or plane tickets, collecting fixed commissions from the latter, rather than cuts on sales. The website claims that such platform partners will number several thousands in the future, allowing consumers to make comparisons among products offered by those partners.

"The opening of its platform enables consumers to purchase plane tickets or travel products at the lowest prices but risks the inclusion of unscrupulous partners," said an industry insider.

The open platform practice of Ctrip and other travel sites originates from price comparison sites for the sales of plane tickets and travel products, whose agents often profit from commissions provided by airlines or hotels for massive sales of their products. With airlines lowering the commissions for such agents, they compensated by hiking the commission for refunding bookings to offset the thin profit margin, according to market players. Statistics show that the return rate for plane tickets in China stands at less than 5%.

Source: Want China Times 

Hainan Airlines to buy 50 Boeing 737 MAX

(Xinhua) Hainan Airlines is finalizing a deal to spend over 5.1 billion U.S. dollars to buy 50 Boeing 737 MAX8 aircraft, the company said on Thursday.

The commitment will be officially logged after government approval.

"The Boeing 737 MAX will help our company grow more efficiently and offer our passengers five-star service," said Tan Xiangdong, vice chairman and president of Hainan Airlines.

Source: xinhua via china.org

Elong Leads Travel Websites’ Decline on Lower Fee Income

ELong Inc. (LONG) led a slump in Chinese online travel sites traded in the U.S. after China Eastern Airlines Corp. joined bigger rivals in cutting sales commissions.

Elong, whose top shareholder is Expedia Inc., fell 2.8 percent the lowest close since June 27. Qunar Cayman Islands Ltd. (QUNR), controlled by Baidu Inc., slid for a third day and Ctrip.com International Ltd. (CTRP), China’s biggest online travel agency, sank to the lowest level in three weeks. The Bloomberg China-US Equity Index slipped 1.4 percent to 106.97 in New York, dropping the most in seven days.

China Eastern followed other air carriers in lowering the commissions it pays to domestic ticketing agencies by 1 percentage point to 2 percent, China Business News reported yesterday, citing the airline. 

The impact of the change will be reflected in the travel sites’ third-quarter results even though the companies said the effect on sales would be limited, according to 86Research Ltd. Air China Ltd. and China Southern Airlines Co. had already notified agencies of the lower fees.

“They all will be impacted because they all have exposure” to the air ticketing business, Jeff Papp, senior analyst at Oberweis Asset Management Inc. in Lisle, Ill., said by e-mail. “Ctrip could be most impacted because they have expectations for some profits this year. This move by airlines needs to force consolidation in the travel sector.”

ETF Slips

The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., declined 1.4 percent to $37.97, the biggest slump in three weeks. The Standard & Poor’s 500 index (HSCEI) fell 1.2 percent amid intensifying tension in Ukraine and the Middle East.

Elong’s American depositary receipts slumped to $19.82. Qunar fell 0.8 percent to $27.10 and Ctrip slid 2.6 percent to $58.80.

A business combination of Ctrip and Qunar makes the most sense, Papp said. In April, Bloomberg reported Ctrip and Qunar were discussing the possibility of a merger, citing two people with direct knowledge of the talks. The people, asking not to be identified because the negotiations were private, said the talks were in an early stage and may not result in a final deal.

China’s Southern Metropolitan News reported July 3 that Ctrip.com was planning to acquire Expedia’s stake through a share swap, citing an unidentified person with knowledge of the matter. Four days later, Expedia, the U.S.-based travel website that owns about 65 percent of Elong, said it remains a long-term investor and supports the company’s “drive to become the leading Chinese travel site.”

Melco Drops

Melco Crown Entertainment Ltd. (MPEL), an operator of casinos in Macau, fell 3.3 percent to $31.96 in New York, a five-week low.

Sands China Ltd. yesterday reported second-quarter profit that missed analysts’ estimates, partly because of a special bonus to retain staff before the next wave of new casinos to be opened in Macau next year.

