Singapore Air Show

U.S. airline helps China prep for Olympics

 - February 11, 2008, 9:02 AM

A concerted effort to develop a modern regional air transportation industry in China has finally begun, just in time for the Beijing Summer Olympic Games and as the country’s aerospace industry readies the indigenously developed ARJ21 regional jet for service. Not coincidentally, start-up domestic carrier Kunpeng Airlines secured an operating certificate just nine months after its partners inked a deal to launch service from Xian in northern China. Services began in late October with a pair of Bombardier CRJ200 regional jets formerly flown by Mesa Airlines in the U.S. Four months later, the airline appears to have found its balance, but more like an infant learning to take its first steps than a fully mature participant in a modern air transportation system.

Nevertheless, Kunpeng has drawn a fair share of attention, less due to any spectacular operational achievement than to its ownership structure and its subsequent status as holder of the largest order commitment for the ARJ21 and one of two Chinese customers for “up to” 100 Embraer 190s.

Under the terms of a deal signed in December 2006 with majority owner Shenzhen Airlines, Mesa Air Group received a 25-percent stake in Kunpeng in return for supply of the first batch of 50-seat airplanes, pilot training and maintenance support. The first U.S. airline to enter a joint venture with a Chinese carrier, Mesa also sent senior vice president Mike Ferverda to China to head the airline as director of operations.

Although ostensibly managed by U.S. airline executives, Kunpeng’s operations retain a decidedly local flavor with a roster staffed primarily with Chinese first officers. However, if Kunpeng expands to the degree and at the pace its investors originally planned, Mesa and controlling partner Shenzhen will need to address a shortage of qualified CRJ captains in China.

From the start, the airline has had to import most of its captains. In December, Kunpeng raised the base pay for expats by $750 per month, to $6,800. Along with travel support increases from $3,500 to $10,000 per year and a $375 per month longevity bonus, net compensation totals $110,500. That salary in the U.S., taking into account tax-free status, housing and cash benefits, would equate to around $140,000 per year, according to pilot leasing and recruiting specialist World Aviation Systems of Las Vegas, Nevada.

Meanwhile, Mesa advertises temporary positions for CRJ mechanics willing to relocate to Beijing for six months to a year, and Kunpeng trains local technicians. Although the CRJ is the most popular regional jet in China, Bombardier counts fewer than 40 in operation there. The OEM maintains a spare parts depot in Beijing and customer support team in Shanghai, while Taikoo (Shandong) Aircraft Engineering Ltd. of Ji’nan serves as the only Bombardier recognized heavy maintenance facility in the Asia Pacific.

The support network should keep busy in the future if Kunpeng fields as many airplanes as its order totals suggest. The airline planned to deploy 20 CRJs by the time the Olympics begin in August and as many as 100 ARJ21s within five years. However, as the Singapore show neared, Kunpeng had taken just four CRJs. Last month, Mesa CEO Jonathan Ornstein estimated the airline will take “more likely eight or nine” CRJs by the start of the Olympics. He said “the first few” Embraer 190s will arrive late this year.

Of course, the speed and shape of Kunpeng’s development depend on the human resources and transport infrastructure at its disposal, as well as government cooperation. The civil aviation authority has placed a moratorium on new airline applications until at least 2010 in an effort to help airport expansion to catch up with demand. By then, Kunpeng hopes to be well on its way to carving a self-sustainable niche in China’s blossoming regional air transport business.