AFTER WORLD WAR II, WITH THE RAPID PROMOTION AND
advancement of aviation industry and technological level of the civil aviation, the aviation transportation industry is developing rapidly with the advantages of safety, swiftness and comfort, has become an essential industry with considerable scale in the nowadays, and is playing an important role in the social life of human beings. According to the static of International Aviation Organization, the total amount of circulation of the world regular flight transportation is 3.49 billion ton kilometers in 1950, 12.34 billion ton kilometers in 1960, 56.65 billion ton kilometers in 1970, 130.7 billion ton kilometers in 1980, 235.87 billion ton kilometers in 1990, and in 2002, it achieved at 385.37 billion ton kilometers with the 1.621 billion passengers. The operation of the general aviation has applied to agriculture, forestry, geological prospecting, tourism, disaster-offer and other professions and many a field of social life with its flexibility and other characteristics. The development level of aviation industry has become one of the essential symbols that judge the development level of the social economy and overall national strength of a country.

The civil aviation industry has the following important characteristics: the first is that it has strong internationalism and paramilitarism, the second is that it has high requirement for technology and safety, and the third is that its fund is intensified and of relatively more risk. Therefore, many a national government not only have taken stricter (compared with other industries) management policy in civil aviation industry, but also founded special organizations and formulate a series of laws and regulations to standardize aviation activities and strengthen the management of the national airspace and flight safety to prevent the decentralization of the aviation management power, to guarantee the civil aviation safety and the orderly development of civil aviation industry and to meet the requirement of politics, economy national defense and diplomacy. Since the 1970s, the US congress has passed the Law of Slackening Aviation Control, implemented the policy of "no control" and "open the sky". In many countries, some state-owned aviation companies have carried out civilizing transformation, some large aviation companies have combined in various styles to promote the competitiveness, and the international civil aviation industry has entered a new period of adjusting structure.

The origin of China civil aviation can date back to the 20s of this century. In 1929, the old China set up China Airlines, and then the Sino-Germany joint-venture European Asian Airlines appeared, which reorganized as Central Airlines in 1943. Because of the political and economic restriction in the society at that time, the civil aviation developed at a considerable low speed. Until 1948, we have only set up 45 domestic and international airlines with a 75 million ton kilometers transportation circulation and 0.64 million passengers. On the eve of the liberation, the "China Airlines" and the "Central Airlines" have been moved to Hongkong. In Nov., 1949, the two companies proclaimed the uprising-the famous "the uprising of the two aviation", in which 12 airplanes flied back to Beijing.

In 1949, the Peoples' Republic of China (PRC) has been founded, which has created a new road for the development of China civil aviation industry. Because the basis of equipment and technology left by the old China is considerably weak, and the various political and economic causes in the society at that time were quite complex, the speed of the development of China civil aviation is relatively low before the 1970s. In the 1950s, we only had a few small Piston planes like MILESTONE 2 and IR14. In the 1960s, we began to use turboprop planes like SAFE 24, IR 18, and VISCOUNT.

In the 1970s, we brought in IR 62, BOEING 707 and other large jet planes. In 1978, at the beginning of the reform and the opening to the outside world, our civil aviation had only 98 transport planes, 162 airlines among which there are 12 international airlines, 70 airports offered for civil aviation among which most are middle and small model, and there 36 civil military airports, finished 0.299 billion ton kilometers transportation circulation with 2.30 million passengers.

Since the 1980s, with the trend of national reform and opening to the outside world, China civil aviation has entered a new period with constant and rapid development, and the feature of the industry has changed fundamentally. In 1990, our civil aviation had 204 transport planes, 439 airlines, 97 civil airports, and finished 2.5 billion ton kilometers with 16.596 million passengers. In 2001, our civil aviation had 566 transport planes, 1143 airlines, 143 civil airports, and finished 14.12 ton kilometers transportation circulation with 75.24 million passengers. And in 2001, the total transportation circulation and passenger circulation of our civil aviation ranked at the 6th. Only in the 52 years, our civil aviation industry has achieved a lot--- ranked from the less-developed level to the powerful nation of civil aviation, which stems from the correct leading of the central Party Committee and the State Council, from the support of all walks of life and the help of the whole nation, and from the constant efforts and reform of the staff and every level leaders of civil aviation industry.

I. 1949-1979, the evolvement and formation of the civil aviation management system

Not long after the establishment of the PRC, on 2nd, Nov. 1949, the Central Government proclaimed to set up Civil Aviation Administration of China (CAAC) charging the civil aviation profession of the whole country. There is not a clear line between the functions of the government and those of the enterprises in this aviation administration--it is not only an organization directly under the central government implementing the intensified and integrated management on the civil aviation industry of the whole country, but also a nation-wide large enterprise engaged in aviation transportation and general aviation operation directly.

From 1949 to 1979, there have been several essential changes in the leading mechanism of civil aviation administration: in 1949, when the civil aviation administration was founded, it was only a aviation administration under the Central military Committee which was directed by airforce in administration and leaded by Central Finance Economy Committee in business; in 1952, the civil aviation administration was transformed into organizational system of airforce and leaded totally by airforce; from 1954 to 1969, the civil aviation administration was transformed into the organizational system of the State Council and leaded by relevant sections of the State Council and airforce according to the division of labour; in Nov. 1969, the civil aviation administration was incorporated into the organizational system of airforce and became a component of airforce.