Investors will be most concerned about Sands’ competitors as other operators have also announced new staff retention plans during the quarter, Karen Tang, a Deutsche Bank AG analyst, said in a note yesterday.

E-Commerce China Dangdang Inc., an online retailer based in Beijing, tumbled 4.9 percent to $12.14 in a third day of declines. Youku Tudou Inc. fell 3.7 percent to a one-month low of $19.80.

The Hang Seng China Enterprises Index slipped 0.1 percent to 10,467.06, sliding for a second day. 

The Shanghai Composite Index (SHCOMP) retreated 0.6 percent to 2,055.59, dropping the most in a week

Source: Bloomberg News by Belinda Cao | Photo: China Daily

Weaker Yuan Creates Rough Weather for China's Airlines

(WSJ) China's three major state airlines will likely post weak first-half results next month, stung by the depreciating yuan and despite steady air traffic growth in the country.

A weak Chinese currency hits the state airlines' bottom lines because much of the debt they take on to finance aircraft purchases is denominated in dollars, so their debts become costlier as the yuan declines in value against the dollar. The airlines also have dollar-denominated aircraft lease and jet-fuel purchase obligations.

Air China Ltd. said Monday that its first-half net profit is expected to fall as much as 65%, due to increased finance costs arising from foreign-exchange losses. It didn't give exact figures for its profit forecast, but said it posted a first-half net profit of 1.12 billion yuan (US$180.4 million) a year earlier.

The Chinese flag carrier's profit warning comes just days after its state rival China Southern Airlines Co., the nation's biggest carrier by fleet size, warned that it expects to post a first-half net loss of 900 million yuan to 1.1 billion yuan because of foreign-exchange losses due to the Chinese currency's weakness. It posted a first-half net profit of 302 million yuan a year earlier. The carrier uses Chinese accounting standards.

As of the end of 2013, China Southern's net debt totaled 104.3 billion yuan, of which more than 80% was dominated in dollars.

The yuan fell as much as 3.4% against the dollar in the first four months of this year, after several years of consistently strengthening as the government moved to depreciate the currency. Depreciation of the yuan against the dollar narrowed to 2.5% in the first half.

Figures released in April showed China's "Big Three" state carriers were already reporting significantly weaker first-quarter results because of the yuan's 2.7% slide against the dollar during the quarter. Air China's first-quarter net profit plummeted 63% to 92.7 million yuan, compared with 249 million yuan in the year-earlier period. China Southern and China Eastern Airlines Corp., meanwhile, posted a combined net loss of 511 million yuan during the period.

Air China said its interest-bearing debt totaled 111.6 billion yuan in 2013, with more than 70% denominated in dollars. China Eastern's total liabilities were 111.49 billion in 2013; the airline didn't break out its foreign debt position in its 2013 annual report.

Barclays Research expects Air China and China Eastern to make similar profit warnings due to foreign-exchange losses ahead of their earnings releases scheduled for late August. 

The brokerage firm estimates a foreign-exchange loss of 1.6 billion yuan for China Southern in the first half, compared with a foreign-exchange gain of 1.5 billion yuan the previous year, when the Chinese currency was strengthening.

To be sure, these foreign-exchange losses are mostly noncash, and they don't pose significant medium-term impact if the yuan's decline stabilizes near current levels, say analysts.

The weak net results therefore mask the underlying strength in China Southern's first-half performance, Barclays said in a note. It added that China Southern would have been profitable on an operating level if the currency impact was excluded.

Kelvin Lau, an analyst at Daiwa Securities, said China Southern's profit warning came as no surprise to a market familiar with the weak yuan. "We expect passenger yield improvements to help drive core profitability for the big three state airlines for 2014, though their bottom line would likely be weighed by exchange losses," he said.

The nation's air travel boom has helped boost core earnings at China's biggest airlines and signaled that the nation's recent slowdown hasn't weighed on consumer sentiment as much as some may have feared. 

