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Private capital enters aviation industry
2003-02-13
China Daily
The Junyao Group, a well-known Chinese private enterprise, was recently approved to buy Yichang Airport, 30 kilometres away from the Three Gorges Dam Project. The deal was the first such transaction for private capital.
Experts predict private capital will gradually become a new force of China's aviation industry. Meanwhile, the investment system of the aviation industry will become more market-oriented.
China's aviation industry was considered a special, monopolized and semi-military business for a long time.
After the regrouping of six aviation groups last year, many eager domestic aviation companies hoped to introduce outside strategic investment to learn from advanced management experience and skilful market operation methods, said Feng Fei, an expert with the Development Research Centre under the State Council.
Wang Junyao, board chairman of the group, led the company to open the first chartered flights by private enterprises in 1991.
He decided when earning profits from the chartered planes that he would become more involved in the aviation industry while still abiding by national regulations.
In 2001, Wang made civil aviation one of the two major aspects of business of his group, as well as dairy. He set another record last year by becoming the first to take the shares of a local airline company with private capital.
Junyao has now developed into a fully diversified group, with aviation and dairy as its core business.
Experts said many large projects exclusively belonged to State-owned enterprises for a long time. But last year saw private capital quickening its pace in the aviation industry through participation in air route management and the acquisition of shares in airports. Junyao was instrumental in speeding up the opening of the aviation sector to private companies.
According to Feng, the first approval of private capital for an airport signifies China's private business has become an important force in the nation's economic reform.
Zhang Tao, an analyst with Huatai Securities, said the investment of private capital in aviation shows the rapid growth of China's private enterprises and its strong confidence in the industry.
China's aviation industry has attracted many domestic entrepreneurs who see that business is booming.
A common method internationally of breaking up an airport monopoly is to introduce an auction system. Feng said the Yichang Airport could be considered as a first trial of such a method, which can promote aviation reform.
According to his prediction, the airport will face two important issues: The introduction of competitive merchants to the airport, and the strengthening of government supervision.
Feng believed increasing amounts of vital private capital will be injected into the aviation industry as the local government hopes to improve infrastructure.
Having waited a while before receiving final approval, Wang said his group's transaction has broken the ice for other private enterprises to enter China's aviation industry.
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