CAAC to ask airlines to delay delivery of new jets

PUBLISHED : Friday, 28 November, 2008, 12:00am
UPDATED : Friday, 28 November, 2008, 12:00am

Beijing will ask mainland carriers to delay delivery of new aircraft and may halt approvals for new purchases as demand for air travel slumps, a manager at an airline and a regulatory official said.

The Civil Aviation Administration of China (CAAC) was preparing to ask the airlines to negotiate with aircraft leasing firms and aircraft makers such as Boeing and Airbus on postponing the delivery of new orders, said Hu Bin, the general manager of Xiamen Airlines.

'The market is flooded with excess supply, resulting in ruthless price cuts in airfares and shrinking sales,' Mr Hu said.

'A meeting has been called by CAAC at the beginning of next month to discuss an adjustment of the delivery schedule.'

A delay of between three and five months was necessary for demand and supply to return to a balanced state, Mr Hu said.

The number of aircraft on the mainland has doubled over the past six years to more than 1,200. Boeing has projected the country would need more than 3,700 aircraft in the next 20 years.

The deteriorating global economy is dampening demand for air travel on the mainland, the world's second-largest aviation market after the United States. In the first nine months, air traffic on the mainland grew less than 2 per cent, compared with more than 14 per cent last year.

Mainland carriers must obtain approval from Beijing for aircraft purchases and generally receive a smaller quota than they ask for.

Chinese airlines would not be allowed to increase orders for aircraft, Liu Shaocheng, the head of policy and research at CAAC, told Bloomberg yesterday. Approved deals could still proceed, he said.

A manager at another airline said: 'We cannot buy aircraft any time that we'd like and cannot react to demand as quickly as our rivals in the international market when the market returns to normal.'

Mr Hu also said the expected reduction in value-added tax on aircraft purchases, which stands at about 17 per cent, could help ease the financial pressure on airlines.