Part I  Reform and Opening Up

1.Defining the Main Contents of Deeper Reforms for "11th Five-Year Plan" Period

    Deepening reforms have provided a system guarantee for the sustained and rapid development of China's civil aviation industry. The industrial reform, which focused on separating enterprise management from government functions, has been largely completed. But as a result of the industry's rapid development, some deeper contradictions and problems and some development-related contradictions and problems have begun surfacing. The "11th Five-Year Plan" period is an important period for China to move from a big civil aviation country to a strong civil aviation country. To ensure that the civil aviation industry develop in a sustained, rapid, coordinated and healthy way and to provide a system and mechanism guarantee for realizing the goal of building a nation with strong civil aviation, CAAC has formulated the Guidelines on Deepening the Reform of Civil Aviation on the basis of wide-ranging and deep-going investigations. This document defined the main tasks1 for deepening reforms during the "11th Five-Year Plan" period. To truly ensure that all the reform tasks be fulfilled as scheduled, the document clearly defines the undertaking units and time schedules2 for all these reforms. Deeper reforms during the "11th Five-Year Plan" period have the following goals: to establish a simple, efficient and unified body for civil aviation administration which coordinates decision making with execution and supervision; to build a government with an adequate legal system, service-oriented, limited, responsible and transparent; to establish a civil aviation industry which will conform to the need of economic and social development, have a rational structure, operate smoothly and develop scientifically; to establish an unified, open, competitive and orderly civil air transport market; to establish an air transport system of a new generation which will be highly flexible and adaptable and can provide passengers with safe, fast and comfortable travels services; to establish civil aviation enterprises and airports which will operate according to law and be full of vitality, with some of them being internationally competitive; and to cultivate force of civil servants, operational and management personnel and professional and technical personnel, who will be highly knowledgeable, professionally excellent, quantitatively sufficient and first rate in work style. Deeper reforms have the following main contents: improving and strengthening administrative management, the industry's macro regulation, reforming and adjusting market management, guiding and promoting enterprises and airports to deepen reforms, and adjusting and improving research and education systems.

2. Further Changing Government Functions and Promoting the Work of Civil Aviation Intermediary Organizations

    In accordance with the instructions of the State Council on abolishing and adjusting the items requiring administrative examination and approval, CAAC formally handed over the certification and management of the air transport sales agencies of categories I and II to China Air Transport Association on Mar. 31, 2006. In keeping with the relevant provisions of the Regulations on the Administration of the Civil Air Transport Sales Agencies, China Air Transport Association has formulated rules on implementing the certification of air transport sales agencies3 and began its work in the field of certification. At the same time, CAAC has vigorously pushed forward the organization of industrial associations and fully allowed civil aviation industrial associations to play active roles in developing the air transport industry. After the establishment of China Air Transport Association in 2005, Civil Airport Association and Civil Aviation Maintenance Association were established in 2006 in accordance with the principles of government guidance, voluntary sponsorship and independent management.

3. Strengthening Bilateral Aviation Relations with Developing Countries in Support of China's Diplomatic Strategy

    In support of China's diplomatic strategy for the new period, CAAC strengthened bilateral air cooperation with the developing countries in Africa, Central and South America in 2006. In all, CAAC conducted bilateral air negotiations with 28 countries, formally signed bilateral air transport agreements with Algeria, Myanmar and Afghanistan, and initialed seven bilateral air transport agreements with Libya, Tanzania, Uganda, Nigeria, Zambia, Saudi Arabia and Croatia. This brought to 106 the total number of countries having bilateral air relations with China, of which 93 had formally signed and 13 had initialed bilateral air transport agreements. Air China has successfully opened Beijing-Madrid-Sao Paulo route, which represented a breakthrough in China's civil aviation relations with South America and was the first scheduled passenger flight route to link China with that continent. In the meantime, China Southern Airlines also opened Beijing-Dubai-Lagos route, which was the first route to Africa ever opened by Chinese airlines.

4. Making Preferential Arrangements for Hong Kong and Macao Service Providers to Enter the Civil Aviation Industry in China's Mainland

    In order to further strengthen economic and trade relations and cooperation between China's mainland and the Macao and Hong Kong Special Administrative Regions, the central government respectively signed the Additional Agreement 3 to the Closer Economic Partnership Arrangement between China's Mainland and Macao and the Additional Agreement 3 to the Closer Economic Partnership Arrangement between China's Mainland and Hong Kong with the two special regions on Jun. 26 and 27, 2006. With regard to the air transport service under the two additional agreements, CAAC has further opened the air transport sales agency market in China's mainland to the service providers in Hong Kong and Macao, and allowed the air sales agency enterprises in Hong Kong and Macao to establish their wholly-owned air transport sales agency enterprises in China's mainland with their registered capital requirement the same as that of their counterparts in China's mainland.

