A fourth pillar of Chinese aviation is rapidly emerging. Grand China Airlines, a company established in 2004 as the vehicle to merge the major aviation assets of Hainan Airlines, Xinhua Air, Changan Air and Shanxi Air, has cleared a major hurdle in receiving its operating licence from the CAAC.The move paves the way for Grand China Airlines to complete a planned listing in Hong Kong, possibly as early as the second half of 2007. The listing, which could raise up to USD500 million, would be a huge achievement for a carrier with roots in the resort island of Hainan in the South China Sea.

The carrier’s leisure-based, sun-seeking tourist image has progressively been replaced with a hard-edge business travel focus, borne out by the fact that over 16% of the airline’s capacity is now focused on the Beijing market (with just 9% in Haikou, the capital of Hainan Province - see today’s edition of Airport Business Daily for more information). Hainan Airlines Group is also establishing a regional carrier based in Tianjin (near Beijing) and has a stake in fast-growing Hong Kong carrier, Hong Kong Express.

As the key element in the Grand China Airlines mix, Hainan Airlines had a successful 2006, increasing revenues and turning around losses on the back of a 12.4% increase in passenger numbers. The carrier plans to add two B737-800s, three A319s (two leased) and two leased A330s to its fleet of 101 aircraft in 2007, to continue to expand its presence in the Chinese domestic market. Hainan Airlines, including Xinhua Air, Changan Air and Shanxi Air, has an 8% share of the market.
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