11/02/12, 22:13:18 EST

  e-mail this article

UPDATE 1-AVIC I, China Eastern eye $133 mln airline

reuters.com

BEIJING - State-owned China Aviation Industry Corp I (AVIC I) said on Wednesday it plans to team up with China Eastern to form a 1 billion yuan ($133 million) regional airline that will fly locally built planes.

The new airline would be based in western China and could begin operations in the first half of next year, Senior Vice President Hu Wenmin told reporters at an aviation forum.

"The plans are moving ahead smoothly," Hu said.

"This airline will fly China-made airplanes on shorter routes in the west of the country."

AVIC I was also building a 90-seat passenger jet, the country's first home-grown regional aircraft, which it hoped to begin delivering in 2009, Hu said.

It aimed to produce 30 ARJ21 aircraft annually from 2010, entering a market dominated by Brazil's Embraer (ERJ.N: Quote, Profile, Research)(EMBR3.SA: Quote, Profile, Research) and Canada's Bombardier (BBDb.TO: Quote, Profile, Research).

The ambitious company has the full backing of Beijing, which has plans for a domestically built wide-bodied jet to reduce its reliance on Boeing (BA.N: Quote, Profile, Research) and Airbus.

"We have plans to become further integrated with the global aviation industry," Hu said.

AVIC I supplies parts to Boeing and Airbus, a unit of European aerospace group EADS (EAD.PA: Quote, Profile, Research).

Hu's comments came after regulators said last month that the country's aviation industry was growing too fast, citing a lack of qualified personnel, airports and airspace that were putting pressure on safety.

On Tuesday, Boeing raised its 20-year forecast for aircraft demand from China by 17 percent to 3,400 new airplanes as China has 10 new airlines waiting for approval.

Hu reckons the new airline and airplane will grow rapidly as China has plans to build 51 new regional airports in the coming five years.

"After these airports are built, the demand for these planes should grow rapidly," he said.

Foreign investors are also vying for a piece of the rapidly growing industry.

Singapore Airlines - the world's second-largest airline by market value -- and its parent Temasek agreed this month to pay US$918 million for 24 percent of loss-making China Eastern.

The investment fanned speculation that China's two other dominate carriers -- Air China and China Southern Air - could attract more investor attention.

 Printable Version  | published Sep 19, 2007