In the first six months of this year, China Southern, for example, carried 47.39 million passengers, up 8.2% from a year earlier. Demand was particularly strong in outbound air travel, with international passenger revenue up 16% during the period, as China Southern seeks to expand its overseas reach.

Source: Wall Street Journal by Joanne Chiu

South Korea to become top destination for Chinese tourists

(Want China Times) The Republic of Korea will overtake Thailand to be the largest outbound destination for Chinese tourists in this year, said a report from China's leading online travel agency Ctrip.

Ctrip predicts the number of Chinese visitors to the ROK will jump 40% from a year ago in 2014, thanks to visa-free policy for Chinese visitors to Jeju Island, the most popular tourist attraction in the country.

In 2013, nearly 4 million trips to the ROK were made by Chinese tourists, the largest among foreign visitors, according to Ctrip.

Chinese airline companies have started to increase flights between the two nations to meet the growing demand. China Southern Airlines will operate three daily flights from south China's Guangzhou city to Seoul since July 15. Air China started non-stop flights between Beijing and Jeju on June 11.

Source: Want China Times

Mountaintop airport in Guangxi

When it opens next month, the airport in Hechi in Guangxi Zhuang autonomous region should prove a nail-biting landing for arriving passengers.

Dozens of hilltops were levelled to clear way for the 850-million yuan (HK$1.06 billion) airport, built 677 metres above sea level. There is a single terminal and one runway extending 2.2km.

It can accommodate three flights an hour, compared to the 60 that the mainlands busiest airports handle.

Construction began in December 2008 and was completed at the end of last year. The airport will be a transit stop on the sole air route between Chongqing and Haikou in Hainan province. It might also add a flight from Guangzhou in the future, local media reported.

Hechi is located in northwestern Guangxi on the southern end of the Yunnan-Guizhou Plateau, which is home to about four million people.

Source: china daily

China Air Passengers Up 11 Percent as More Flights Sought

(Bloomberg) The number of air passengers in China rose 10.7 percent in the first six months of the year, the country’s aviation regulator said, as it urged carriers to expand into less-developed regions.

The Civil Aviation Administration of China said in a statement posted on its website that 186 million people flew into and out of Chinese airports during the half. Passenger volume grew at a slightly slower pace than the 11 percent increase in the first six months of 2013.

Airlines should expand into smaller cities, particularly in the country’s midwestern region, the statement said, citing remarks by agency chief Li Jiaxiang at an aviation work conference yesterday. Li said the agency also wanted to improve the operating environment for low-cost carriers.

The push to expand regional air travel could benefit Boeing Co. (BA) and Airbus Group NV (AIR), which manufacture the midsized aircraft needed to serve lower-volume routes.

The regulator said it would work to set up a civil aviation investment fund and attract “social capital” to aid the sector’s expansion. The statement said air cargo volume rose 6 percent in the first half of this year.

China is expected to account for about 40 percent of the jets that will be delivered to the Asia-Pacific area over the next 20 years, said Randy Tinseth, vice president of marketing at Boeing’s commercial airplane unit. Boeing said May 14 it would sell 50 single-aisle 737s with a list value of at least $3.8 billion to a discount carrier being set up by China’s Juneyao Airlines Co.

China Eastern Airlines Corp. said July 2 it was starting its first low-fare carrier, a move that may encourage bigger rivals Air China Ltd. and China Southern Airlines Co. to consider similar steps.

Source: Bloomberg News by Clement Tan

Expedia Calls eLong Reports Inaccurate

(WSJ) Expedia Inc. on Monday called certain rumors reported in Chinese media about the company's majority ownership of Chinese online travel service provider eLong Inc. inaccurate.

The Bellevue, Wash., online travel site said it remains a long-term investor in eLong and supports eLong's drive to become the leading Chinese travel site.

Expedia said that as a matter of corporate policy, it doesn't comment on market rumors relating to its business.

Expedia's involvement with eLong dates back to 2005, when Expedia's then-parent IAC/InterActiveCorp. took a controlling interest in the Chinese company.