Part II Legal Construction

1. Comprehensive Advance in Improving Legal System in Civil Aviation

    In 2006, CAAC continued to steadily push forward the enactment, revision and revocation of laws and regulations. In the year, 17 regulations were promulgated, and seven regulations and two regulatory documents were abolished.
    The promulgated regulations were: the General Rules on Maintenance and Modification (promulgated on Jan. 16, 2006 by CAAC Order No. 159), the Regulations on Permitting the Operation of Domestic Air Route of Civil Aviation of China (promulgated on Jan. 16, 2006 by CAAC Order No. 160), the Regulations on Administrative Permission of Civil Aviation (promulgated on Feb. 20, 2006 by CAAC Order No. 161), the Regulations on Administrative Reconsideration of CAAC (promulgated on Feb. 20, 2006 by CAAC Order No. 162), the  Regulations on Administrative Inspection of Civil Aviation (promulgated on Feb. 20, 2006 by CAAC Order No. 163), the Regulations on the Limits of Compensation Liability of Domestic Air Transport Carriers (promulgated on Feb. 28, 2006 by CAAC Order No. 164), the Regulations on the Management of the Licensing of the Resident Representative Offices of Foreign Air Transport Enterprises (promulgated on Apr. 3, 2006 by CAAC Order No. 165), the Regulations on the Pre-Flight Planning Management of Civil Aviation (promulgated on Apr. 3, 2006 by CAAC Order No. 166), the Regulations on Permitting Foreign Air Transport Enterprises to Operate Non-Scheduled Flight (promulgated on Jun. 21, 2006 by CAAC Order No. 167), the Regulations on  Licenses Management of Air Traffic Controllers of Civil Aviation (promulgated on Jun. 21, 2006 by CAAC Order No. 168), the Regulations on Licenses Management of Information Personnel of Civil Aviation (promulgated on Jun. 21, 2006 by CAAC Order No. 169), the Regulations on the Traffic Safety Management of the Road on Civil Airport Aircraft Movement Area (promulgated on Jul. 12, 2006 by CAAC Order No. 170), the Regulations on  Licenses Management of Meteorological Personnel of Civil Aviation (promulgated on Sept. 4, 2006 by CAAC Order No. 171), the Regulations on the Opening and Operation of Air Traffic Management Equipment of Civil Aviation (promulgated on Oct. 20, 2006 by CAAC Order No. 172), the Regulations on the Certification of Pilots, Flight Instructors and Ground Instructors of Civil Aviation and the Regulations on the Operational Certification of  Large Aircraft Public Air Transport Carriers (promulgated on Oct. 30, 2006 by CAAC Order No. 173), the Additional Provisions (2) to the Regulations on the Foreign Investment in Civil Aviation Industry (by Order No. 174 issued jointly by CAAC, the Ministry of Commerce and the State Development and Reform Commission), and the Regulations on Licenses Management of Telecommunication Personnel of Civil Aviation (promulgated on Dec. 31, 2006 by CAAC Order No. 175).
    The revoked regulations and documents were: the Regulations on the Management of the Operation of China Civil Aviation Domestic Routes and Flights (promulgated on Nov. 18, 1996 by CAAC Order No. 59), the Rules on the Administration of the Non-Scheduled Flights of Foreign Civil Air Transport (promulgated on Nov. 23, 1990 by CAAC Order No. 14), the Regulations on Licenses Management of Air Traffic Controllers of China Civil Aviation (revised and reissued on Jan. 8, 1999 by CAAC Order No. 82), the Regulations on Licenses Management of Information Personnel of Civil Aviation (revised and reissued on Apr. 8, 2003 by CAAC Order No. 118), the Regulations on the Traffic Management of the Road on Civil Airport Aircraft Movement Area (promulgated on Jun. 3, 1998 by CAAC Order No. 75), the Provisional Regulations on the Issuance of the Licenses of Civil Aviation Meteorological Personnel (revised and reissued on Jan. 6, 1997 by CAAC Order No. 60), the Provisional Regulations on the Licenses of Civil Aviation Telecommunications Personnel (revised and reissued on Jan. 6, 1997 by CAAC Order No. 60), the Provisional Regulations on the Compensation for Physical Damages of Domestic Air Transport Passengers (promulgated on Feb. 20, 1989 by the State Council and revised and reissued on Nov. 29, 1993 by the State Council), and the Notice on Implementing the Provisional Regulations on the Resident Representative Offices of Foreign Enterprises (Document No.: Minhang JZD 80-399).

2. Bigger Steps in Improving Administrative Enforcement Systems of Civil Aviation

    In order to execute the Implementing Program on Comprehensively Pushing Forward Administration issued by the State Council, strengthen the industrial regulatory function of the civil aviation administrative organs after the reform of the administrative system and comprehensively push forward the institutionalization and standardization of administrative inspection, CAAC formulated the Regulations on Administrative Inspection4 of Civil Aviation in accordance with the provisions of the Law on Civil Aviation, the Law on Work Safety and other related laws and regulations. The document contained provisions on the definition of civil aviation administrative inspection, the implementing organs and personnel for administrative inspection, the jurisdiction of administrative inspection, the execution of administrative inspection, the mandatory measures for administrative inspection and the legal liabilities of administrative inspection. All these were designed to ensure that the civil aviation administrative organs exercise administration according to law and fully fulfill their functions of administrative regulation. In the meantime, CAAC in 2006 formally promulgated the Manual on Administrative Enforcement by China Civil Aviation Inspectors, which provided unified principles, procedures, standards and technical specifications for administrative enforcement organs.
    In order to promote the civil aviation administrative organs standardizing administrative permission, the Regulations on Administrative Permission of Civil Aviation was promulgated in 2006 for implementation5. The document explicitly requested that the powers of civil aviation administrative organs at all levels conform to the established principles and that the establishment, entrustment and authorization of administrative permission be conducted according to law. If the items requiring administrative permission set by the laws, regulations or State Council decisions contained no concrete implementing provisions, such as the conditions for permission and the documents, procedures and time limits of applications, CAAC could only specify them by issuing relevant regulations and should refrain from arbitrarily changing them with regulatory documents. In accordance with the provisions of the laws and regulations, the civil aviation administrative organs might entrust other administrative organs to implement administrative permission. Without the backing of laws and administrative regulations, the civil aviation administrative organs should not charge any fees for implementing administrative permission and for supervising and inspecting administrative permission, and their regulations were prohibited from arbitrarily specifying fee collection. In addition, the procedure for implementing administrative permission, the hearing procedure and the supervision and inspection system were also established.
    As a result of the higher awareness of the players inside and outside the industry to safeguard their own rights according to law and as a result of the continuous growth in administrative reconsiderations done by the civil aviation administrative organs, CAAC promulgated the regulations on administrative reconsideration6, providing that the legal department of CAAC was in charge of handling reconsideration cases. In addition, the systems and procedures for the application, acceptance and handling of civil aviation administrative reconsideration were established to prevent and remedy the illegal and improper civil aviation administrative behaviors, to protect the legitimate rights and interests of the citizens, legal persons and other organizations and to guarantee and supervise the civil aviation administrative organs to exercise their powers according to law.
    In order to objectively reflect the state of civil aviation administrative enforcement and to provide data and materials to the relevant departments for forming guidelines and suggestions for administrative enforcement, the Regulations on the Statistics on Administrative Enforcement7 of Civil Aviation promulgated in 2006 provided that the statistics of civil aviation administrative enforcement should be compiled once half a year and should be submitted by the relevant units and departments respectively on Jan. 15 and Jul. 15. The statistics of administrative enforcement should cover the information on administrative permission, the information on administrative inspection, the information on administrative mandatory measures, the information on administrative punishment, the information on administrative reconsideration, the information on administrative action, the information on enforcement training, the information on the preparation and issuance of regulatory documents and the opinions and suggestions on enforcement.
    While strengthening the legal work of the administrative organs and in light of the important roles of legal work in preventing risks, ensuring safe operations, guaranteeing legal operations and safeguarding legitimate rights and interests, CAAC and the State-Owned Assets Supervision and Administration  Commission of the State Council also requested civil aviation enterprises and airports to effectively strengthen their legal work8. All airlines, service supply enterprises, airport group (management) corporations and major airports should establish their independent legal affairs departments within two or three years and be staffed with legal workers with qualifications as their legal advisors. Other airports should designate their legal affairs department and be staffed with full-time legal workers to them. The CNAHC, China Southern and China Eastern corporations, the Capital, Shanghai and Guangdong airport corporations, China Travelsky Holding Company and China National Aviation Fuel Corporation should establish their chief legal advisor system and appoint their chief legal advisors as soon as possible.

