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The Civil Aviation Administration of China (CAAC), in a
statement on its website, said it has revised rules in response
to a changing aviation market as well as the 2019 opening of a
second international airport in Beijing, which in turn is aimed
at creating the world's largest aviation hub in the city.
The CAAC introduced the policy in 2009 for long-haul
international routes to prevent mainly China's state-backed
airlines from competing too aggressively on routes deemed
difficult to profit from.
But the policy made it difficult for airlines to expand
international networks at a time of growing overseas travel, and
has allowed airlines to develop control of popular non-stop
routes such as Beijing-Los Angeles, operated by Air China Ltd
<601111.SS> <0753.HK>.
The revised rules were issued in draft form in August last year,
and will become effective on Oct. 1 this year. They involve
dividing international routes into two categories.
The first category will comprise unrestricted routes to
destinations in countries with at least a partial open skies
agreement with China, such as Australia, Thailand and the United
States.
Long-haul destinations in the second category will be subject to
certain restrictions.
China defines a long-haul route as one that requires flying over
4,500 kilometers (2,800 miles) one way.
"This will be a positive long-term development for Chinese
airlines whose international route expansion have been limited
by traffic rights access," said Corrine Png, chief executive of
transport research consultancy Crucial Perspective.
However, further liberalization could increase competition and
pressure passenger yields, while foreign carriers with higher
cost structures and inferior services could lose market share to
Chinese airlines, Png said.
At present, Air China has priority on routes out of Beijing, but
the eased policy will allow China Eastern Airlines Corp Ltd
<600115.SS> <0670.HK> and China Southern Airlines Co Ltd
<600029.SS> <1055.HK> to grow market share from their bases at
Beijing's new Daxing Airport.
Shares in the three main carriers closed higher on Monday, with
Air China's Hong Kong-listed shares rising 2.6 percent, while
China Eastern and China Southern both rose 4.7 percent.
Privately owned Juneyao Airlines Co Ltd's <603885.SS>
Shanghai-listed shares closed up 7.1.
(Reporting by Brenda Goh; Additional Reporting by Jamie Freed;
Editing by Christopher Cushing)
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