1. Development of Air Transport in 2005 in Retrospect
      In 2005, the last year of the "10th Five-Year" Plan, the whole civil aviation industry took Den Xiaoping Theory and the important thought of "Three Represents" as the guidance, implemented scientific outlook on development all-around, united and cooperated, opened up with innovations, surmounted the difficulties including the soaring of oil price, successfully fulfilled the development and construction missions under the prerequisite of ensuring safety, and realized the goals of "10th Five-Year" Plan for civil aviation.

(1) Development of Air Transport
      In 2005, the whole industry carried a total air traffic of 26.1 billion ton-km, 138.27 million passengers, 3.07million tons of cargo and mail, representing increases of 13.1%, 14.1% and 10.8% respectively to that of the previous year, and the five year increases averaged 15.3%, 15.5% and 13.9%. In the year, air routes for scheduled flights totaled 1 257,including 1 024 domestic air route (containing 43 air routes to Hong Kong and Macao) and 233 international air routes (for the development of air transport and the general aviation production in 2005,see Table-1).
      In 2005, all the targets of our civil aviation were fulfilled with a sustained, over-all and fast growth based on the high-speed development of those in the previous year, out of which the increasing rates of the total air traffic, passenger traffic and cargo and mail traffic carried on the domestic routes were3.5, 0.4 and 1.8 percentage points higher than those on international routes, and for the whole industry, the increment of passenger traffic was 2.8percentage point higher than that of the cargo and mail traffic. In 2005, the growth rate for the passenger traffic carried by our civil aviation was6.5 percentage points higher than that of the world's average.
      Compared with other modes of transport: in 2005, the passenger traffic carried in the whole society was up by 6.7% to that of the previous year, among which air passenger traffic was up to 14.1%, 7.4 percentage points higher than that of the average growth. The proportion of air passenger traffic in the entire national transportation was 11.7%,0.8percentage points higher than that of the previous year and 3.8 percentage points higher than that of2000. The cargo traffic carried in the whole society was up by 15.2% to that of the previous year, of which air cargo traffic was up by 9.9%, 5.3 percentage points lower than that of the average growth(for the traffic growth of various modes of transport in 2005, see Table-2).

(2) Aviation Safety and Flight Regularity
      In 2005, no air transport or aviation security accidents occurred in the whole industry. In the whole year, 116 incidents occurred with the rate of incidents 0.40 per10 000 flight hours, 0.02 lower than that of the previous year and 0.20 lower than that in 2000. The rate of incidents per 10 000 flights was 0.68, the same as that of the previous year and 0.01 higher than that in 2000.
      In 2005, the average rate of flight regularity of the whole industry was 81.99% with 2.11 percentages points' increment to that of the previous year and4.56 percentage points increment to that in 2000.The flight regularity rate of domestic flights was81.94% with 1.90 percentage points increment to that of the previous year and 5 percentage points increment to that in 2000; the rate of flight regularity of international flights was 83.83% with 5 percentage points increment to that of the previous year and 2.88 percentage points increment to that in2000.

(3) Economic Efficiency and Tariff
      In 2005, the principal business of the whole industry earned 208.4 billion Yuan in revenue at the cost of171.7 billion yuan, 19.7% and 27.2% up respectively to that of the previous year. In the whole year, the profit realized was 2.9 billion yuan, a decrease of 4.1billion yuan compared with that of the previous year. The principle business of airlines earned 140.5billion yuan at the cost of 117.6 billion yuan, with13.0% and 22.1% increase respectively to that of the previous year, and the deficit for the whole year was 1.6 billion yuan, increasing 6.8 billion yuan compared with that of the previous year.
      In 2005, the transport revenue of the whole industry was 5.13 yuan per ton-km, with 0.02 yuan increase per ton-km to that of the previous year.The revenue on domestic routes (excluding Hong Kong and Macao routes) was 5.51 yuan per ton-km with 0.12 yuan decrease per ton-km, and that on international routes was 4.18 yuan per ton-km with0.23 yuan increase per ton-km.