Part III  Safety Supervision

1. Airworthiness Management

(1) Defining Protection Requirements for the High Intensity Radiated Fields of Aircraft9
    The reduction in the parameters of the electronic and electric components (such as the electric voltage, current and power) in the air-borne equipment of modern aircraft has reduced the capacity of the electronic and electric systems to resist electromagnetic interferences. When exposed to the increasing growth of powerful radiation from the high-power transmitters of the uplink radar, radio, television and satellite data on the ground, on ships, on offshore platforms or on aircraft, the functions of the air-born systems made of these electronic and electric equipment are seriously affected or even lost or confused. As the advanced digital electronic and electric systems introduced in recent years are even more vulnerable to the impact of the high-intensity electromagnetic radiation and as the widely-used compound materials have very poor shielding performance, the electronic and electric systems are more exposed to external electromagnetic environment. In order to ensure that the HIRF special requirements formulated in the course of the certification of various aircraft types observe unified principles and in order to prevent the aviation electronic and electric systems performing key functions from suffering component damage and functional interruption resulting from direct or indirect HIRF impacts, and thus causing disastrous accidents, CAAC has explicitly demanded that the civil aircraft applying for type certificates and the existing civil aircraft being modified to install new systems for executing key functions have sufficient HIRF protection capacity.
(2) Airworthiness Certification of Civil Aviation Fuels
    The management of the airworthiness of aviation fuels comprises three aspects: the airworthiness certification of the enterprises supplying aviation fuels (including the certification of the fuel grades and specifications), the certification of the units testing civil aviation fuels, and the post-certification supervision. In 2006, CAAC demanded that all fuel-supplying enterprises and fuel-testing units be prepared to accept the preliminary airworthiness evaluation or examination. In accordance with the provisions of the Regulations on the Management of the Airworthiness of Civil Air Fuels, the airworthiness certification department of CAAC will complete the airworthiness certification of all the existing fuel-supplying enterprises and fuel-testing units before Oct. 1, 2007. As from Oct. 1, 2007, only the fuel-supplying enterprises having obtained the Airworthiness Certificate of the Enterprises Supplying Civil Aviation Fuels shall be allowed to supply fuels, only the fuel grades included in the item list of the Airworthiness Certificate of the Enterprises Supplying Civil Aviation Fuels shall be allowed to sell on the civil aviation fuel market, and only the testing units having received the Letter of Approval for the Units Testing Civil Aviation Fuels shall be allowed to provide aviation fuel testing service. By the end of 2006, the airworthiness certification department of CAAC had completed the certification of the whole system of aviation fuel companies in China (involving 102 airports) and the preliminary certification of all the civil aviation fuel-supplying enterprises and fuel-testing units10.

2. Safety Training

    In order to standardize civil aviation safety training, enhance the safety awareness of all those employed in civil aviation and prevent the occurrence of civil aviation accidents, CAAC has established a safety training system, under which the leading officials, safety management personnel and all other staff related to civil aviation operational safety of all airlines, airports, air traffic control and aircraft maintenance units, and the units providing air fuel supply and air information service must participate in safety training11. Safety training comprises basic safety training and special safety training. The former for the leading officials of civil aviation enterprises and institutions, the safety management personnel and other people shall not be less than 20, 80 and 24 hours. The leading officials and safety management personnel of the civil aviation enterprises and institutions shall participate in at least a knowledge-updating safety training every two years.

3. Airport Safety Management

    The Regulations on Certification of Civil Airports, which focused on the management of airport certification, was put into implementation on Nov. 7, 2005. To ensure that the document be effectively implemented, CAAC made further clarifications on the matter in 200612: the approval documents for the civil airport certificates issued by CAAC or regional civil aviation administrations of CAAC with special approval, shall carry the word "temporary", and for the airport certificates specially approved, a period of validity shall be set, which in principle shall not be longer than one year. The applications for certificates of civil airports used for transport with flight zone category 4E (inclusive) shall be submitted by the airport management for preliminary examination by the regional civil aviation administrations of CAAC. Based on the opinions of the preliminary examination by regional civil aviation administrations of CAAC, the application materials shall be revised and re-submitted till the documents basically conform to the requirements specified in the Regulations. After the regional civil aviation administrations of CAAC indicate their examination opinions, the airport management bodies shall then submit the examination opinions of the regional civil aviation administrations of CAAC and the application documents together to CAAC for examination and approval. Regional civil aviation administrations of CAAC shall arrange for the renewal of the airport certificates in accordance with the requirement that an airport certificate be valid for five years. When issuing and renewing the airport certificates, the regional civil aviation administration of CAAC shall apply by telephone or telegram to the airport department of CAAC for nationally unified certificate numbers.
    The roads on the airport movement areas are the areas used for aircraft to take-off, land and park in the airport as well as those marked for the passage of people and vehicles in the related ground movement areas discussed herein. In 2006, CAAC issued relevant regulations13 to standardize the road traffic control of vehicles and people on the aircraft movement areas and to ensure the ground traffic safety of aircraft, vehicles and people. The document defined the responsibilities of CAAC, regional administrations and airport management bodies in the management of road traffic safety on the aircraft movement areas of airports, specifying that the airport management bodies have the primary responsibility to ensure road traffic safety in the aircraft movement areas of their respective airports. The document also specified the conditions that the vehicles and vehicle drivers running on the roads in the aircraft movement areas of the airports meet and the rules that the vehicles observe when running in these areas.
    In order to meet the need of civil airport construction and development, and to ensure the safe operation of airports, CAAC in 2006 revised the Technical Standards of the Flight Zone of Civil Airports14 and the Construction Standards of Civil Aviation Feeder Airports15, and designated the two documents as the mandatory standards for civil aviation industry.