II. 1980-1986, the reform on civil aviation management system began

In 1980, Comrade Deng Xiaoping made an instruction --- the civil aviation must lead on the enterprise road. On March 5th, 1980, the State Council and the Central Military Committee made a decision on the transportation of the leadership relation of the civil aviation---transform the China Civil Aviation Administration to the administration directly under the State Council, leaded by the State Council and implements the enterprise management in each subsidiary unit from the administration under the organizational system of Army. People's Daily has carried an editorial-- Civil Aviation must Lead on the Enterprise Road, for this essential issue.

From 1980 to 1986, according to the requirement of leading on the enterprise road, the civil aviation has carried out a series of reforms on the management institution, and the major content are: to the subsidiary units, we established economic accounts institution, examined each economic standard, and implemented the management method like being responsible for the profit and operating in the responsibility system and so on; we reformed the internal management mechanism and the organizational units under the Army organs; we reformed the labour and employment system and salary system, and abolished the compulsory labour system; we reformed the investment system, and took the international lease styles to bring in and purchase planes and so on.

The reforms on management institution mentioned above have enriched new vitality to the development of the civil aviation; have given full play to the enthusiasm for the work of the staff effectively, and promoted the rapid development of civil aviation industry and the promotion of the operation level and economic benefit. According to the static, until the end of 1986, the airline mileage, the total transportation circulation, total number of passengers, posted-freight amount and the general aviation operation working hour of the civil aviation have gone up by 12 times, 42 times, 33 times and 52% separately compared with those of 1978. The implementation of enterprise road not only brought great changes to the feature of the civil aviation, but also laid foundation for the civil aviation to develop regularly according to its own law.

III. 1987-2000, carried out the reform on civil aviation management system all-sidely

The reform on the leading system has only changed the styles of leading and management, but hasn't fundamentally transformed the management system of the section-without a clear line between the functions of the government and those of the enterprises. Civil Aviation Administration of China is still not only government section charging civil aviation affairs, but also a nation-wide enterprise operating aviation transportation and general aviation business directly under the name of CAAC. Under CAAC there are six regional aviation administrations distributed in Beijing, Shanghai, Guangzhou, Chengdu, Lanzhou (moved to Xi'an later), and Shenyang. Under the regional aviation administrations, there are 25 provincial (autonomous region, the cities directly under the government) aviation administraions (exclude Sichuan province, and the provincial (city) aviation administrations will not set up in the province (the city directly under the government) which the local aviation administration is located in), and the aviation administrations were all set up according to the administrative divisions, and each province (autonomous region) has a flight station (airport). The regional aviation administrations, province (autonomous region, the city directly under the government) and flight stations are engaged in the specific operation of transportation, production and general aviation. This kind of management system is good for guaranteeing the centralized and integrated leading of the civil aviation, but it also has a great number of defects: no clear line between the functions of the government and those of the enterprises, no distinction between the rights and obligations, too much centralization, too much mechanical operation, getting equal share regardless of the work done, lack of vitality and poor benefit. With the vigorous development of our socialist market and the increase of business amount of civil aviation by a great margin, this management system is becoming more and more unsuitable for the general requirement of the reform on the national economic system and the objective requirement of the development of the civil aviation, and is in an urgent demand for reform.

In 1984, according to the "Decision about the Reform on the Economic System", CAAC began to draw up a program for civil aviation management system, and submitted it to the State Council for approval after serious discussions and repeatedly modifications. At the beginning of 1987, the State Council approved the program. From then on, the reform on the civil aviation entered a new period with the reform on management system all-around.

In 1987, according to the principle of separating the function of government from those of the enterprises and setting up airlines companies and airports separately, CAAC conducted the experiments in the reform whose major content is the schism of aviation administrations, airlines and airports in the former Civil Aviation Chengdu Administration. On the basis of the former Civil Aviation Chengdu Administration set up the Civil Aviation Southwest Administration which brought the functions of the government into play, the China Southwest Airlines which is engaged in aviation transportation business and Chengdu Shuangliu International Airport which is engaged in the business of ground guarantee and service.

On the basis of the experiments, CAAC carried out a series of reforms on system in other five regional aviation administrations and relevant provincial (autonomous region, cities directly under the government) aviation administrations to the former civil aviation one after another. Until the end of 1992, the civil aviation system has broken out the former single-section system---no clear line between the functions of the government and those of the enterprises, and implementing highly centralized management through administrative and military methods, and formed the new pattern of management system--- clear line between the functions of the government and those of the enterprises, schism of regional aviation administrations, airlines and airports, and formed the new framework of civil aviation management system which is qualified for the goal of the reform on the national economic system, which is a great, profound and unparalleled reform in the history of the development of the civil aviation in the PRC.

1. Reformed the administrative management system of the civil aviation industry

From 1987 to 2000, according to the requirement of the State Council, Civil Aviation Administration of China (CAAC), regional aviation administrations, provincial (region, city) aviation administrations implemented essential reform in the aspects of organs and functions. As the government section, CAAC, civil regional aviation administrations carried out the administrative management for aviation industry; each provincial (autonomous region, the city directly under the government) aviation administrations have been transformed into organs with enterprise nature, taking practical government the functions of government and operating the civil airports (flight station) directly in the regions.

