Rising passenger volume and the strong yuan spurred profits in China's civil aviation industry by 66 percent in the third quarter of this year, domestic carriers and airports earned a total of 9.1 billion yuan (US$1.22 billion) in profit from July to September, and revenue rose 12.5 percent to 73.6 billion yuan. Domestic passenger traffic was 126 mln persons, up 15.8 pct year-on-year, while international passengers increased by 24.6 pct to 12.47 mln. Domestic cargo rose 10.2 pct year-on-year to 2.074 mln tons and cargo carried on international routes was 805,000 tons, up 24.6 pct. Registered aircraft in the civil aviation sector totaled 1,099 at the end of September, up by 101 from end-2006.

Details: Profit soars 66% amid air carriers

Rail and air travel operators are going to head to head as they compete for high-end customers on key routes. Traditionally, air travel has had the upper hand when it comes to long-distance travel - 1,000 km or more. The upgraded service and faster traveling speed have helped greatly boost occupancy rates on bullet trains. Travel experts have said the new promotions and services are a clear indication of the "accelerating" competition between rail and air travel providers.

Details: Competition hots up for passengers between rail and air

Since China's first private airlines Okay Airways took off in 2005, the expansion of private airlines in China has put more and more pressure on their state-owned competitors.

Foreign airlines have accelerated their steps in Chinese aviation market. On May 22, 2007, China and United States have modified 2004 Sino-U.S. Civil Aviation Transportation Agreement, which opened Chinese aviation gate much wider.

Details: US airlines vie for flight rights to China route

In China, where air travel is growing rapidly, the four largest Chinese airlines have flocked to the alliances. China Southern joins SkyTeam on November 15, 2007. Air China and Shanghai Airlines join Star Alliance on December 12, 2007, and China Eastern will most likely go to Oneworld. Chinese airlines will sharpen their competitive edge in the global market and offer better service to more customers by joining international airline alliances.

In Depth: Chinese Airlines Flock to Global Alliances

China's fast growing economy demands efficient air transport links, and progressive liberalization has played an important role - opening Hainan as a free port for aviation services, liberalizing bilaterals with the US, ASEAN, Japan and Korea. With the aviation industry's centre of gravity moving East, China has an enormous leadership opportunity to shape policy where the US and EU have failed to do so.

At present, the three domestic large airlines have been strengthening the layout of route network. The hub construction in Beijing, Shanghai, and Chengdu by Air China has been initially effected; the code-share with foreign airlines and the cooperation with Cathay Pacific Airways have enriched its international routes. Air China has already formed balanced and widespread route network with domestic supporting international routes, and international covering domestic routes. At the same time, China Southern Airlines continues its Dual-Hub-Base strategy, and accelerates the construction of Beijing hub. In addition, joining the SkyTeam provides a good way to connect domestic and international routes.

To implement multi-level price policy and revenue management, the airlines can take up the high profit market, and penetrate into the potential low price market, avoiding the price batter in pursuit of high seat occupation rate and market share, so that they can maximize the profit.

Cost is the bottom lines for the airlines to join the price batter. Whose cost is the lowest, the one can take the most advantageous position. Although the 60% fixed costs are out of control, the airlines still can control the 40% costs, which can be reduced through hard-working, such as through structural reform and flat management to reduce managerial costs, and enhancing control and command ability to reduce flight delay and over-night, then reduce airport service charges.