(4) Market Structure and Passenger Composition
      Among the total air traffic carried in 2005, 67.2% was on domestic air routes (5.1% of which was carried on Hong Kong and Macao routes) and 32.8% was on international routes. Of the total air traffic carried, 69.8% was passenger traffic (77.9% on domestic routes and 22.1% on international routes) and 30.2% was cargo and mail traffic (42.6% on domestic routes and 57.4% on international routes).
      A sample survey showed: out of the air passengers in 2005, the proportion of the passengers traveling at their own expense (51.4%) was for the first time in excess of that of those traveling at state expense (48.6%), and the proportions of passengers traveling on business, on tourism and visiting family were49.6%, 38.4% and 12.0% respectively (for the composition of air passenger transport market in recent years, see Table 3).

(5) Aircraft Fleet and Utilization of Transport Capacity
      In 2005, 135 transport aircraft were added to the fleet (129airliners and 6 freighters) and 26 transport aircraft were reduced (24 airliners and 2 freighters), with a net increase of 109 transport aircraft (105 airliners and 4 freighters) and intranet increase of 336 transport aircraft (340 airliners added and 4 freighters reduced) for the past 5years. By the end of 2005, the whole industry had863 transport aircraft, including 835 airliners with136 000 passenger seats, 15.2% higher than that of the previous year and 11.5% average increase for the last 5 years, and 28 freighters with the loading capacity of 1 400 tons.
      In 2005, the average daily utilization of transport aircraft in the whole industry was 9.3 hours, 0.1hours lower than that of the previous year and 1.7hours higher than that in 2000. Considerable increases of average passenger load factor and load factor of regular flights were seen compared with those of the previous year. The passenger load factor of regular flights was 71.5%, with 1.9percentage point's increment to that of the previous year and 10.3 percentage points increment to that in 2000, and the load factor of regular flights was 65.0%, with 1.0 percentage point increment to that of the previous year and 7.7 percentage points increment to that in 2000.

(6) Construction of Infrastructure
      In 2005, the fixed asset investment of the whole industry was 21.2 billion yuan. Within the year, 10major projects were completed: Changchun Longjia Airport, expansion of the terminal area of Dalian Zhoushuizi Airport, expansion of the terminal area of Xining Caojiapu Airport, expansion of the terminal area of Jinan Yaoqiang Airport, project of the No. 2 runway of Shanghai Pudong Airport, project of Shanghai Area Control Center, project of Guangzhou Area Control Center, project of VHF system for the three major regional ATC centers, reconstruction project of Beijing-Kunming air route, and reconstruction of civil aviation data communication network. Within the year, 6 major projects were started: expansion of Shanghai Pudong Airport at 2nd phase, expansion of Tianjin Binhai Airport, expansion of Hohhot Airport, expansion of Wuhan Tianhe Airport, reconstruction of the terminalarea of Beijing Capital Airport and project of3# and 4# radar systems of Changchun and Guanghan Airports.
      By the end of 2005, a total of 142 civil airports (certificated) were available to air transport in the whole country, 135 airports of which were available to scheduled flights serving 133 cities. These airports handled 284.41 million passengers and 6.33 million tons of cargo and mail, with 17.6% and 14.6% increments respectively to those of the previous year.