In 2011, Expedia boosted its stake to near its current level of roughly 57%, while Tencent Holdings Ltd. also unveiled a strategic investment in eLong.

Meanwhile, Expedia has continued to add to its portfolio of brands from around the world.

Late Sunday, Expedia unveiled its bid to acquire one of Australia's largest online travel agencies, Wotif.com Holdings Ltd., for 703.1 million Australian dollars ($658.4 million). The deal was embraced by Wotif's board.

Last month, Expedia agreed to buy European online car-rental company Auto Escape Group from private-equity fund Montefiore Investment, and last year paid $632 million for 62% of German travel site Trivago.

Source: Wall Street Journal by Anna Prior

Beijing mulls higher bus, subway fares

(Xinhua) Beijing began soliciting public comments on price rises for bus and subway fares on Thursday.

Residents can comment on fare pricing plans from July 3 to July 20. It is the first time Beijing has solicited public opinion before raising prices. Any changes will be based on suggestions and a public hearing organized before any increases.

To ease traffic congestion, Beijing reduced bus tickets to as low as 4 jiao ($0.06) and two yuan ($0.32) for subway tickets ahead of the Olympics in 2008. Since then, prices have not changed. Recently, huge losses by the system and safety concerns about overcrowded vehicles have led to suggestions that prices need to rise.

In 2013, Beijing's buses carried eight billion passengers, an increase of 64 percent from 2007. The number of passengers taking subways hit 3.2 billion last year, an increase of 350 percent from 2007. 

Subsidies also jumped from 13.5 billion yuan in 2010 to 20 billion yuan in 2013.

"Public transport prices in Beijing have been well below their actual value for some time. Ticket revenue is nowhere near operation costs. The current system is neither sustainable nor conducive to urban development," said Wang Limei, secretary general of the China Road Transport Association.

Multi-tier pricing may ease subway crowds in rush hours and will improve services, said Wang.

"It is not a pure price hike, but a more reasonable ticketing system," said an official of the Beijing development and reform commission. "Our purpose is to solicit public opinion and suggestions then to formulate a reasonable price regime."

Residents have expressed their support for a reasonable price increase, but hope for a better service.

"My monthly expenditure is about 100 yuan. Even a doubling of price would be quite acceptable, but prices should not be too high," said Lu who hoped the government system soliciting of public opinion would not be formal.

Liu, another resident said much improvement is needed to signals and safety on Beijing's subways.

Source: xinhua via china daily

China signs deal to purchase 123 Airbus helicopters

(Reuters) - Airbus Group NV's (AIR.PA) helicopter division sealed a deal on Monday to sell 123 helicopters to Chinese companies during German Chancellor Angela Merkel's China visit.

The orders, including both light single-engine helicopters from Airbus Helicopters' Ecureuil family and the light twin-engine EC135, are being placed by three Chinese general aviation service providers, the company said in a statement.

“We are grateful to the operators for selecting Airbus Helicopters to be their partner in developing the general aviation market to serve China’s needs,” said Airbus Helicopters CEO Guillaume Faury.

“It is evident that China’s relaxation of its low-altitude airspace regulations is enabling the country’s burgeoning helicopter market to realize its potential.”

Germany's Deutsche Lufthansa AG (LHAG.DE) and China's flag carrier, Air China Ltd (601111.SS), also signed a memorandum of understanding (MOU) to expand and strengthen their partnership in a separate deal signed earlier on Monday.

The MOU should pave the way for a commercial joint venture between the two carriers, Lufthansa said. The airline did not provide further details.

The two carriers, both members of the Star Alliance, also said they were working to offer better flight connections, particularly on China-Europe routes, and expand collaboration in maintenance, repair and overall services.

Source: Reuters

Hong Kong Airlines Considers First Dual-Currency Hong Kong IPO

(WSJ) Hong Kong Airlines, a small carrier based in the city, is considering plans to launch what would be the first dual-currency initial public offering, with a US$500 million yuan-Hong Kong dollar float sometime this year.