4. Air Transport Safety Management

(1) Launching Special Campaign to Control Dangerous Goods
    Currently, there are 41 airlines (7 domestic airlines and 34 foreign airlines) that have been certified and have acquired valid qualification for transporting dangerous goods. But after the Regulations on the Management of China's Civil Aviation Transport of Dangerous Goods was promulgated in July 2004, the work of some domestic airlines, airports, freight agencies and other related departments still had hidden dangers in safety, and quite a few dangerous goods incidents occurred to the detriment of the interests of airlines and the personal safety of their staff. To ensure the safety of the air transport of dangerous goods and to prevent ineffective management from causing safety incidents, CAAC in 2006 launched a special campaign to control dangerous goods. It requested all airlines and airports to improve their internal management measures concerning dangerous goods, strengthen relevant personnel training, and improve reporting procedures. All the regional civil aviation administrations shall intensify investigation into and impose punishment on the illegal transport of dangerous goods, supervise and inspect all air carriers and airport companies with regard to the establishment of the management bodies and procedures for training, incident reporting and emergency handling concerning the transport of dangerous goods, and to work out detailed annual working plans and inspection programs for special control in this respect16.
(2) Formulating Management System on the Trans-regional Operation of Airlines
    With the completion of the transitional period for the merge and integrated operation of airlines and with a view to ensuring that effective regulation over safe operation be carried out according to law, CAAC made, in accordance with the principle of "joint certification, and territorial-based management", further clarifications17 over the issues regarding the management of trans-regional operation in 2006: the regional administrations shall be responsible for the issuance of the operational certificates and operation specifications of the airlines whose main operation is based in their regions, and as well as for the approval of these airlines' operation manuals and maintenance engineering management manuals which make reference to the specification documents requiring joint compliance by several operation bases of airlines. With regard to the approval of the technical management documents (such as training programs, maintenance plans and aircraft operation manual) that are related to aircraft types and the additional operational certification, the airlines may, in light of the geographical locations of their fleets and the operational features of aircraft types, submit written applications to certificate management departments. After being approved, their subsidiaries or bases shall submit their applications for the examination and approval of the relevant documents to the local regional administration for examination and approval. The regional administration shall provide a list of documents that have been examined and approved to the certificate management departments in a timely manner. These departments are responsible for incorporating the documents examined and approved by the regional administrations into operational specifications. The regional administrations are responsible for exercising territorial supervision over the operation of the subsidiaries and bases in their jurisdictions of the four major airlines. With regard to the trans-regional operation of the four major airlines, namely the operations outside the jurisdictions of the certificate management departments or the territorial regional administrations, the management responsibilities undertaken by their original regional administrations remain unchanged. With regard to the operations in the form of phasic or long-term deployment in places other than their local regions, the airlines should submit reports on trans-regional operations to the certificate management departments and the territorial or non-territorial regional administrations so that these authorities can be aware of the dynamic state of operations and exercise supervision according to law.
(3) Improving Management Modes of Aircraft Maintenance and Repair
    With the rapid development of the Chinese economy, the civil aviation industry has gradually entered a situation, in which the unitary public air transport has developed into multiple segments, comprising business flight, general aviation, air sports and private aviation. The maintenance activities of aircraft constitute groundwork for ensuring the normal operation of aircraft and flight safety. Therefore, the management of these activities should also be adjusted according to the change in the modes of operation and flight management. Since the promulgation of the Maintenance Certification (CCAR-145) in 1988, China's civil aviation has exercised management over the maintenance activities for all civil aircraft according to the document. As the CCAR-145 applies to the maintenance units that must have certain organizational institutions, it can hardly apply to the operation of the aircraft in small fleet and with few staff. Therefore, management regulations, not limited to the modes of management of CCAR-145 maintenance units, are needed. While ensuring maintenance standards and flight safety, this will help simplify the management modes and procedures and meet the demand of the joint development of various segments of China's civil aviation industry.
    In 2006, CAAC promulgated the General Rules on Maintenance, Repairs and Modification of Civil Aircraft18 (CCAR-43). This document contained the basic requirements, such as the documents, tools and equipment, aviation materials, working environment, personnel qualification, recording and clearance requirement and management rules for aircraft maintenance and modification. As CCAR-43 contained general rules on the maintenance and modification of civil aircraft, air operators or aircraft users may carry out maintenance and modification on their aircraft according to the rules specified in CCAR-43 only, except for the circumstances defined by the operation regulations, in which the relevant aircraft maintenance shall be made according to CCAR-145, and the maintenance and repair carried out by aircraft maintenance units according to CCAR-145 is deemed as maintenance and repair conforming to CCAR-43.
(4) Management of Pre-Flight Planning
    Pre-flight planning refers to the flight planning done in advance by an air operator to reach the goal of its flight activity, which comprises operation arrangement and the contents regarding aircraft, air routes, airways, airspace, airport and time schedule. To ensure the safety and smoothness of civil aviation flight activities, CAAC in 2006 promulgated the Regulations on the Pre-Flight Planning19 Management of Civil Aviation. Under the document, CAAC conducts management over pre-flight planning for both scheduled flights and non-scheduled flights, including additional flights, charter flights, dispatched flights and business flights executed by air operators in the airspace of the People's Republic of China and the airspace over the high seas where the international treaties concluded or joined by the People's Republic of China provide that the People's Republic of China provides air traffic control service.
When an air operator carries out a civil aviation flight activity, its pre-flight planning shall be approved. If its pre-flight planning is not approved, the air operator shall not execute the flight. The air operator shall execute the flight according to the approved pre-flight planning. If the air operator cancels the approved pre-flight planning, it shall report for record in a timely manner to the department approving the pre-flight planning. Before an air operator carries out a civil aviation flight activity, it shall also obtain the operation permit and the operation certificate from CAAC.
(5) Standardizing Management of the Opening and Closing of Air Traffic Control Equipment
    Civil aviation air traffic control equipment refers to all types of special equipment used to provide communications, navigational, monitoring and meteorological services for the activities of aircraft. The services provided by the air traffic control equipment have a direct impact on flight safety, the safety of national properties and the safety of human lives. Before civil aviation was restructured, the management of the opening, closing and even the scrapping of the air traffic control equipment had all along been an internal matter of the civil aviation system. But as the restructuring of the civil aviation system advances, the management of the opening and closing of the air traffic control equipment can not be exercised in the former way, because the airports owned by regional governments have also become administrative counterparts.
    After the Law of the People's Republic of China on Administrative Permission was promulgated, the opening and closing of the air traffic control equipment have been formally listed as a matter requiring administrative permission. In 2006, CAAC promulgated the related regulations20 and exercised regulation over the behaviors of the applicants, handlers, air traffic control equipment operating units and related personnel in the course of the management of the opening and closing of the civil aviation air traffic control equipment according to the provisions of the Law on Administrative Permission.