(7) Structure Reform and Opening to the Outside World
    "Managerial Regulations on the Merging and Reorganization of Civil Aviation Enterprises and Airports" was promulgated to standardize the merging and reorganization of civil aviation enterprises and airports. "Regulations on Domestic Investments in Civil Aviation Industry (Experimental)"was promulgated to further expand the investments to civil aviation industry and create favorable conditions for private capital to enter into civil aviation industry.
      China Air Transport Association was officially founded to push forth the reform of civil aviation community. In the year, approvals were granted to6 airlines for the preparation of formation and thereof them were already founded. At the time when developing overall the international relations in civil aviation, the work to develop the air relations with South American, South Asian, West Asian, Southeast Asian and African countries was enhanced. By the end of 2005, China had signed 98 bilateral air service agreements with other countries (7 initialed). In May, 2005, Minister Yang Yuanyuan was honored by International Air Transport Association the Global Aviation Leadership Award, which is awarded to the civil aviation leaders of all the countries who have made remarkable contributions to the world civil aviation.
      The air transport market was opened further to the outside world, focusing on meeting the needs of the social and economic development in the western, northeastern and central parts of China and the construction of hub airports to open up international air traffic rights. We actively participated in the regional air transport cooperation and initiated our regional air transport liberalizing process with ASEAN. The bilateral co operations with USA, Singapore and Canada were further improved, and the bilateral co operations with Korea, Japan and Spain were started. We played the role as a Council member in the first category of ICAO, and were involved broader and deeper in the global and regional civil aviation affairs. For the whole year, 747 million US dollars of foreign capital were utilized.
 

2. Prospects for the Development of Air Transport in 2006

(1) Air Transport Market Analysis
      In 2006.the world economy will continue its stable growth. According to the latest forecast of IMF, the growth rate of 2006 will be 4.3%, the same as that of 2005. Along with the sustained growth of the world economy and transnational investments, the world trade will keep developing rapidly. IMF forecasted that the world trade volume will increase by 7.4%, higher than the 7% rate of 2005. ICAO forecasted that in 2006, the world air transport would grow comparatively fast, with the passenger traffic increasing by a rate of 6.5% to amount to 3 947 billion passenger-km and further increasing by 6.2% in 2007 to 4 192 billion passenger-km.
      In 2006, our economy will keep on the trend of the fairly fast and stable growth. As the economic globalization develops in depth, we will be more involved in it. The foreign capital to be used will increase steadily and the foreign trade stably. It is estimated that the volume of our foreign trade will exceed 1600 billion US dollars, an increase of about
15%. Our tourist industry will keep the momentum of fast growth. It is estimated that more than 120million tourists will come to our country, an increase of 8.1%, and the domestic tourists will be 1.3 billion, an increase of 7.3%. By the end of 2005, the tourist destinations abroad for Chinese citizens approved by the State Council had reached 117 countries or regions, 76 of which had already been implemented, and the number of tourists going abroad will further increase.
      The factors favorable to the development of air transport in 2006 mainly are: the deepening of the structure reform of civil aviation, opening wider to the outside world and the developing environments will be further improved; the industry's vitality will be enhanced, for the liberalization of part of economic management policies has started to be complemented; the gradual increasing of the enthusiasm of the local government to develop civil aviation after the territorial jurisdiction reform for airports will add new motives for the development and construction of civil aviation; the effective trans-regional integration of the recourses of civil aviation enterprises and the transform of internal operating mechanism will increase the market operating efficiency, and the flexible management policy for domestic air fares and rate will still be the important factor for the need to expand air transport market.
      The unfavorable factors are: the professional and technical personnel are in great demand, especially the pilots; the new management system still needs some time to get harmonized and perfected; some major airports has reached the limit of their handling capacity; the contradiction between the available airspace over busy airport regions and the demand for air transport are obvious and the sustained high international oil price will increase the operating cost of enterprises.

(2) Forecast of Air Transport Development
      It is estimated that air transport will remain fast growth in 2006, the total air traffic to be carried in the whole industry will be 29.5 billion ton-km, the passenger to be carried will be 159 million and the cargo and mail to be carried will be 3.38 million tons, an increase of 13%, 15% and 10% respectively to that of the previous year (for our estimated traffic growth of various modes of transport in 2006, see Table 4).