According to the integrated arrangement of the reform on the Party administrative and organization and organization of the central authorities, the organs of CAAC carried out three relatively great reforms on organization in 1989, 1994 and 1998 separately. On the basis of the decentralizing functions, CAAC emphasized the functions of government of supervising the flight safety and the macro control over the industry; at the same time, CAAC rationalized the internal work -relationship, adjusted the establishment of organs, reduced the number of staff, and promoted the work efficiency; CAAC transferred the former functions belonged to the enterprises down to the enterprises.

After the reform on the organization, as the section under the State Council charging civil aviation affairs, CAAC performed the following functions on the whole: research and draw up policy and strategy of civil aviation industry for our country; work out civil aviation law and status drafts, and formulate civil aviation rules, regulations, institutions and standards; implement the safety supervision and control; carry out the market management; undertake the macro control; charge foreign relationship; be responsible for the management of air traffic.

The first-class regional aviation administration has established six regional aviation administrations of civil aviation-North China, East China, Central South, Southwest, Northwest, and Northeast, in Beijing, Shanghai, Guangzhou, Chengdu, Xi'an and Shenyang separately, charging the civil aviation affairs in the jurisdictional regions. The major obligations of regional aviation administrations are: implement and perform the policies, laws, ordinances, rules and institutions of civil aviation; manage the civil airport (include the civil airports directly under the national government and under the local government, and the civil part of civil-military airports) and the flight activities of civil aircraft; investigate and settle down the flight accidents of civil aircrafts; examine, promulgate or revoke operation license, airworthiness license, maintain license, radio station license and maintain personnel license of civil aviation enterprises in the jurisdictional regions; carry out the examination of professional skill on flying personnel of civil aviation, the supervisor and controller of air traffic, the signed personnel of the flight and the intelligent agents of the flight; lead the management organization of civil airports directly under the central authorities and the civil part of the civil-military airports in the jurisdictional regions; put forward a proposal for the institution of the airway and civil airports, and the establishment of the airlines.

2. Reformed the management pattern of the government

According to the requirement of running the administration with the limits of law, in this period, CAAC started the transformation from the mandatory administration of administration to running the administration within the limits of law, implemented the work of legislation, enforcing the law, and the supervision of the enforcement of the laws, formulated and issued a series of rules, standards and institutions of the industry management on e after another, drew up a series of laws approved by the State Council on by one, worked out and got an approval and issuance for the "Civil Aviation Law" from the Standing Committee of National People's Congress, set up system of civil aviation which has complete content, relatively clear stadium, and relatively supplemented laws, rules and regulations, with the "Civil Aviation Law" at the core. Until now, we have 1 law, 28 rules and 114 regulations taking the civil aviation management as the content.

3. Established national core aviation transportation enterprises and general aviation enterprises

After the State Council approved the reform program of civil aviation management system in 1987, CAAC set up six state-owned core aviation companies one after another and practices the policy of "operating by oneself, assuming full responsibility for one's own profits and losses, and competing fairly among these companies". The six state-owned core airlines are: AIR CHINA, which was separated from the former Civil Aviation Shanghai Administration in June, 1988, takes the operation of domestic airlines as the major business, and domestic airlines in the regional airlines and a part of international airlines; China Southern Airlines which was separated from the former Civil Aviation Guangzhou Administration in February, 1991, takes the operation of domestic airlines as the major business, and sidelines in the regional airlines and a part of the international airlines; China Southwest Airlines which was separated from the former Civil Aviation Chengdu Administration in Dec. 1987, takes the operation of the domestic airlines as the major business, and sidelines in the regional airlines and the minority of the nearby international airlines; China Northwest Airlines which was separated form the former Civil Aviation Xi'an Administration in Dec. 1989, takes the operation of the domestic airlines as the major business, and sidelines in the minority of the nearby international airlines and the regional airlines; China Northern Airlines which was separated from the former Civil Aviation Shenyang Administration in April, 1991, takes the operation of the domestic airlines as the major business, and sidelines in the minority of the nearby international airlines and regional airlines. Besides, the China National Aviation Corporation that takes the general aviation business as the major business and sidelines in aviation transportation business was founded in July 1989.

The newly founded airlines are the legal entity that enjoy civil-law rights and undertake the civil-law responsibilities independently. According to the "Enterprise Law", "Regulation of Transforming the Operation System of the State-owned Enterprises" and the regulations of other laws and rules, these airlines possessed independent managerial authority and carried out managerial activities independently and implemented and performed the laws, rules, regulations and institutions of the management of civil aviation industry, accepting the management of CAAC and the industry management of the regional aviation administrations under the CAAC at the same time.