The airline hasn't made a final decision on whether to push forward with either its listing plans or whether the IPO should trade in both the Chinese currency and the Hong Kong dollar, people with direct knowledge of the deal said. Hong Kong Airlines has yet to file a listing application with the stock exchange, but it is looking into a fourth-quarter IPO, the people said.

Hong Kong Airlines is controlled by Chinese conglomerate HNA Group, whose holdings include Hainan Airlines.  It flies short-haul regional routes between Hong Kong and other destinations in Asia, including Phuket in Thailand, Osaka in Japan, and Chinese cities like Beijing and Shanghai.

The airline, which has a fleet of around 23 aircraft, is looking to list as it grapples with high fuel prices and competition from bigger rival Cathay Pacific Airways Ltd.  Funds raised from an IPO would go toward financing its plan to buy more aircraft, the carrier had said. Hong Kong Airlines declined to comment.

While a dual-currency IPO may win some fans for its novelty, a deal such as this may be less alluring than it would have been a few years ago when the yuan was rising, according to industry experts. The yuan has fallen 2.5% against the U.S. dollar so far this year, according to FactSet.

The only company in Hong Kong that trades in the Chinese currency, Hui Xian Real Estate Investment Trust,  raised US$1.6 billion in an IPO in April 2011, when the yuan was still on an upward trend. The trust company owned by Hong Kong tycoon Li Ka-shing has seen its shares fall 36% since then, with its stock underperforming Hong Kong's benchmark Hang Seng Index by 1.2%.

Still, if the Hong Kong Airlines listing goes ahead, it will be a coup for the Hong Kong Stock Exchange, which has been encouraging companies to list in both currencies in the past couple of years. 

The exchange has been eager to have stocks listed in both currencies to cater to the growing demand outside China for investment products denominated in the yuan, also known as the renminbi, though none have taken up this option yet. The stock exchange has said previously that a platform to accommodate yuan-denominated dual-currency IPOs is ready.

WH Group, the Chinese pork producer that made headlines last year with the acquisition of U.S.-based Smithfield Foods Inc, at one point was considering a dual-currency listing earlier this year. It went ahead with an attempt to raise up to US$5.3 billion in a solely Hong Kong-dollar float in April, but pulled that listing when demand fell through. The company, formerly known as Shuanghui International Holdings, is now looking into reviving its listing attempt, again just in Hong Kong dollars, people familiar with the situation previously said. It wasn't immediately clear why WH didn't go the dual-listing route.

Hong Kong Airlines, set up in 2006, has attempted to fly long-haul but pulled out due to weak demand. 

It cut services to Moscow and suspended its all-business class flights to London in 2012. It is now solely focused on short-haul routes, of which Chinese cities dominate. It flies in total to around 20 Chinese cities.

Source: Wall Street Journal by Prudence Ho, Yvonne Lee and Joanne Chiu

Air China, Lufthansa Consider Joint Venture on Some Routes

(WSJ) Deutsche Lufthansa AG and Air China Ltd.  are seeking closer ties that could include a joint venture on routes between China and Europe, taking advantage of the growing demand for trade and passenger travel between the markets.

The carriers, both members of the Star Alliance, could announce the plans during German Chancellor Angela Merkel's visit to China this week.

An executive at the Chinese flag carrier cited rising competition from other airline alliances. A joint venture could boost their networks and capacity in the China-Europe market, while making flight times more efficient.

Lufthansa has said it is interested in forging accords beyond those it has in Japan and North America. Establishing such a pact in China has interested management for some time. The German carrier has revenue-sharing joint ventures with Air Canada,  Japan's ANA Holdings Inc. and U.S.-based United Continental Holdings Inc.

A joint venture allows airlines to closely coordinate operations and pricing. On certain routes, the airlines can operate like a single carrier without violating antitrust rules. Such deals, which are subject to regulatory approval, provide far greater financial benefits than network alliances or code-sharing agreements, which allow partners to book customers on each other's flights, by helping to boost sales and curb costs.