5. Management of Civil Aviation Professionals

(1) Strengthening Management of Civil Aviation Pilots
Pilots constitute the backbone force in civil aviation transport and in safety guarantee. In 2006, CAAC put forward requirements for further strengthening the management of pilots21. As the subjects responsible for industrial safety, all airlines took pilot management as a top priority of all their efforts and assign the pilot management responsibility to various levels. In accordance with the spirit of the document issued by five ministries and commissions, the management of the flow of pilots was strengthened. When an airlines recruits an active pilot from another airlines, the former must consult in advance with the latter which employs the pilot and shall not contact with the pilot in private. Only after an agreement is reached through consultation can the relevant formalities be handled. In addition, the recruiting company shall also pay the relevant expense as required to the original unit where the pilot works. In this way, the company-to-company flow of pilots can be realized. The resignation of a pilot shall be handled according to the state stipulations on labor contract management. When a pilot resigns, he shall leave his pilot license and technical files in the temporary custody of the regional administration of his former employer. When the pilot resumes piloting in a new airline after resignation, the airlines shall still actively consult with the former employer of the resigned pilot according to the provisions of the document issued by the five ministries and commissions. If a pilot resigns and finds new employment on his own without consultation, no regional administration shall be allowed to handle his signing-in formalities with the new company or permit the pilot to participate in the operational flight of the new company. If the grounding of a pilot has exceeded the prescribed time limit during the period of handling resignation formalities, the pilot can resume flight only after he has passed strict refreshment training and examination. If a pilot has a serious incident and is still under investigation or if a pilot has been temporarily grounded for reasons such as ideological style, organizational discipline, safety liability and technical reasons, no airlines shall be allowed to accept him without the approval of CAAC. And the pilot shall leave his pilot license and technical files in the temporary custody of the regional administration of his employer. A multi-channel, multi-level and diversified pilot training mechanism should be actively established to ease pilot shortages. In the meantime, the training of existing co-pilots should be intensified. The airlines may regulate the demand and supply of pilots through labor contracts, leasing and other channels. The pilot-training schools should strengthen cooperation with airlines to speed up the training of pilots. Airlines may continue to cooperate with foreign pilot training institutions approved by CAAC to produce pilots. An appropriate number of foreign pilots may be imported and the acceptance of military pilots should be improved. Finally, the introduction of aircraft should be maintained at a proper speed and should be done according to real needs and capacities.
(2) Heightening English Proficiency Requirement for Pilots
    In conformity with the relevant requirements specified in Annex 1 to the Convention on International Civil Aviation and in order to further improve civil aviation safety, CAAC in 2006 revised the Regulations on  Certification of Pilots, Flight Instructors and Ground Instructors of Civil Aviation (CCAR-61-R2) and the Regulations on the Operational Certification of Large Aircraft Public Air Transport Carriers (CCAR-121-R2), which heightened the English proficiency requirement for pilots and flight crew22.
(3) Standardizing Management of the Licenses of Air Traffic Control Professionals
    In 2006, CAAC further standardized the management of the licenses of air traffic controllers, air infor-mation personnel, meteorological personnel and telecommunications personnel23. Only those having valid licenses can be engaged in the work of air traffic control, air information gathering and analysis, air weather forecast and the operation and maintenance of the equipment for civil aviation communications, navigation and surveillance. The regulations contained explicit qualification requirements for air traffic controllers, information personnel, meteorological personnel and telecom personnel, and explicit provisions on applications for the issuance, alternation and revocation of license. CAAC is in charge of the unified issuance and management of the licenses of the relevant personnel, the air traffic management bureau of CAAC is in charge of specific license issuance and management, the regional civil aviation administrations of CAAC are in charge of supervising the management of the licenses of the relevant personnel in their respective jurisdictions, and the air traffic management bureaus of the regional civil aviation administrations are in charge of the specific management of the licenses in their respective jurisdictions.

Part IV  Economic Management

1. Planning Civil Aviation Development for the "11th Five-Year Plan"

    Guided by the spirit of the 16th Party Congress and the scientific approach to development and in light of China's 11th Five-Year development plan, CAAC in 2006 formulated the "11th Five-Year Plan"24 for the development of China's civil aviation industry in order to realize the strategic goal of becoming a strong country in civil aviation. The plan envisages that during the plan period, the civil aviation industry should develop in accordance with the basic principles of sustainability, speed, safety, comprehensive coordination, change in the mode of growth, building the industry through science and education, and deeper reform and opening up. By the end of the plan period, the industry's overall strength have been enhanced in a comprehensive way, have played even more prominent roles in the country's overall transport, have further expanded its impact on the world civil aviation industry, and have basically met the need of economic and social development. The average annual growth rate of civil aviation transport will be maintained at about 14 percent. By the year 2010, the total turnover of civil aviation transport will have reached 50 billion ton/kilometers, the passenger traffic will have reached 270 million person/times, and the cargo and mail traffic will have reached 5.7 million tons. The general aviation will have grown at an average annual rate of about 10 percent, and the ratios of the county-level administrative units and population covered by the service of the civil aviation transport airports will have been 10 percent higher.
    In order to ensure that the plan be implemented, CAAC decides that the market should play the basic roles in allocating resources, the government should correctly fulfill its functions of regulating and channeling social resources and rationally allocating public resources, and the government and the market should fully perform their different functions25 in implementing the "11th Five-Year Plan".