At the same time with the establishment of core airlines, according to the principle of separating the airlines from the airports, since 1990, the reform on the partial provincial (autonomous region, the city directly under the government) aviation administrations and flight stations which used to undertake the business of aviation transportation has been carried out. The major content of the reform are: retain the former establishment of organizations in the former provincial (autonomous region, the city directly under the government) aviation administrations, airports (flight station), separate it from the business of the aviation transportation and general aviation; taking the above as the basis, the branches of the six airlines were established, and the retained provincial (autonomous region, the city directly under the government) aviation administrations and airports (flight station) are engaged mainly in the management of airports, ground guarantee and service. These newly founded branches of the airlines are: Subsidiary Company of AIR CHINA in Inner Mongolia, Subsidiary Company of AIR CHINA in Tianjin, Subsidiary Company of China Eastern Airlines in Shanghai, Anhui and Jiangsu, Subsidiary Company of China Southern Airlines in Henan, Hubei, Hunan, Hainan, Guangxi, Subsidiary Company of China Southwest Airlines in Chongqing, Subsidiary Company of China Northern Airlines in Heilongjiang, Jilin, Dalian, and the subsidiary Company of China Northwest Airlines in Gansu.

4.Reformed the management system of airports

In the process of reform on the separation of regional aviation administrations, airlines and airports, Beijing Capital International Airport, Shanghai Hongqiao International Airport, Guangzhou Baiyun International Airport, Chengdu Shuangliu International Airport, Xi'an Xiguan Airport (has been moved to Xianyang and named Xi'an Xianyang International Airport) and Shenyang Taoxian International Airport have been founded. After the establishment of the branches of the airlines, the former provincial (autonomous region, the city directly under the government) aviation administrations charging the business of aviation transportation, integrated with the airports continuously, implementing the enterprises operation-perform a part of the functions of the government, undertake the construction plan of airports and the management of operation of flight area of airports (runway, taxiway, aircraft parking area, and the boundary marks in the airports and so on), flight station area (waiting building and parking area and so on), the operation area (stores, hotels, restaurants and ground service and so on in the airports), and public facilities area (supply of electricity, water and heat, drainage and road and other facilities), offer various ground service and guarantee of production and life to passenger, owners of cargo, airlines and each stationed unit in airports and sustain the operation of the airports by charging the fees of taking off and landing and the ground service.

In order to explore the new model of the management of airports, according to the instruction of the State Council, CAAC has carried out experiments-the airports directly under CAAC has been transferred down to the local government. In Oct. 1988, CAAC transferred the Xiamen Gaoqi International Airport to the government of Xiamen, and in Dec. 1994, CAAC transferred the Shanghai Hongqiao International Airport down to the government of Shanghai. With the investment of local government on airports, more and more airports are transferred down to the local government or managed both by CAAC and local government with the joint-fund step by step. To the airports transferred down to the lower power, there will not be subsidiary relationship between the transferred airports, and the implementation of industry management should be carried out according to laws, rules and standards of industry management.

5. The reform of the air traffic management system

The management system of civil aviation air traffic is a component of national management system of air traffic. Before the reform, the management of air traffic in the district where the former six regional aviation administrations located was integrated with the management of airports. In order to adapt to the requirement of large-scale increase of flight amount, strengthened the construction of airway and promote the management level of air traffic; the civil aviation separated the management sections (including the management and control of flight, intelligent of flight, communication navigation and guarantee of atmosphere and so on) of air traffic from the former units relatively, and the established the relatively-independent management system of civil aviation air-traffic. In 1989, CAAC founded the managerial center of flight affairs (has been changed as air traffic management department of CAAC). From then on, each regional aviation administration founded managerial center of flight affairs (has been changed as regional aviation administration of flight affairs of civil aviation) and each provincial (region, city) aviation administration and airport of civil aviation established managerial center of flight affairs or managerial station of flight affairs in succession. Therefore, the new air-traffic managerial web of civil aviation with integrated management and direction, integrated program and construction, and integrated standard and operation was formed.

6.The reform on guarantee system of aviation transportation service

According to the principle of separating the functions of government from those of the enterprises and separating the functions of government from those of institutions, CAAC separated the supportive business of service surrounding the major business of aviation from the former government managerial organization of civil aviation and founded professional enterprises and institutions. In 1990, CAAC founded the China Aviation Oil Supply Corporation that was especially engaged in the business of the supply of aviation oil by the branch organization established in each airport. In this period, CAAC founded China Aviation Supplies IMP. & EXP. Corporation Company which was engaged in the import and export business of aviation equipment, Computer Center which was engaged in the management and explosion of national computer-ordering system and accounting center of aviation which was engaged in the supply of international accounting services of aviation transportation for aviation companies and so on.

7. Reformed the investment system

The reform on the management system of civil aviation has created favorable conditions for local governments, every walks of society's and foreign enterprises' investment on civil aviation enterprises and airports. In this period, the reform on civil aviation industry that has transferred the single-investment system to diversified-investment system was carried out.

From 1988 to 1994, civil aviation formulated the regulations that allowed the local government, domestic enterprises and citizens to invest on the civil aviation enterprises and airports. Some provincial government, city government and domestic enterprises invested independently or pool capital with CAAC or Central enterprise in succession, founding more than 20 aviation transportation companies and more than 20 general airlines, forming a new trend of airlines. The Eastern Airlines has created the precedent for citizens' investment on civil aviation industry through listing in the domestic market. At the same time, a lot of local government invested on the construction of airports, forming the various models of airports---managed by sole capital of central government, sole capital of local government and the joint-fund of central government and local government.

