Facing International Financial Crisis, CAAC Issues 10 Measures to Promote Industry Growth

Since latter half of 2008, the global economic crisis has increasingly impacted the development of Chinese civil aviation. Hence CAAC, in cooperation with central government and state councils, has stipulated 10 measures for coping with various risks and promoting civil aviation’s sustainable rapid growth. I. To address safety monitoring and enforce safety policy Uncertain times require steadiness in implementing safety policies, namely: "Safety First," "Prevention as Priority," and "Integrated Management." These entail continuous and strict adherence to standards, reinforcing safety education, evaluating responsibilities and how they intersect, and monitoring. As capital dwindles, reduction in safety expenditures or undue tinkering with safety margins must be prevented. Tracking and monitoring of older aircraft must be reinforced. New projects should be checked for myopia in safety concerns. Strong group dynamics encourage the kind of communication that leads to higher safety, and so there should be some level of stability in pilot and flight technical teams. Small airlines should be monitored more. According to international and domestic terrorist threats, security investments should be increased for possible targets. To these ends 10 billion Yuan will be invested into the civil aviation special funds for the safety infrastructure. II. To give more structure to the aviation market and improve market conditions Before 2010, refuse to accept any new airlines’ application in principle. Accelerate the approval process for setup of eligible cargo airlines and subsidiaries that have already applied. Regulate market price behavior, and adopting appropriate measures to prevent deleterious competition among airlines. III. To control growth capacity and help balance supply and demand Put more effort into capacity control, make the approval process more strict for projects involving new importing transportation aircraft in 2009, and encourage airlines to cancel or delay orders of imported aircraft in 2009. Off-lease expired leasing overseas aircraft and wet-leasing aircraft, adopt methods of grounding, selling, or retrofitting passenger aircraft into transporters, and enlarge reinforcement of retiring old aircraft. Encourage airlines to adjust their capacities. Reduce aircraft imports. IV. Implement a special air route policy while realizing passenger and cargo market potentials Increase the subsidies to the 100 routes to rural and emerging-market areas, protect the airlines operating wholly owned new air routes for three years, and provide subsidies to some special long-range international routes. At the same time, invest 400 million Yuan to continue fulfilling the existing subsidy policy for regional aviation. If safety conditions are ensured, add about 50 takeoff and landing times to busy airports. Fully use auxiliary airports around a metropolis to ease metropolitan airport stress. Standardize the assignment of international flight rights, and enhance Chinese airlines’ international competition capability. Reinforce the monitoring of the implemented air routes’ preferential policy. Coordinate domestic hub airport construction, and support airlines’ exploration of international markets. V. Put the national financial policy in effect, and boost airlines’ operation capabilities Refund a total of 4 billion Yuan of the airport construction fees that were collected from domestic airlines in the latter half of 2008, and exempt them from airport construction fees for the early half of 2009. Fulfill the refund policy of returning some confirmed airlines’ registered capital, exempting the fuel surcharges and business tax, refunding the domestic fuel value-added tax to all the international flight and the flights to Hong Kong and Macau. Based on the partial exemption of the airport calibration fees, compensate the landings to the airlines in some small and medium airports in 2009. VI. Practice pricing adjustment and realize resource optimization Teaming up with related national departments, regulate aviation fuel prices, logically adjusting international and domestic aviation fuel purchasing amounts, properly lowering the integrated cost of aviation fuel. Optimize the price policy of the first class and business class in domestic air routes. The highest price will be implemented as the referring price for the airport charges in the first half year of 2009. The usual landing fees will remain the same. Encourage the preferential policy in the charging management system for CAAC airports. All of the aforementioned measures would save on average 2 billion Yuan for all the airlines. VII. Proactively encourage energy saving and pollution reduction, and improve the industry’s operational efficiency Optimize airspace, air route structure, and approach procedures. To that end actively impel new applications of area navigation and new technologies. At multi-runway and multi-terminal airports, order the priorities of takeoff and landing runways and taxiways, and, at busy airports, introduce the landing and departure sequencing system. Reasonably arrange the aircraft pushback and run-up time, actively coordinating with related departments to use direct routes to save flying time. 3 minutes saved per flight, whether flying in the air or waiting on ground, would in total save 200,000 operating hours, or 4.5 million Yuan per year. For safety, establish apposite best cruise heights and cruise speeds. Promote applications of ground power supply and gas supply to substitute for APU to reduce fuel consumption. VIII. Reinforce infrastructure construction, and promote national economic growth Set hard deadlines for construction projects of “11th five-year plan,” especially for the projects related to mid-west regional airports and west trunk airports, while implementing some eligible projects of the “12th five-year plan” in advance. There are 140 national airport construction projects to be completed by 2010, 50 of which are to be newly built, 12 to be moved, and 78 to be retrofitted. Schedule major ATC construction projects for the civil aviation operation management centers and the area control centers in Xi’an and Chengdu. Repair and rebuild projects affected by the earthquake. Increase investment into civil aviation enterprises’ safety and security facilities. Increase investment for civil aviation administration and monitoring, schools and trainings, R&D, and a civil aviation emergency rescue system. The total investments in these recent civil aviation infrastructure projects amount to over 400 billion Yuan. VIIII. Promote general aviation development and enlarge aviation service ranges Agriculture and forest aviation, emergency medicine and rescue, and short-range passenger and cargo transportation are the major service ranges. Construct general aviation airports in northeastern and western rural or developing areas. Strongly support eligible general aviation companies to use small aircraft in the abovementioned areas for short range passenger, cargo, and mail transportation, effectively connecting with regional and trunk air transportation, further enhancing the aviation transport network. Support the social power to purchase private and individually owned or operated aircraft, simplify the importing, airworthiness management, and registration procedures; optimize the infrastructure constructions for the air space security services; and lead and promote general aviation consumption by the general public. X. Support enterprise unity and reform to withstand the financial crisis Lead and drive the industry toward unity in development, all the while continuously optimizing the market structure. Form a “fist” in international market competition, yet form benign competition in the domestic market. Urge civil aviation enterprises to enhance and improve their internal management so as to contain costs. These 10 measures require urgent and immediate adoption. They will play a very important role in easing the industry’s known difficulties, as well as ensure the civil aviation’s healthy development in the near future. CAAC will set up an Aviation Transportation Committee to enhance its guidance of the industry’s development. CAAC regional administrations will be required to track and monitor the implementation of these 10 measures. All airlines understand well the tandem relationship between safety and development implied by these measures. All the related units of ATC, airports, TravalSky Technology Ltd. and China Aviation Supplies Holding Company (CASHC) have these overall notions in mind, and will provide powerful support for ensuring healthy operation and growth.