(3) Policies and Measures to Promote Air Transport Development
      In 2006, we should take Deng Xiaoping Theory and the important thought of "Three Represents" as guidance in the civil aviation development, earnestly carry out the spirit of the CPC 16th National Congress and its 5th Plenary Session as well as the spirit of the Central Economic Working Meeting, continue to lead the overall development of civil aviation with the scientific outlook on development, firmly follow the policy of "Safety First, Prevention Foremost" and strengthen safety work, deepen reform and opening to the outside world, transform the growth mode and realize faster and better development and make a good start for the smooth implementation of the "11th Five-Year" Plan.
      1) Strengthen safety management and further upgrade civil aviation safety. The main targets of safety work of the whole industry in 2006 will be: to stop major transport flight accidents, major aviation ground accidents and serious aircraft maintenance accidents, and to make air traffic incident per 10000 hours lower than 0.7; to persist in the systematic safety management ideas of "human orientation" and comprehensive controls; to put strictly the responsibility system of production safety into effect and strengthen continuously the safety management at grass-root levels; to set up and improve further the production safety responsibility and all the rules and regulations, and to establish truly, for safety support, a self restrained, self supervised and self improved enduring mechanism; to strengthen airworthiness and maintenance management, to raise the safe operation level of airports, and to strengthen the work concerning aviation security; to improve further the aviation safety regulations and standard system, and to set up new system for safety supervision; to strengthen technical support system for safety, to better systems for emergency and rescue, and to optimize the information system for safety management; to enhance safety supervision and to increase input for safety; to strengthen safety management for air traffic control and to continue enhancing the coordination between military and civil aviations; to stress the management of radio interference and objects up in the air, and to initiate the project of air control safety management system.
      2) Improve market management and create a fairly competitive environment for the market: to continue the liberalization of the policies for market entry and to support various investing bodies to invest in civil aviation industry; to adjust further the management policies for air routes and flights, and to improve entering and quitting mechanism for international air routes; to improve the management of flight schedules and to improve further 'the national information system of flight schedule management"to encourage airlines to substitute smaller type of aircraft with those of 200 seats and more for the busy airports that need schedule adjusting.
      3) Do a good job in the macro regulation of transport capacity and accelerate a sustained, fast and healthy development: to regulate reasonably the increase of transport capacity so as to make it adapted to the market demand, flying technology, aircraft maintenance, overall supporting capacity and airspace resources; to control rationally the timetable for purchasing aircraft; and for the aircraft purchased by way of trade-in, to adhere strictly to the plans worked out when aircraft is purchased to retire the old ones.
      4) Strengthen the infrastructure construction and the industry's material and technical bases sustainable for growth. The special funds for investments in civil aviation will continue to favor the projects of the old industrial bases in western and northeastern regions, air traffic control and safety. The principles of overall planning and key point highlighting will be abided by to guarantee the completion of key projects like Capital Airport, etc. The construction and installation of important infrastructure and equipment concerning flight safety and transport service quality will be paid high attention to and the investments to the airports in major and central cities and key tourist cities will be enhanced to improve transport conditions.
      We will complete the new construction of Tibet Linzhi Airport, start the expansion of the airports of Chengdu Shuangliu, Shengzhen Bao'an, Hangzhou Xiaoshan, Zhengzhou Xinzheng, Taiyuan Wushu and Yinchuan Hedong, and actively accelerate the expansions of Kunming New Airport and Urumqi Diwopu Airport and the early phase of the expansion of Xi'an Xianyang Airport, and work hard on the projects, in course of construction, of the airports of Beijing Capital, Shanghai Pudong, Tianjin Binhai, Hohhot Baita, Qingdao Liuting and Wuhan Tianhe. We will complete the reconstruction of the air routes of Beijing-Xiamen,Shanghai-Xi'an-Chengdu-Kunming, and the project of 3# and 4# home-made radar systems for Changchun and Guanghan, actively accelerate the early phase of the projects of terminal areas of Shanghai and Guangzhou and the regional ATC centers of Xi'an and Chengdu, and work hard on the constructions of air traffic facilities of Beijing terminal area, the air routes of Shenyang Shanghai and Beijing-Shenyang, etc.. We will work out and complete the transiting plan of complementing RNP/RNAV all over our country's civil airspace, and continue to make studies and put forward the standards for airspace categorization and the complementing plan in line with our national conditions.