2. Liberalizing and Standardizing Air Route Operation Permission

    With the sustained development and deepening reform of the civil aviation industry and in light of the practical conditions of the development of civil aviation transport, CAAC has been liberalizing the access to the domestic civil aviation transport market in an orderly manner. To this end, CAAC has introduced many policies and measures, including the abolition of the examination and approval of the bases of the airlines, the expansion of the business scope of the airlines, the decentralization of the administrative power over regional air routes, and the introduction of air route management according to registration and approval classifications. In the meantime, as a matter that requires administrative permission, permission on the operation of domestic air routes and flights should also be managed in accordance with the relevant requirements of the Law on Administrative Permission and according to the mandatory powers, scope, conditions and procedures. Both the behaviors of the airlines in applying for the operation of domestic air routes and flights and the efforts of the civil aviation authorities to exercise management according to law and improve their services and management should be standardized.
    Therefore, on the basis of summarizing the ideological guidelines and practice in managing domestic air routes and flights in the past two years, CAAC has made major revisions to the contents and structure of the Regulations on the Management of the Operation of Domestic Air Routes and Flights, and renamed it as the Regulations on Permitting the Operation of Domestic Air Routes26. The new regulations introduced the system of approval and the system of registration to liberalize the administration of the permission of the operation of domestic air routes, at a time when the Law on Civil Aviation is yet to be amended and the permission administration should be introduced for the operation of all air routes according to law. While the air routes of the airports that are subject to the limits of comprehensive supporting capabilities and the limits on the number of rush-hour takeoffs and landings, as approved by CAAC, the air routes of the busy airports and the air routes with heavy traffic flow and the air routes of the airports that have special requirement for flight safety are all subject to approval administration, most other air routes are subject to registration administration. The new regulations also reduced the number of documents, such as market feasibility study reports, that should be submitted when applying for permission, to the Application for the Approval of the Permission of the Operation of Domestic Air Routes and the Registration Form for the Permission of the Operation of Domestic Air Routes. Besides, the new regulations also strengthened post-event supervision and administration over the permission of air route operation.

3. Standardizing the Collection of Civil Aviation Fund and Airport Construction Fee

    In order to standardize the collection and management of the civil aviation capital construction fund and the civil airport management and construction fee, CAAC revised, in 2006, the Implementation Rules on the Collection of the Civil Aviation Capital Construction Fund and the Implementation Rules on the Collection and Management of the Civil Airport Management and Construction Fee27, which were promulgated in 2004, in light of the practical conditions of implementing the related rules.
    The revised detailed regulations on the collection of the civil aviation capital construction fund further standardized the responsibilities and obligations of the Air Traffic Management Bureau of CAAC, the air traffic management units of the regional administrations, the Accounting Center of China Aviation, the airlines and other units involved in fund collection in the fields of data transmission, account opening and account settlement. Meanwhile, the document also established the working systems for dispute settlement, non-compliance punishment and evaluation.
    The revised rules for implementation of the collection and management of the civil airport management and construction fee provide that when passengers buy open tickets for domestic connecting flights, regional (Hong Kong and Macao) and domestic connecting flights, and international and domestic connecting flights, they pay RMB 50 yuan per person for the consolidated domestic airport fee and the passengers of international and regional flights pay RMB 90 yuan per person. When the airlines issue free air tickets for domestic, regional (Hong Kong and Macao) and international routes, the free-ticket holders should pay the airport fee. The "infants" and "children" under 12 are exempted from the airport fee. At the same time, the revised rules for implementation of the collection of airport fee also contained provisions on the procedures for data transmission and account opening and settlement.

4. Establishing Management System on Airport Construction Fund Subsidized by Government Investment

    Since the beginning of reform and opening up, airport construction and development in China has largely met the demand of economic and social development. Since the geographical distribution of airports is not so rational, the functions of the hub airports need to be improved and the security facilities and equipment at the airports need to be strengthened. In order to build a system of new-generation civil aviation transport airports and to support the infrastructure construction of civil aviation transport airports across the country, CAAC in 2006 defined the policies on subsidizing airport construction projects with special funds28, standardized the behavior of subsidizing airport construction projects with investment from special funds, and allowed special civil aviation funds to fully play their macro-regulatory and investment-guiding roles to support and serve regional economic and social development.
    The scope for the special civil aviation fund to invest and subsidize airport projects is limited to the construction projects in which the market cannot effectively allocate resources. The fund comes from the centralized part of the civil airport construction and management fee. As a government fund, the fund users shall book the investment subsidy fund as state capital. The use of the investment subsidy fund shall fully demonstrate the policy guidance of
"favoring safety construction, favoring underdeveloped regions and favoring small and medium-sized airports". Funding is arranged level by level through a progressively leaning mechanism in accordance with the degree of importance of the projects, the conditions of the development of the economy and civil aviation in various provinces (autonomous regions and centrally-administered municipalities) and the operating and financing capacities of the airports. CAAC exercises an overall control over the volume of airport investment subsidy in various provinces (autonomous regions and centrally-administered municipalities) during the Five-Year Plan period. In particular, the funding volume for new airports is set in accordance with the conditions of the new airport projects in various provinces (autonomous regions and centrally-administered municipalities), which has been included into the airport distribution plan and in light of regional and airport classifications. The funding volume for airport development is set in accordance with the passengers handled by the existing airports in various provinces (autonomous regions and centrally-administered municipalities), in light of regional and airport classifications, in keeping with the principle of progressively leaning toward the underdeveloped regions and small and medium-sized airports and on the basis of the estimations worked out in the progressive calculation method. Based on the estimations, CAAC and the regional civil aviation administrations shall consult with the provinces (autonomous regions and centrally-administered municipalities) in working out the implemention plans for the airport construction projects and setting the sizes of the funding inputs of the regional governments and the subsidies from CAAC during the Five-Year Plan period. Necessary adjustments will be made in the middle of the Five-Year Plan in light of fund collection and project implementation. The projects using investment subsidies are subject to the inspection and audit by CAAC and the regional civil aviation administrations according to the relevant stipulations. In the meantime, they are also subject to the supervision and inspection over the subsidized projects by the national departments in charge of investment, finance, audit and supervision according to their functional divisions.