In May, 1994, approved by the State Council, CAAC and Foreign Trade and Economy Cooperative Ministry issued the "Notice of Relevant Policy of Foreign Investment on Civil Aviation Industry", permitting foreign merchant to invest on airlines, airports, airplane maintain and relevant enterprises of civil aviation. Through listing in Hongkong and New York, the Eastern Airlines, Southern Airlines, Beijing Capital Airport and Computer Information Center financed about 20billion Yuan (RMB) in succession. AIR CHINA and China Southern Airlines and other enterprises pooled capital with foreign enterprises, and then founded new maintain companies and assort foods companies.

8.Carry out the internal reform of the enterprises

Keeping pace with the reform trend of national enterprises, civil aviation enterprises and airports began to carry out the reform of establishing the modern enterprise system and transform the operation system, began to transform the economic examination institution from production responsibility system to economy responsibility system, and from the economy responsibility system to fund-operation responsibility system, carry out the reform of internal management institution which takes the reform on distribution system as the breach, and the reform on salary system of personnel labor as the focal point, and started the transformation from production model to the production-management model, and from the production-management model to the combination model of production-management model and capital-operation model.

Through the constant reform from 1987 to 2000, the management system and operation system of China civil aviation have changed a lot, which promoted the rapid development laws of civil aviation industry. The major achievement of the reform on civil aviation in the 14 years are mainly represented in the following four aspects:

(1) The management system that is in agree with the development laws of civil aviation has been found out primarily through the reform practice, and the industry management is strengthening step by step.

The industry management of civil aviation industry is an essential aspect for government to reform the management functions. From the practice of international profession management of civil aviation, we can see that although there is a great difference between countries in the aspects of political system and the real condition of civil aviation development, generally, the government of each country sets up special organization to implement the centralized in central government, which is a common and distinct characteristic of the industry management of the world civil aviation.

Under the new management system, the content of industry management of civil aviation can be summarized as four aspects of work-program, coordination, supervision and service. "Program" means to formulate the policy and guideline of the development of civil aviation industry or draw up or formulate the rules, regulations and institutions of industry management, formulate the program and plan of industry development and arrange the construction of basic facilities; "Coordination" means to implement macro control, guarantee the industry develop stably and harmoniously, establish safety guarantee system and set up market environment with orderly competition through economic, legal and essential-administration means; "Supervision" means to supervise and examine the implementation condition of industry management policy, rules and regulations of each civil aviation enterprise and institution to guarantee the safety of flight and air defence, and to guarantee the fair and justice market competition ; "service" means to assemble and transfer the industry information, to manage air traffic, to support and help aviation enterprises and airports strengthen the management, to guarantee the safety, to promote the benefit, to improve the service, and to realize the development.

(2) The civil aviation enterprise groups and airports which takes the aviation transportation as the major business and takes the aviation companies as the principal part are becoming more and more powerful, and the management and operation level is promoting step by step.

Airlines and airports are the principal parts of the existence and development of civil aviation industry. After the reform in 1987, the nature rights, responsibility and obligations of airlines and airports have been clarified, the manager responsibility system and management responsibility system have been implemented, and the staff's income has been connected both pressure and motive power, so each enterprise keeps a firm hand on the management and operation of the enterprises as the matter having prime importance associated with the existence and development of the enterprise, pays attention to strengthening and educating the staff's concept of quality and benefit and awareness of operation and competition, establishes and perfects every management operation system of production according to the individual characteristics of each enterprise and the profitable advanced experience of enterprise management domestically and abroad, promotes the general operation and management level of civil aviation enterprises through strengthening the management of enterprises accordingly, and the social profit and economic benefit have been promoted greatly.

The succession establishments of civil aviation enterprises have brought fundament changes to the traditional structure of our civil aviation industry, forming the civil aviation enterprise group with some considerable range and strength, and forming the aviation transformation web which takes Beijing, Shanghai and Guangzhou as the hub and covers various provincial capital cities, the cities open to the outside world and tourist cities. Each Airlines carried out market-oriented and fair competition in the aspect of safety guarantee, service quality and regular rate of flight and so on. Within the range of their own operation, which has broken the monopolization of a certain Airlines over the aviation transportation market in a certain place and formed the competitive trend of company's participation basically. The monopolized-operation model of aviation market has been broken, and the new market system-offer fair chance to every party to compete, give priority to efficiency and only the fittest survive here, has been founded basically. The system of aviation market taking a great number of the independent operators (airlines and airports and so on), a large group of consumers (passengers, and owners of cargo and so on), relatively-detached manager of industry (CAAC and various regional aviation administrations) as the basic components has developed fully, and the prospect is quite splendid and prosperous.

(3) The financing means have been broadened, and the local and social enthusiasm for setting up civil aviation enterprises and airports has been promoted.

As a result of relatively-excellent system environment and correct guiding of policy, the local and social enthusiasm for investing on civil aviation has been brought into full play, which has widened the financing means of civil aviation enterprises and airports, strengthened the power of the enterprises and airports and promoted the development of civil aviation industry.

(4) The reform provided strong motive power to the development of civil aviation and brought fundamental changes to the feature of civil aviation.

