Small jets will operate to third-tier cities to serve the burgeoning middle class China's growing middle class will soon be offered an alternative to road and rail for short trips. An increasing number of third-tier cities are being connected by airlines with aircraft of fewer than 100 seats. China Southern Airlines, which last week took delivery of two mainland-assembled 50-seat ERJ-145s, is among three carriers preparing to launch short-haul services with smaller aircraft. China's largest carrier by fleet size will fly to second-tier cities in Guangdong when the Guangzhou Baiyun International Airport opens next month, and small regional airlines are planning to follow suit. Hainan Airlines has earmarked US$200 million for 20 small imported jets, while Shandong Airlines is looking to buy 10 mainland-produced aircraft. Zhong Shu, executive vice-president of Hainan Airlines, said the carrier planned to make Xian its hub for regional jet operations. Its merger with Xian-based Changan Airlines, Beijing-based Xinhua Airlines and Shanxi Airlines - to form Grand China Airlines - will strengthen the Haikou-based carrier's network in the northwest. 'For the northwestern provinces like Gansu, where road and rail networks are under-developed, there's potential for flights within 1,500km,' Mr Zhong said. Hainan wants to add 20 32-seat Dornier 328 aircraft to its regional fleet. It is awaiting approval from the General Administration for Civil Aviation of China (CAAC). 'Northwestern China will need 100 to 200 small regional jets in five years. Hopefully we can be a dominant player in that market,' Mr Zhong said. Shandong Airlines has placed an order for 10 ARJ21-700s, a 70-seat regional jet being developed by China Aviation Industry Corp I, for delivery in 2007. The Jinan-based airline, which runs a fleet of 10 Canadian-made Bombardier CRJ-200s, said regional operations had been promising. 'Our existing operations prove there's a market for regional jets,' a Shandong spokesman said. 'Ordering mainland-made aircraft is cheaper. We can avoid import tax.' The import tax for regional jets with fewer than 100 seats is 5 per cent, compared with 1 per cent on larger models, such as the Boeing 737 and Airbus 330. Together with the 17 per cent value-added tax, carriers have to pay almost 22 per cent tax if they want to import regional jets. But with more locally made aircraft coming into the market, carriers have cheaper options. While the ARJ21-700 is still being developed, the first two China-assembled ERJ-145s, produced by Harbin Embraer, a joint venture between Brazil's Empresa Brasileira de Aeronautica and China Aviation Industry Corp II (Avic II), have already flown to China Southern's hub in Guangzhou. The Guangzhou-based carrier ordered six jets from the joint venture in February as part of its plan to strengthen its domestic network. But China's short-haul network still has a long way to go. Xu Zhanbin, vice-president of Avic II, said only 12 per cent of civil jets in China were small, regional aircraft, compared with 30 per cent in the developed world. Of the 720 aircraft flying in China, only 70 are small jets. A low average disposable income and weak purchasing power were key hurdles for the development of the short-haul market in China, a CAAC official said. Low demand meant carriers were hesitant to service third-tier cities with smaller aircraft, he said. 'Not many carriers are keen on the new market when most of them are enjoying 20 per cent growth in trunk routes every year,' he said.