By Dai Yan (chinadaily.com.cn)
Updated: 2007-09-04 16:06

China Aviation Industry Corporation I (AVIC I), the country's biggest aircraft maker, has begun to tap the domestic regional aviation market after domestic airlines flocked to vie for the market.

China Eastern Airlines confirmed yesterday it has signed a letter of intent with AVIC I in Shanghai to establish a regional airline joint venture in the western China. China Eastern will hold 40 percent of the new airline, and AVIC I the rest.

In the early stage of operation, the new carrier will mainly operate the Modem Ark 60 (MA60) airplanes, a turbo propeller regional aircraft manufactured by Xi'an Aircraft International Corp, an affiliate of AVIC I's Xi'an Aircraft Industry Group. It will then add the ARJ-21 regional planes, to be launched this year, to its fleet.

Chinese airlines have been considering separate operations of truck and feeder routes amid growing competition in the trunk aviation market. Grand China Express, China's largest regional airline and owned by Hainan Airlines, has begun operations in Tianjin with 29 Fairchild-Dornier 328 commuter airplanes.

Hainan Airlines Group signed a contract with Brazilian aircraft manufacturer Embraer for 50 ERJ145 planes and 50 E190 aircraft. They will likely fly on regional routes in the future, said the group’s chairman Chenfeng.

Shenzhen Airlines, China's biggest private airlines, last December signed an agreement to set up a feeder airline with the second-largest US regional carrier Mesa Air Group and Wilmington Trust Corp. The new company will be China's first Sino-foreign joint venture regional airline.

Shenzhen Airlines will invest 255 million yuan (US$32.6 million) to hold 51 percent of the Beijing-based new carrier, which has a registered capital base of 500 million yuan. Mesa Air Group and Wilmington Trust Corp will pay 245 million yuan for the rest of the stake.

The new venture will begin operations at the end of this year with 20 airplanes, mostly 50-90-seaters. It will add 20 more regional aircraft annually, up to a maximum of 160 to 200 aircraft.