Since we reformed the management system in 1987, our aviation transportation has been increasing rapidly (excluding a few exceptional years)-the total turnover, passenger volume and the average increase-speed of each year was over 10%. The row number of the total turnover of our civil aviation transportation in the world civil aviation industry has been increasing constantly, our country has vaulted right up to a powerful country of civil aviation and is striving forward to a strong country of civil aviation with high-spirited appearance. To the public, air travel is not far behind to keep pace with, and great changes have taken place in the aspect of the passengers-the percentage taken by self-financed passengers is increasing by a big margin. The market of aviation transportation has transformed to buyers' market from the sellers' market. At the same time, it is quite common to see that passengers prefer to select carriers (Airlines), airplane type and flight number on the same airline. The soft and hard environment of aviation transportation has improved greatly. From the aspect of "hardware", through the way of finance leasing, our aviation companies have possessed the most-advanced luxurious, comfortable and rapid large-type and middle-type passenger planes in nowadays world; The structures of plane type in airlines have changed a lot: the condition of plane group taking Soviet Union System as the primary has been improved-transport plane group with reasonable structure and first-class equipment taking the two series of American Boeing and the European Air passenger train as the primary and the home-made planes as the sideline has been formed; Airports, the modernized-level control and management of air traffic and other supplementary facilities and equipment has been promoted by a large margin: the percentage of the airports that can accommodate and guarantee the air type of Boeing 737 or over take off and land under the various weather condition is over 50%, and the handling capacity of passengers and freight has been increased greatly. From the aspect of "software", we can see that because the competition system has been introduced, and each Airlines takes the improvement of service quality as the important content of strengthening popularity, of promoting competitiveness and economic benefit, the general level of the service on the ground and in the plane are increasing year by year. As a component of our comprehensive transportation system, aviation transportation has become an indispensable strength from its supplementary position, and it is becoming more and more important in our reform and open policy and the construction of socialist modernization.

IV. After 2001, the reform on China civil aviation system is deepening

With the establishment of socialist market economy system, the changes of supply and demand relationship and day-by-day furious competition in international market, some deep-level contrasts and problems in our management system and operation system of civil aviation have appeared step by step. The major manifestations are: management of profession and the management of the assets' possessors have not been completely separated; the arrangement of the transportation capacity is scattered; the large-number and small-scale airlines are not standardized. In civil airlines and airports, the liabilities rates are high, the foreign debt is heavy, the system is inflexible and the benefit is low. All those problems have restrained the development of civil aviation industry-especially, our civil aviation industry can not adapt to the requirement of improving the socialist market economy system, to the demand of furious competition of international aviation industry after we entered WTO, so it is urgent task for us to deepen the reform on civil aviation system.

All these contrasts and problems have made an appearance in 1996. And according to this, CAAC organized a large ranks to make thorough research and investigation and repeatedly verifications to search a right way of deepening the reform on China civil aviation, and put forward the primary program for deepening the reform on China civil aviation. In 2002, the State Council assigned National Planning Committee, Financial Ministry, Ministry of Public Security, system reform office, research center of economic development and other sections, to make further verifications, study and investigation together with CAAC. At the same time, the discussions and consultations over combination and reorganization have been carried out among aviation companies. On March 3rd, 2002, the State Council approved "Reform Program of Civil Aviation System". And the deepening reform on China civil aviation began to be implemented.

1. The guiding ideology of the reform

Under the guiding of Deng Xiaoping's theory and the ideas of the "three represents" of the general secretary-Jiang Zemin, the implementing the spirit of the 15th the Central Committee of the CPC (CCCPC) and the forth Plenum of the 15th Central Committee of the CPC, according to the central authorities' general arrangement of perfecting socialist market realized the separation of industry management and the possessors of assets, overcome the over-scattered distribution, standardize the market competition, bring the new civil aviation system qualified for the requirement of socialist market economy, guarantee the normal operation of flight and transport production and promote the healthy development of China civil aviation industry, serving for the modernization drive and for the public.

2. The major goal of the reform

Separate the industry management from the management of assets' possessors, and transform the government functions; Reorganize the assets and optimize the equipment; Break the monopolization, and encourage competition; Strengthen the supervision and control, and guarantee the safety; Transfer the airports to a lower power and carry out the possession management; Promote the benefit, and improve the service.

(1) Reform the administrative and subsidiary relationship of China civil aviation enterprises, realize the separation of enterprises from the administration of business executive department of government, and set up independent operation of enterprises, the supervision and control of government within the limits of the law and operation system of civil aviation with the normal and orderly competition.

(2) Reorganize the civil aviation transportation enterprises and civil aviation resources, carry out the stock transformation, clarify the relationship of property rights, improve the management structure of legal entity, set up modern enterprise system, transfer the operation system of enterprises, and form several large aviation transformation enterprise groups with international competitiveness.
(3) Implement possession management in airports, arouse the local government's enthusiasm for developing civil aviation industry further, realize the sharing over airport resources and the enterprise operation, and reform the management system which is favorable for the development and construction of the airports.

(4) Transform the management function of government, improve the laws and regulations, strengthen the management and control of China civil aviation industry, establish the double-level management system of China civil aviation industry with small but competent organizations and high-efficiency operation and centralizes and integrated management system of safety and air traffic of China civil aviation.

