More Chinese airlines are courting local governments to establish joint venture carriers as they seek funding, incentives for landing, parking and ground-handling charges. Most recently, Xiamen Airlines (XAL) and the Hunan local government have agreed to form a regional carrier known as Zhongnan Airlines through the Hunan Airport Management Group (HAMG). The partners plan to base Zhongan’s operations at the Changsha Huanghua International Airport and launch services in the south and central regions of China late this month using Boeing 737-800s.

According to a Hunan government official, Chiao Bio, Xiamen Airlines will hold a 60 percent stake and HAMG the remaining 40 percent. The joint venture accounts for the eighth partnership in China involving an airline and local government. The others are Fuzhou Airlines (XAL with Fuzhou City government), Urumqi Airlines (Hainan Airlines/Urumqi city government), Lucky Air (Hainan Airlines/Yunan provincial government), Jiangxi Air (XAL/Jiangxi provincial government), West Air (Lucky Air/Chongqing city government), Tianjin Airlines (Grand China Air Co/Tianjin city government) and Capital Airlines (Hainan Airlines/Beijing city government).

Civil Aviation Administration of China (CAAC) official Lu Shen said the agency does not object to local governments partnering with second-tier carriers partly owned by centrally owned China Southern Airlines (CSA), China Eastern Airlines (CEA) or Air China because both the central government and regional authorities share common interests in generating economic development.

“China's big three airlines are in no position to serve the entire Chinese market on their own as it is so vast and rapidly expanding due to the increased number of links across the country and growing middle class,” Lu said. Nevertheless, the CAAC does not allow privately owned or second-tier carriers to compete directly with the so-called big three on international routes. Lu said the carriers outside the big three may operate international routes, but they must originate from a different departure points in China.

Xiamen Airlines holds 99.23 per cent stake in Hebei Airlines, which previously operated as China Northeast Airlines (CNEA) and rebranded in 2010. Under the consolidation of China’s civil aviation industry, China Southern acquired loss-making CNEA in 2001 then sold it to Xiamen later.

Xiamen Airlines plans to will take delivery of the first of six 787-9s on order in December and deploy it on the three-times-weekly Fuzhou-New York sector in February. Delivery schedules call for the remaining five aircraft to arrive through the year into 2018. Xiamen operates a fleet of 149 aircraft, including six Boeing 787-8s, 122 B737-800s, 17 B737-700s and four 757-200s.