Why does the government have to raise millions of funds to pay for regional aviation losses?

“Flying a class, losing a class” is the most authentic portrayal of airlines flying certain feeder routes. On December 11, the Civil Aviation Administration of China announced that the Northwest Regional Administration of Civil Aviation will unite with the local government to raise more than 10 million yuan to provide cash subsidies to airlines. The “cash subsidy”, which is led by the Civil Aviation Administration and specifically targeted at regional aviation, is the first in China.

"Northwest will be the first pilot in the country, and whether this model should be promoted to the whole country depends on whether we succeed or fail." Zhou, the director of the Marketing Department of the Northwest Regional Administration of Civil Aviation, said.

At the same time, Xi'an's tickets to Ankang, Yan'an and Qingyang all had a 30% discount on tickets below 100 yuan.

Director Zhou told reporters that this is the result of subsidizing regional aviation by the Northwest Regional Administration of Civil Aviation. At present, the Northwest Bureau of Civil Aviation has raised more than 10 million yuan with the governments of Shaanxi, Gansu, Ningxia and Qinghai, and all of this money will be used for subsidies on poor routes. It is hoped that by increasing the number of flights to expand the space for passengers to choose, lowering the fare can stimulate a part of the potential market, thus driving the development of the regional aviation market.

As an airline, because of the high cost, the discount on the regional aviation market is extremely limited. Zhao Zhongying, senior executive vice president of HNA Group, said that due to the short and low altitude of regional airlines, the fuel consumption of aircraft will increase accordingly when flying these routes. On the other hand, the construction of many regional airports is built according to high standards. The standard has caused the airport to bear heavy debts, and the airline’s charging standards are difficult to reduce.

However, the current situation makes people unable to understand, while discounting, subsidies, and how long the government can pay for it.

Industry insiders told reporters that because the local government is concerned about flight density and passenger throughput, because this is directly related to the income of the regional airport and the development of the local economy. Since the airport was localized, it has been subordinated to the provincial governments. However, many small airports have become the “burning machines” of the provincial government because they do not have routes. Therefore, for them, the only way to change the status quo is to encourage airlines to open more routes and increase density. The resulting expenses such as landing fees and passengers' transit fees can make them “financial resources”.

An Junyong, deputy director of Sichuan Airlines Enterprise Management Department, said that subsidies are definitely good news for airlines! But this kind of cash subsidy can only be a short-term behavior, and the government cannot always pay for airlines.

In fact, there have been some negative reactions that have occurred on ticket agents. A ticket from Beijing told reporters that the current ticket generation relies on sales tickets to get commissions from airlines. The general ratio is 3% of fares. “Obviously, the lower the discount on the ticket, the lower our income will be.” Therefore, there are even some cases in the Xi’an market where the company has deliberately refused to sell low-priced tickets.

For airlines, enjoying government subsidies does not mean restless. Shortages in aircraft and pilots, as well as corporate governance, still constrain airlines.

"Airlines must have their own hematopoietic function and cultivate the civil aviation branch market. Subsidies may mobilize the airline's enthusiasm for a while, but there is no way to improve the operating environment of the market for a long time." An industry insider worried.

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