3. The major contents of the reform

(1) Reorganize and combine the aviation transportation companies

Reorganize and combine the aviation companies that are directly under CAAC to form 3 large aviation group companies. The government encourage other airlines to combine and reorganize as new aviation group companies or join the 3 large aviation group companies or develop independently, on the basis of voluntary and according to the requirement of establishing modern enterprise system.

Taking AIR CHINA as the principal part, and combined with China National Aviation Airlines and China Southwest Airlines, we set up China National Aviation Holding Company. After the establishment of the group company, we retained the name of AIR CHINA, separated the major business from the sideline business of the three combined parties, transferred the major business of aviation transportation and the relevant assets to AIR CHINA, use the integrated sign of AIR CHINA and have finished the integration of major transportation business; And the separated reorganization of sideline business is managed by the group company.

Taking Eastern Airlines as the principal part, annexing China Northwest Airlines, Combined with Yunnan Airlines, we set up China National Aviation Holding Company. After the establishment of the group company, we retained the name of China Eastern Airlines Co., Ltd, separated the major business from the sideline business of the former China Northwest Airlines and Yunnan Airlines, transferred the major business of aviation transportation and the relevant assets to China Eastern Airlines Corporation limited, use the integrated sign of China Eastern Airlines, and have finished the integration of major transportation business of the group company; The separated reorganization of the sideling business is managed by the group company.

Taking the Southern Airlines Company as the principal part, combined with China Northern Airlines and China Xinjiang Airlines, we set up China Southern Airlines Company Limited. After the establishment of the group company, we retained the name of China Southern Airlines Co., Ltd, separated the major business from the sideline business of the former China Northern Airlines and Xinjiang Airlines, transferred the major transportation business and relevant assets to China Southern Airlines Co., Ltd, use the integrated sign of China Southern Airlines Co., Ltd, and have finished the integration of the major transportation business of the group company; The separated reorganization of the sideline business is managed by the group company.

(2) Carry out the possession management in airports

According to the principle of separating the functions of the government from those of the enterprises, and the principle of possession management, we carried out the reform on the management system to the existing 129 civil airports (there are 89 airports directly under CAAC, 35 airports under the local management and 5 airports managed both by the local authorities and China civil aviation).

The airports directly under CAAC were transferred down to the provincial (region, city) aviation administrations where they located, and the relevant assets, liabilities and personnel were all transferred down. The civil airports and civil-military airports under the combined management of CAAC and local government, and the assets, the liabilities and relevant personnel belonged to CAAC were all transferred down to the province (region, city) where they located. After the airports have been transferred down to the lower power, principally we should establish airport-management company which takes the province (region, city) as the unit and carry out the enterprise operation.

In view of the importance of Beijing Capital International Airport, the Capital Airport is managed by CAAC. However, the separation of the functions of the government from those of the enterprises and the enterprise operation must be carried out in Beijing Capital International Airport. And the civil airports in Xizang Region are still under the management of CAAC.

After the airports are transferred down to the province (region, city), the transferred airports should accept the possession management of CAAC, act in accordance with the rules, laws regulations and technology standards of the construction of civil airports, of the integrated management and operation formulated by our country, make the construction and the operation of the airports be in agree with the national policy and the development program of civil aviation industry, and assure the airlines they will provide guarantee service safely and fairly.

(3) Reform the management system on air traffic

According to the principle of centralization and integration of management, we reform the management system on air traffic and set up the management system of air traffic combining CAAC, local aviation administrations and the center (station) of airport air management. The air management system is managed as an institution.

Air aviation administrations of CAAC carried out the integrated direction to national civil aviation management and control of air traffic, and carried out integrated management to program, standards, type selection of equipment and personnel training of air traffic management. Regional air-traffic aviation administrations charge the direction and the management of the flight activities in the air territory of the regions. Each center (station) of airport air management implements the direction and the management over the flight activities in the air territory of the center (station).

The control of towers of branch-airline that is not responsible for the regional control is charged by the airports where the towers located, and in business, the towers should accept the integrated direction and management of civil aviation air-management section.

(4) Reorganize the civil aviation service guarantee enterprises

Taking the computer-information center of civil aviation as the principal part, absorbing the whole body of accounting center of into Computer Information Center of Civil Aviation, we set up China Aviation International Group Company. After the establishment of the group company, we transferred the major business and relevant assets of the accounting center to China TravelSky Holding Company according to the norms of listed companies at the right time. The group company should provide aviation companies airports agents, both at home and abroad with fair electronic retail, information of leaving and reaching the ports, and clearing accounts and other services.

China Aviation Oil General Company has been reorganized as China Aviation Oil Holding Company. China Aviation Oil Holding Company should separate the major business from the sideline business: the major business and the relevant assets have been reorganized as the limited company in which the group company hold stock rights and the three major aviation group companies purchase shares, and the limited company absorbs domestic petroleum enterprises and petrochemistry enterprises to purchase shares, realizing the sharing of benefits and the bearing of the risks of proceducers, suppliers, sellers and final customers; the separated reorganization of sideline business is managed by the group company.

Open the aviation oil market step by step, and bring in the system of competition. Permit the qualified suppliers of aviation oil in our country to get contract of aviation oil supply by tender and public bidding or consulting with aviation companies. Permit the qualified enterprises to finance in oil business, forming orderly competition of aviation oil supply and financial market. The facilities of oil supply in airports provide the supplies with permitting qualification with undiscriminatory use-service, and implement the institution of market permission and compensated use.