Joint ventures increasingly are popular among airlines to boost returns in an industry that has large barriers to consolidation. Most countries limit foreign investments in their airlines, effectively blocking many cross-border mergers.

European carriers including Lufthansa, British Airways PLC and Air France-KLM SA are seeking stronger ties in growth markets such as China to offset shrinking European business. Strengthening direct ties into China also is seen as a way to keep passengers from defecting to fast-growing Persian Gulf carriers, such as Emirates Airline.

An agreement between Lufthansa and Air China would cement ties that date to 1989, when they established an aircraft-maintenance joint venture, Ameco Beijing. Air China airline holds a 60% stake in that venture and Lufthansa has the rest. The German and Chinese carriers first signed a code-sharing agreement in 2000.

Air China joined the Star Alliance in 2007. The alliance, the world's biggest, will have 27 members this month when Air India Ltd. joins carriers such as Singapore Airlines Ltd.  and Air New Zealand Ltd.

Airline alliances benefit members through marketing campaigns and other forms of cooperation to lure customers. Member airlines also pool ticketing and airport resources to save on operating costs. Air China's state-run rivals China Southern Airlines Co. and China Eastern Airlines Corp. belong to SkyTeam alliance. Hong Kong's Cathay Pacific Airways Ltd. is part of the Oneworld alliance, which includes British Airways and American Airlines Group Inc.

Source: Wall Street Journal by Joanne Chiu and Robert Wall

China United Airlines to become low-cost carrier

China United Airlines (CUA), a subsidiary of China Eastern Airlines, announced on July 2 that it will officially transform itself into a low-cost carrier, reports the Chinese-language Beijing News.

CUA will become the fourth low-cost carrier to spring up in China as well as the first state-owned operator. It will also be the first with its base in Beijing.

After the transformation, CUA will be at least 20% cheaper than other airlines flying the same routes and maintain a difference of between 20%-40%, said airline president Zhang Lanhai. The firm will work on a direct ticket purchase platform common to low cost carriers, and will consider charging for meals, select seating, and luggage check-in so as to lower costs.

Low cost carriers provide cheaper tickets through downsizing function costs. Darren Hulst, director of product forecasting for Boeing Commercial Airplanes, said that the scale of low cost carriers in Asia has grown six-fold in the past decade and will continue to grow another 10% over the next two decades. The global market share of Chinese low-cost carriers is only 8%, indicating a huge space to develop. Chinese low-cost carriers will develop fast and be aggressive competitors in the global future market, he said.

Spring Airlines, China West Air, and 9 Air have all lowered their costs and the prices of tickets through raising seat numbers and occupancy rates, adding flight hours and charging for meals. With UCA joining the market of low cost carriers, Huabei (north), Huadong (east), Huanan (south), and the west areas have their own locally based low-cost carriers.

With China Express Airlines, Chengdu Airlines and Beijing Capital Airlines expressing interest in the transformation, major airlines such as Air China and China Southern Airlines are also considering transforming their subsidiary airlines. It is expected that low-cost carriers will soon become the mainstream.

Source: Want China Times 

Air China, Lufthansa Consider Joint Venture on Some Routes

(WSJ) German's Deutsche Lufthansa AG and Chinese flag carrier Air China Ltd. are seeking closer ties that may include a commercial joint venture on routes between China and Europe, taking advantage of the growing demand for trade and passenger air travel between the two markets.

The carriers, both members of the Star Alliance in which airlines cooperate, could announce plans to further strengthen their partnership during German Chancellor Angela Merkel's seventh visit to China from July 5 to July 8.

"We aim to deepen and further expand our relationship in the face of rising competition from other airline alliances," said an official at the Chinese carrier who declined to be named. He noted possible areas of cooperation include an intention of setting up a commercial joint venture on routes between China and Europe, though details of the planned accord have yet concluded.

By forming a commercial joint venture the two airline group could boost their network and capacity in China-Europe market, while optimizing flight times.

