The Yunnan provincial government and Grand China Air — which is partially owned by billionaire financier George Soros — have agreed to establish Yunnan Airlines, a joint venture airline that will challenge China Eastern Airlines’ dominance of the Yunnan air travel market.

The announcement comes at a time when air travel in Yunnan and elsewhere in southwest China is expected to continue its rapid growth and Kunming is building what will be one of China’s largest airports. The one in the illustration below is the current one.

The news also came shortly after state regulatory body the Civil Aviation Administration of China (CAAC) stripped Shanghai-based China Eastern of several air routes in Yunnan — including flights to Dali and Xishuangbanna — after an apparent mid-air strike by pilots in March of this year.

The company is still awaiting regulatory approval from the central government — which is likely, given that a provincial government will be a stakeholder in the company.

Despite the potential conflict of interest, the Yunnan government released a statement in which it said that in addition to Yunnan Airlines’ plans to establish its hub in Kunming it hopes that other airlines including China Eastern’s Yunnan subsidiary will further develop their operations in Kunming.

Yunnan Airlines will start out with a fleet of at least 30 aircraft.
Source: Go Kunming

China Eastern Airlines, the nation’s third-largest carrier, said it may lose RMB405 million ($58 million) of sales this year after being ordered to scrap flights that were disrupted by a labor dispute.

The Shanghai-based airline said in a statement to the city’s stock exchange that two routes in the southern Chinese province of Yunnan will be halted May 4. The number of its flights on six Yunnan routes were cut by between two and six daily.

The government took away routes from the carrier after its pilots aborted flights to protest working conditions. This will do nothing to add to their popularity with the management.

The pilots were able to take such cavalier action because the country is facing a shortage of pilots which will only increase.

Yu Jianjun, an analyst at Huatai Securities Co. in Nanjing said, ‘Aggressive fleet expansion is the reason for all these problems. The nation’s civil aviation industry is running at high risk and debts because everyone is regarding market share as first priority.”

China Eastern’s routes in the southern province will be given to four rivals including Air China.

Board Secretary Luo Zhuping said in a Shanghai interview the airline will seek government permission to resume as soon as possible the routes that were taken away after pilots aborted flights to protest working conditions.

The country’s passenger numbers may increase 14% this year, helped by leisure travel and demand for flights to attend the Beijing Olympic Games.

According to the General Administration of Civil Aviation China’s airlines may fly 210 million passengers in 2008.
Source: Bloomberg

Pilots flying for a subsidiary of China Eastern Airlines turned back midflight to southwestern Chinese airports, in a rare strike to protest lower pay and other conditions.

Seventeen flights returned to their departure airports in Yunnan Province in a protest by pilots of China Eastern subsidiary Yunnan Airlines.

The Yunnan Info Daily quoted an unnamed pilot as saying China Eastern flights departing from Kunming airport returned to the city after takeoff on Monday and Tuesday for reasons other than ‘weather conditions’ — the explanation given by the carrier.

The pilots’ complaints seen to be that they limited to domestic routes and therefore shorter flying hours and lower pay than counterparts in the parent company. There is also a question of tax on overtime pay.

State-run television reported the strike as well as passengers’ complaints

Leading financial magazine Caijing said that pilots would not be punished, citing an air administration official.

The return of the flights left at least 1,500 passengers stranded in Kunming airport.

This is the third incident in a month related to the disputes.

More than 40 Shanghai Airlines pilots asked for ’sick leave’ on March 14, while 11 East Star Airlines pilots ‘took a holiday’ last Friday.

This week’s incidents caught the attention of the General Administration of Civil Aviation of China (CAAC).

Beijing Times reported that in an emergency meeting, the CAAC said the pilot leading the move could face a lifelong ban on piloting.

The CAAC also asked China Eastern to settle the dispute as soon as possible to guarantee flight safety.

The newspaper quoted insiders as saying the root of problem lies in a national shortage of pilots, especially captains. The CAAC estimated at least 6,500 more pilots are needed by 2010, but only 600 to 800 are trained every year.
Source: China View and Reuters

China Eastern Airlines has opened a new route from the southwestern city of Kunming to Phnom Penh, Cambodia.

Wang Qian, a spokeswoman for the company in southwest China’s Yunnan Province said there are now three regular flights a week to Cambodia’s capital capital using a CRJ-200 (shown head on in our illustration) with a capacity of 50 passengers.

Flights take off from Kunming, capital of Yunnan Province, at 7:15 a.m. on Wednesdays, Fridays and Sundays, and arrive in Phnom Penh at 10:40 a.m. local time.

Return flights leave Phnom Penh at 11:30 a.m. local time the same day.

The flights make a stopover in the southern Chinese city of Nanning for 40 minutes.