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Advantages & challenges facing local airlines

07-08-2010 09:53 BJT

Amid fierce competition in the aviation industry, an increasing number of airlines are turning to local governments. The governments are major shareholders, and even hold naming rights. Let's take a look.

In order to attract airlines, local governments have offered very good terms.

There's tax breaks and concessions. Some even promise airliners they can use land and airports for free. Subsidies are also granted to certain flight routes.

Zou Jianjun, Official of Civil Aviation Management Inst. said "Now the local governments have realized the value of airlines. They're making efforts to improve the investment environment and making better use of resources. Airline companies are facing fierce competition. They need to take new approaches especially to gain support from the local governments in terms of policy and finance."

Local governments benefit too.

The aviation industry brings good returns to local economies. An improved aviation network not only drives growth in local economies, but also the regions international trade.

But despite the advantages, there are still many challenges.

Zou Jianjun said "In the long run, I think there might be some problems. The aviation industry is typically based on network and scale. In this case, it is unlikely local airlines companies will develop quickly in the short term."

Experts say local airlines are relatively small and less competitive. Therefore, the companies might be restructured, merged or acquired if and when they have operating problems.

Editor:Xiong Qu |Source: CCTV.com

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