Lufthansa previously has said it is interested in adding to joint venture accords beyond those it has into the Japanese and North American markets. Establishing such a pact in China has interested management for some time. Lufthansa currently has revenue-sharing joint ventures with United 

Continental Holdings Inc., Air Canada and ANA Holdings Inc.

A joint venture accord, if approved by regulators, allows airlines to closely coordinate operations and ticket pricing. On certain routes, the airlines can operate virtually like a single carrier without violating antitrust rules. Such deals provide far greater financial benefits than mere alliance partnerships or code-share agreements by helping to boost sales and curb costs.

Joint venture accords are increasingly popular among airlines to boost financial returns in an industry with larger barriers to consolidation. Most countries place limits on foreign investments in their airlines, effectively blocking many cross-border mergers.

European carriers such as Lufthansa and rivals British Airways and Air France-KLM are seeking stronger ties into growth markets such as China to offset shrinking European business. Strengthening direct ties into China also is seen as a way to keep passengers from defecting to the high-growth Persian Gulf carriers, such as Emirates Airline, the world's largest by international traffic. An agreement between Lufthansa and Air China would cement ties between the two airline groups whose relationship dates back to 1989 when they established an aircraft maintenance joint venture--Ameco Beijing. The Chinese airline holds a 60% stake and Lufthansa has the remaining 40% interest.

In 2007, Air China joined the Star Alliance, –the world's biggest airline alliance with 27 members when Air India this month joins carriers such as Singapore Airlines Ltd., and Air New Zealand Ltd. The German and Chinese carriers first signed a code-sharing agreement in 2000, allowing their customers to be booked on flights on partnering airlines.

Airline alliances benefit members through marketing campaigns and various forms of cooperation to lure customers. Member airlines also pool ticketing and airport resources to save on operating costs. Air China's state-run rivals China Southern Airlines Co. and China Eastern Airlines Corp, belong to SkyTeam airline alliance. Hong Kong's Cathay Pacific Airways is part of the Oneworld alliance that includes carriers such as British Airways and its joint venture partner American Airlines Group Inc.

Source: Wall Street Journal by Joanne Chiu and Robert Wall

China Eastern Airlines Plans Budget Carrier

(WSJ) China Eastern Airlines Corp. plans to convert one of its units into a low-cost airline, becoming the first Chinese state-run carrier to enter Asia's booming budget-airline market after Beijing's move to liberalize its aviation sector.

China United Airlines, a Beijing-based domestic carrier controlled by China Eastern Airlines, will transform itself into a low-cost airline, said James Wang, China Eastern's company secretary.

"We believe the low-cost carrier market has enormous growth potential in China given its low penetration rate, which is just 5% now, much lower than a 30% to 40% penetration in developed markets such as the U.S. and Europe," said Mr. Wang. He declined to give details about when China United will begin operations as a budget airline.

Beijing this year unveiled new guidelines to jump-start its fledgling low-cost-airline market after its decision last year to lift a six-year-old ban on establishing new airlines. The guidelines included simplifying approvals for new low-cost airlines as well as measures to help existing budget carriers expand more quickly.

Based at Beijing's Nanyuan Airport, a smaller military-and civil-use domestic airport roughly 8 miles 

from downtown Beijing, China United Airlines operates a fleet of 26 Boeing 737 aircraft and flies to about 70 cities in China. It plans to triple its fleet size to 80 aircraft by 2019 and will then relocate its home base to Beijing's planned second major airport when it commences operation by the end of this decade.

Mr. Wang said China's aviation market is big enough to absorb more competitors and lower airfares could spur ticket sales. "People may consider going on multiple trips instead of just one a year. Those who used to travel by train would consider going by air now because of lower ticket prices," he said.

Among China's three state-run carriers, Shanghai-based China Eastern is likely the most vulnerable to the budget-airline boom. Spring Airlines Co., the nation's largest budget airline, is also based in China's financial capital and has grown its fleet to roughly 40 Airbus A320 aircraft, which fly short-haul flights to popular markets such as Japan, South Korea and Hong Kong.