5. Establishing Management Policy on Sales Prices of Aviation Kerosene and Adjusting Fuel Surcharge in a Timely Manner

    In order to reform the pricing mechanism for sales price of aviation kerosene, the Reform Plan for Sales Prices of Aviation Kerosene (pilot), which focused on reforming the difference between the purchasing and sales prices of aviation kerosene, was formally put into implementation on Apr. 1, 2006. The move was designed to transform the unitary pricing mode for the purchasing and sales prices of aviation kerosene into a mechanism of setting  different prices for different kerosene-supplying companies and for different airports.
    According to the reform plan, the difference between the purchasing and sales prices of aviation kerosene for the domestic flights of the domestic airlines will mainly observe the government-guided prices instead of the government-set prices. CAAC sets the base price for the difference between the purchasing and selling prices and the range for price fluctuations according to the kerosene-supplying cost of the supplying companies, the demand-supply conditions of the market, and the affordability of the airlines. Based on the base price, the airlines and the kerosene-supplying companies set, through consultation, the difference between the purchasing and selling prices within a fluctuation range of no more than 8 percent. The difference between the purchasing and selling prices of aviation kerosene for the international flights and the flights to Hong Kong and Macao of the domestic airlines observe the market-regulated prices instead of the government-set prices.
    In order to actively cope with the impact of the rise in the price of aviation kerosene on domestic air transport and in light of the changes in the fuel cost of the airlines, the State Development and Reform Commission agreed that CAAC should introduce an interactive mechanism between fuel surcharge and aviation kerosene prices. Approved by the State Council, the fuel surcharge for domestic air routes was raised on Apr. 10, 2006 from RMB 20 yuan to RMB 30 yuan per passenger for the segments of less than 800 kilometers, and from RMB 40 yuan to RMB 60 yuan per passenger for the segments of more than 800 kilometers. On Sept.1, the fuel surcharge for domestic was readjusted from RMB 30 yuan to RMB 60 yuan per passenger for the segments of less than 800 kilometers and from RMB 60 yuan to RMB 100 yuan per passenger for the segments of more than 800 kilometers. These adjustments eased the operational pressure on the airlines arising from the rise in the cost of aviation kerosene.

6. Trying out System on Air Transport E-Ticket Receipt for Reimbursement

    In order to promote the development of electronic air tickets, the General Administration of Taxation and CAAC regulated the reimbursement of E-tickets29. Beginning on Jun. 1, 2006, the itinerary/receipt of E-ticket for air transportation was temporarily used as the payment receipt or receipt for reimbursement of E-tickets purchased by passengers. The introduction of mandatory receipt for reimbursement solved a bottleneck to the development of E-ticket and as a result the use of E-ticket has risen sharply from less than 20 percent to about 90 percent, which greatly reduced the relevant cost of the airlines, offered convenience to the passengers and played a positive role in promoting business facilitation in civil aviation.

7. Standardizing Management of Foreign Air Transport Enterprises

(1) Non-Scheduled Flights of Foreign Air Transport Enterprises
    In order to maintain the order of the air transport market, CAAC in 2006 promulgated regulations to administer the permission of the operation of non-scheduled flights carrying passengers, luggage, cargo and mail by foreign air transport enterprises between foreign countries and China. 
    The permission on the operation of the non-scheduled flights in civil air transport refers to the permission on the operation of the commercial air transport flights other than the scheduled flights and additional flights. They include the non-fixed group charter flights, general tourism charter flights, public charter flights, social group charter flights, common-interest charter flights, special activity charter flights, student charter flights, self-use charter flights, cargo charter flights, passenger-cargo charter flights and joint charter flights. The foreign airlines engaged in the non-scheduled flights between foreign countries and the People's Republic of China shall apply to CAAC as required, acquire operation permission and complete operational certification according to the Regulations on the Operational Certification of Foreign Public Air Transport Carriers before a flight can operate. CAAC observes the principle of mutual benefit and reciprocity when granting operation permission for non-scheduled flights. If the aviation authorities of foreign governments impose unreasonable restrictions on the operation permission for the non-scheduled flights of the civil air transport enterprises of the People's Republic of China to their countries, CAAC will also impose the same restrictions on the civil air transport enterprises of those countries.
(2) Management on the Resident Representative Offices of Foreign Air Transport Enterprises30
    If foreign air transport enterprises apply for the establishment of representative bodies in the People's Republic of China, they must obtain the approval of CAAC and complete registration with the State Administration of Industry and Commerce or its authorized bureaus in charge of industrial and commercial administration in various provinces, autonomous regions, centrally-administered municipalities and cities enjoying provincial status in state plan. Without such approval and registration, foreign air transport enterprises are not allowed to establish representative bodies in the People's Republic of China or to engage in any business activities related to air transport business. Foreign air transport enterprises can establish representative bodies only if the governments of the countries where these foreign air transport enterprises are located have signed air transport agreements or related agreements with the government of the People's Republic of China and these foreign air transport enterprises have acquired the designated qualification for engaging in air transport service between the two countries. If a foreign air transport enterprise that has not acquired the designated qualification for engaging in air transport service between the two countries wants to establish a representative body, the enterprise must seek special approval from CAAC.

