July 25, 2007 -- The Civil Aviation Administration of China (CAAC) awarded Wuhan-based East Star Airlines international service authority this month. The awarding of international service rights to fourteen-month old East Star on July 6 is a step in the liberalization process of China's commercial airline industry, experts say.

"Right now, we only have approval to fly to Macau and Hong Kong," a representative of East Star Airlines told Emerging China. "Service will start in September after two months of preparation."

According to CAAC regulations, only air carriers who have been operating for a minimum of three years qualify for permission to fly international routes.

"The decision to license East Star for international flights ahead of the standard three-year wait period is consistent with the government's moves to continue liberalizing the sector - if at a more measured pace than some would like - while also encouraging aviation development outside of the main gateways," Richard Pinkham, a Singapore-based consultant for the Center of Asia Pacific Aviation, told Emerging China.

East Star has recorded a quick growth rate since it was founded in May 2006. The airline averages a monthly load factor of 83.1 percent compared to China's "big three" airlines - Air China, China Eastern and China Southern -- who average a load factor of 75.3 percent.

East Star is part of the growth story of China's domestic airline industry as a whole. According to China's National Bureau of Statistics, Chinese airlines carried 72 million passengers between January and May 2007, a 16.4 percent increase over the same period in 2006.

Privately-owned East Star's qualification for foreign flights could open the door to international services for other fledgling Chinese airlines. Shanghai-based Juneyao and Spring Airlines and Tianjin-based Okay Airways are all looking for international service authority.

"We are now focused on national flights but are considering international flights within the range of our A320s," Zhang Lei, manager of Spring Airlines's planning department , told Emerging China. "Low cost carriers [LCCs] are still growing and gaining market share nationally, and so Chinese LCCs have great prospects."

East Star has also benefited from China's 2001 "Go West" policy that offers incentives to investors in China's Central and Western provinces. Wuhan is often referred to as "China's Chicago" because of its strategic location in Central China, and was designated China's fourth international hub by the CAAC in December 2006. East Star's international service authority fits well with the Chinese government's goal to improve international air links to Wuhan and develop the city as a new regional economic center.