      5) Actively push forward structure adjustment and promote coordinated development. We will adopt preferential polices, quicken the pace of development for air transport, air cargo transport and feeder-route air transport in western and northeastern regions, encourage the investment in air cargo transport by use of foreign capital and domestic private capitals, encourage the development of cargo-only airlines, liberalize the examination and approval procedure for domestic cargo routes and flights, encourage the increase of cargo-only aircraft, open up air routes for cargo transport, quicken the transforming from traditional air cargo transport to modern logistics, liberalize the market entry for feeder-route air transport, further facility the examination and approval procedure for the purchase and lease of imported feeder-line aircraft, actively increase air transport capacity for feeder-routes, employ the system of putting the operation of feeder routes and flights on file, allow airlines to open up air routes and flights on their own, protect the managerial authority over the feeder-routes in the areas of the "old, minority nationality, remote or poor" and revolutionary tourism within a certain period of time, and provide policy compensations for some feeder transport and airport operation.
      6) Continue to deepen the reform and open wider to the outside world. We will carry out "CAAC Guidance for Deepening Civil Aviation Reform", energetically push forward system and management innovation, further establish and perfect the civil aviation management system and operating mechanism that are compatible with the needs of socialist market economy and world civil aviation development, have strengthening air traffic control in mind, continue to carry out "CAAC Opinions on Issues Concerning Further Strengthening Civil Air Traffic Control", perfect ATC structure, support and encourage air transport enterprises and major airports to carry out joint-stock transformation, realize the diversification of investors and perfect the structure of administration by legal persons, set up modern enterprise system, open progressively to the outside world according to the principles of "being active, gradual and orderly" and the policy of combining "importing" with "exporting" to promote world air transport. We will continue the development of world aviation relations, take active part in the co-operations between international organizations and regions, continue to support our airlines to "fly abroad", encourage airlines to enlarge international air route network by"code-sharing" and joining international alliance, especially opening up the air routes to countries in Latin America, West Asia and Africa, encourage and support domestic civil aviation enterprises with strength to invest abroad according to their own needs for development and market situations.
      7) Earnestly carry out "2005-2100 Action Plan on Developing Civil Aviation with Science and Education". We will strengthen tasks of science and technology; quicken the construction of industrialized bases for civil aviation science and technology while continuing building well the science and research bases, tackle major specialized problems, focusing on the new generation of China civil aviation air transport system, strengthen the construction of civil aviation universities and colleges, especially those specialized subjects featuring civil aviation, push forward the construction of practice and training bases of professions specialized in civil aviation, and support experts and middle-aged and young technical bellwethers invited by civil aviation to make thorough studies of the major items of scientific research, and hot topics and hard nuts concerning civil aviation development. We will launch the studies of key technology for the comprehensive public information network and the system platform and intelligence applications for major hub airports, and also the project of system integrations, organize and carry out the development strategy for global distributions, quicken the use of e-tickets, urge the top 20 airports ranked by the passengers handled to quicken the pace of setting up e-ticket service. We will strengthen the management of network and information security, and prepare the construction of the civil aviation backup center for important information system disasters.
      8) Implement the civil aviation's "11th Five-Year" Plan and start the construction of new air transport systems. We will pay attention to and strengthen the functions of civil aviation plans and take the "11th Five-Year" Plan as the important measures and basis for macro adjustment. We will make longsighted and overall plans for the construction of new air transport system, persist in human orientation, and transform, optimize and upgrade the existing civil aviation service system with the help of advanced ideas, modes and technology, set up a modern air transport system adapted to the air transport development in future, realize the overall, coordinated and sustained development of air transport, and make greater contributions to the national economy and social development.