8. Protecting Consumer Rights and Interests

(1) Raising Limits on Domestic Air Transport Compensation Liabilities
    On Jan. 29, 2006, the State Council approved the Regulations on the Limits of Compensation Liability of Domestic Air Transport Carriers31, which was formally put into implemention on Mar. 28, 2006. As a result, the Provisional Regulations on the Compensation for the Physical Damages of Domestic Air Transport Passengers, which was promulgated in 1989 by the State Council and revised in 1993, was revoked. The new regulations drastically raised the limits on domestic civil air transport compensation, with the ceiling on carrier's compensation liability to passenger being raised from RMB 70 000 yuan to RMB 400 000 yuan. Meanwhile, the regulations provided that the ceiling on carrier's compensation liability for passenger's accompanied articles was RMB 3 000 yuan and that for his checked luggage or for transported cargo was RMB 100 yuan per kilogram.
(2) Strengthening Flight Regularity
    In 2006, CAAC continued to take flight regularity as a priority of its effort to improve the quality of transport service and create a harmonious environment for air transport32. CAAC requested that all airlines raise their flight regularity rate for the whole year to over 81 percent and the flight regularity rate for the whole industry rise to over 82 percent. In the meantime, the controllable delays must drop visibly, the average delay time should be tangibly cut and the long delays should be significantly reduced. The handling of flight delays and in particular of mass delays should be evidently improved. Tangible progress should be made in establishing groundwork and long-standing mechanism for flight regularity. CAAC also requested all airlines to implement comprehensively the flight regularity responsibility system. All airlines are strictly prohibited from arranging flights that cannot be executed on time within a time shorter than the prescribed time. And they shall strictly execute flights according to plans. All administrations, airlines, airports and service units shall establish and improve their contingency plans for mass flight delays, and the air traffic control departments shall strengthen control over flight operations.
(3) Improving System on Consumer Complaint Management
    The new regulations on the administration of consumer complaints promulgated in 2006 provided that CAAC was in charge of the management of the complaints from public air transport consumers nationwide. The regional administrations were in charge of the management of the complaints in their respective regions. CAAC authorized its consumer affairs center to be in charge of the day-to-day complaint acceptance. The China Air Transport Association was in charge of accepting consumer complaints against passenger and cargo sales agencies. All airlines shall establish a complaint handling department, publish their complaint hotlines and ensure that their hotlines be open 24 hours a day. The new regulations on complaint management also specified the conditions, contents and demands of complaints and the procedures for complaint handling33.

Notes:
1 The Guidelines of CAAC on Deepening the Reform of the Civil Aviation Industry (Minhangfa 2006-51)
2 The Notice on Printing and Issuing the Plan for Implementing the Guidelines on Deepening the Reform of the Civil Aviation Industry (Minhangfa 2006-66)
3 The Notice on Handing over the Certification of Air Transport Sales agencies (Minhanghan 2006-141)
4 The Regulations on Administrative Inspection of Civil Aviation (CAAC Order No. 163)
5 The Regulations on Administrative Permission of Civil Aviation (CAAC Order No. 161)
6 The Regulations on Administrative Reconsideration of CAAC (CAAC Order No. 162)
7 The Regulations on the Statistics on Administrative Enforcement of Civil Aviation (Minhangfa 2006-126)
8 The Opinions of CAAC and the State-Owned Assets Supervision and Administration Commission on Strengthening the Legal Work of Civil Aviation Enterprises and Airports (Minhangfa 2006-142)
9 The Protection Requirements for High Intensity Radiated Fields (HIRF) (AC-21-1317)
10 The Notice on Issues Regarding Airworthiness Certification of Civil Aviation Fuels (Zongjufamingdian 2006-2666)
11 The Notice on Printing and Issuing the Regulations on Civil Aviation Safety Training (Minhangfa 2006-206)
12 The Notice on Issues Regarding the Implementation of the Regulations on Civil Airport Certification (Minhangfa 2006-6)
13 The Regulations on the Traffic Safety Management of the Road on Civil Airport Aircraft Movement Area (CAAC Order No. 170)
14 The Notice on Issuing the Technical Standards for the Flight Zones of Civil Airports (Minhangfa 2006-73)
15 The Notice on Issuing the Construction Standards for Civil Aviation Feeder Airports (Minhangfa 2006-74)
16 The Notice on Further Clarifying the Issues regarding the Special Campaign to Control Dangerous Goods (Minhangfa 2006-42)
17 The Notice on Further Clarifying the Issues regarding the Management of the Cross-Regional Operation of Airlines (Minhangfa 2006-14)
18 The General Rules on Maintenance, Repairs and Modification (CAAC Order No. 159)
19 The Regulations on the Pre-Flight Planning Management of Civil Aviation (CAAC Order No. 166)
20 The Regulations on the Opening and Operation of Air Traffic Management Equipment of Civil Aviation (CAAC Order No. 172)
21 The Notice on Printing and Issuing the Opinions on Further Strengthening the Management of Civil Aviation Pilots (Minhangfa 2006-109)
22 The Decision on Revising the Regulations on Certification of Pilots, Flight Instructors of Civil Aviation and Ground Instructors of Civil Aviation and the Regulations on the Operational Certification of Large Aircraft Public Air Transport Carriers of CAAC (CAAC Order No. 173)
23 The Regulations on Licenses Management of Air Traffic Controllers of Civil Aviation (CAAC Order No. 168)
The Regulations on Licenses Management of Information Personnel of Civil Aviation (CAAC Order No. 169)
The Regulations on Licenses Management of Meteorological Personnel of Civil Aviation (CAAC Order No. 171)
The Regulations on Licenses Management of Telecommunication Personnel of Civil Aviation (CAAC Order No. 175)
24 The Notice on Printing and Issuing the "11th Five-Year Plan" for the Development of China's Civil Aviation Industry (Minhangfa 2006-167)
25 The Notice on Implementing the Task Assignments Specified in the "11th Five-Year Plan" for the Development of China's Civil Aviation Industry (Minhangfa 2006-211)
26 The Regulations on Permitting the Operation of Domestic Air Route of Civil Aviation of China (CAAC Order No. 160)
27 The Notice on Printing and Issuing the Implementation Rules on the Collection of Civil Aviation Capital Construction Fund (Revised) (Minhangfa 2006-91)
The Notice on Printing and Issuing the Implementation Rules on of the Collection of Civil Airport Management and Construction Fee (Revised) (Minhangfa 2006-92)
28 The Notice on Printing and Issuing the Rules on the Investment and Subsidization of Airport Construction Projects with Special Civil Aviation Fund (Minhangfa 2006-138)
29 The Notice on the Issues regarding the Try-Out of Air Transport E-ticket Receipt for Reimbursement Vouchers (Document No.: Guoshuifa 2006-39)
30 The Regulations on the Management of the Licensing of the Resident Representative Offices of Foreign Air Transport Enterprises (CAAC Order No. 165)
31 The Regulations on the Limits of Compensation Liability of Domestic Air Transport Carriers (CAAC Order No. 164)
32 The Notice on Strengthening Flight Regularity and Delay Handling (Zongjufamingdian 2006-419)
33 The Regulations on the Management of the Complaints from Public Air Transport Service Consumers (Minhangfa 2006-207)