Low penetration in China's budget airline market has also prompted traditional full-service airlines to jump into the discount race. Chongqing-based regional carrier West Air Co., which like Hainan Airlines Co. is controlled by HNA Group, a privately owned Chinese conglomerate, last year transformed itself into a budget carrier. Meanwhile, privately owned Juneyao Group, which also controls Shanghai-based Juneyao Airlines, in June announced a plan to set up a budget offshoot called 9 Air—which translates as "Nine Bucks Airlines" in Mandarin—in Guangzhou later this year.

The increasing number of budget airlines setting up shop in China raises concerns that growing competition could hurt profitability in one of the world's fastest-growing aviation markets. However, Credit Suisse analyst Timothy Ross said the pace of liberalization will likely remain tightly managed by China's aviation regulator, whose aim is still largely to protect the interest of the state-owned carriers.

The authorities "would probably restrict landing rights or slot availability at large airports, and probably offer some degree of incentives to the LCCs to serve more outlying areas. That way you'll achieve your social aim without being detrimental to incumbents," he said.

Mr. Ross said China Eastern's move into the low-cost carrier sector also "reflects both a newfound opportunity and growing frustration at the inability of Jetstar Hong Kong" to get off the ground in Hong Kong amid opposition from de facto flag carrier Cathay Pacific Airways.

China Eastern, the smallest among the three state-owned carriers in terms of fleet size, in 2012 announced a plan to set up Jetstar Hong Kong, a stand-alone budget airline based in Hong Kong under a joint venture with Qantas Airways Ltd.'s Jetstar Group and Shun Tak Holdings Ltd., which is controlled by Macau businessman Stanley Ho. But the airline, which had been scheduled to begin operations in 2013, is still seeking regulatory approval from Hong Kong's government to start flights.

In September, Cathay Pacific filed a formal objection with Hong Kong's government against Jetstar Hong Kong's plan to roll out services, citing possible violation of the city's mini-constitution, the Basic Law. The approval of Jetstar's application would set "a dangerous precedent by granting control of Hong Kong's hard-negotiated sovereign air traffic rights to a carrier that is nothing more than a franchise operation controlled by a foreign airline," Cathay Pacific said. Cathay Pacific said Wednesday its position on Jetstar Hong Kong is unchanged.

Source: Wall Street Journal by Joanne Chiu

Security boosted at capital's subway amid safety campaign

(China Daily) Security checkpoints at Beijing subway stations are being upgraded following several deadly attacks across the country targeting civilians.

About 1,200 police officers were dispatched to the city's 17 subway lines on Monday to inspect security facilities and staff. At around 9:30 am, about 20 police officers inspected Wangfujing station on Line 1, making sure items such as fire extinguishers were working properly and reminding staff members to keep the exits clear.

Such inspections should be regular and anti-terrorism drills will be conducted frequently, said Tan Quan, deputy head of the traffic corps of Beijing Municipal Public Security Bureau.

"We require each station to increase the number of inspectors, ask them to master new security technology, including explosion-proof devices and dangerous liquid detectors, and allocate police dogs," Tan said.

Chen Jihong, a security inspector at the Wangfujing station, said 40 security staff members have been added to each work shift. "Now, our station can operate the security checks via devices and human power at the same time, which means we need to be familiar with the security devices and identify explosives," Chen said.

Currently, nine stations use comprehensive checks - searching bags by hand and with scanners. That number will reach 56 by the end of the year, the traffic corps added.

"If we find something wrong during the security check, we'll call two police officers on patrol in our station and then stop the inspection to help evacuate passengers," Chen said.

All police in the stations must be armed with guns, batons and shields while on duty, according to one of the police officers in charge of Wangfujing station.

"Other professional anti-terrorism and explosion-proof devices that cannot be carried will be stored in the station's office," added the police officer, who declined to be named.

Police dogs, including those that can identify flammable materials such as gasoline, are being used at busy stations and transfer points.

Source: By Cao Yin (China Daily)