CAAC charges the formulation of regulations of aviation oil enterprises' market permission and construction norms of oil-supply facilities.

Reform the system of price formation of aviation oil-the transformation from the government fixes the price to market forms the price step by step.
China Aviation Equipment Import and Export General Company has been reorganized as China Aviation Supplies IMP. & EXP. Group Corporation. The group company separated the major business from the sideline business. The former major business and relevant assets has reorganized the stock-holding by the group company, and reorganized the shared-purchasing by the three aviation group companies and other aviation companies, realizing the sharing of benefit and baring of risks of aviation equipment import and export enterprises and customers.

(5) Reform the public security system of civil aviation

As the posted organization of Ministry of Public Security, the public security administration of CAAC will still leaded by CAAC and the Ministry of Public security constantly. The public security organizations of civil aviation regional management administrations are posted by the public security administration of CAAC and the outlay of public security in the airports are studied by the ministry of public security, central edit office, financial ministry and CAAC specially, and the promoted program would be reported to the State Council to be approved and examined.

In order to strengthen the anti-hijack work, the newly-organized civil aviation air police posted by CAAC to the aviation companies is managed both by the public security administration of CAAC and the aviation Companies.

(6) Reform the system of civil aviation administrative management.

According to the characteristics of transprovincial and transregional operation, we transform the three levels--CAAC, regional aviation administrations and provincial (region, city) aviation administrations, to double level-CAAC and regional aviation administrations. We have retained the Northern, Eastern, Southern, Southwest, Northwest, Northeast and Wulumuqi regional aviation administrations, charging the management and supervision of civil aviation business in the jurisdictional regions, and revoked the existing 24 civil aviation provincial (region, city) aviation administrations.

As the management organization of civil aviation industry of the State Council, CAAC will not represent the functions of the state-owned assets' possessor of the six group companies and the transferred airports, and will be in charge of the management of safety, market and air traffic, the macro-control and foreign relationship and so on. The contents of the functions are: draw up the management laws and regulations of civil aviation industry formulate the regulations and policy of business management and the safety and technology standard of civil aviation; implement the management and supervision of safety of civil aviation activities according to the laws like "Civil Aviation Law of PRC", regulations and rules and standard of safety and technology; guarantee the flight safety and air defence safety; hold the investigation of essential flight accidents and participate in the investigation of extra-large flight accident; manage and supervise the market of aviation transportation, and sustain the fair competition; implement the management of air traffic; guarantee the flight of special planes; formulate the general program of the development of civil aviation industry, and carry out the macro control of civil aviation industry; settle the civil aviation affairs associated with foreign countries as the representatives of our nation; be responsible for the other work assigned by the central Party and the State Council.

The major function of civil aviation regional aviation administrations are: carry out and perform the national laws and regulations and the management rules, standards and institutions of the industry issued by CAAC; put forward the development plan of the regional civil aviation; supervise and manage the safety and market of aviation activities of the jurisdictional regions; assure the flight safety and air defence safety; hole the investigation and settlement of common aviation accidents in the jurisdictional regions. When the personnel of the regional aviation administrations of civil aviation have been reduced, the aviation administrations would be brought into the line with administrative system.

According to the requirement of safe management and different business amount of civil aviation, the regional aviation administration of civil aviation has set up small but competent and high-efficiency supervision and management offices of civil aviation safety to represent the regional aviation administration. The newly-founded supervision and management offices charge the supervision of safety and market management of aviation companies, airports and other issues associated with the civil aviation enterprises' operation of the province (region, city).

Reorganize and adjust the supplementary-business sectors possessed by the existing CAAC. CAAC can possess the necessary scientific research institute of civil aviation. The other sectors related to the design, consult and other supplementary business should break off relations with CAAC and health sectors should be settled according to the relevant regulations of the reform on education and health sectors after they break of f relations with enterprises of education ministry and health ministry.

After the State Council approved the "Program of the Reform on Civil Aviation System", under the direct care of the State Council's leaders, with the support and help of the relevant ministries and commissions of the central authorities and State Council, and after the scrupulous program and overall arrangement, CAAC has been carried out the "Program of the Reform on Civil Aviation System" step by step.

On the 11th, Oct. 2002, the establishment of China National Aviation Holding Company, China Eastern Airlines Corporation Limited, China Southern Airlines Company Limited, China TravelSky Holding Company, China Aviation Oil Holding Company and China Aviation Supplies IMP. & EXP. Group Corporation were proclaimed.

Through the combination and reorganization, our aviation transportation industry will form the enterprise structure taking the three major group companies as the principal part, which is good for standardizing the competition activities of market; Through the combination and reorganization, the three group companies are of relatively large scale and strong power, which is good for promoting international competitiveness and fighting for the initiative in the international competition market; Through the combination and reorganization, the optimized allocation of the existing assets, transport capacity, airlines, flight numbers, market web, manpower and other resources of the enterprises have been achieved, which is good for reducing the cost of the operation; Through the combination and reorganization, the enterprises have been establishing the modern enterprise system-distinct property rights, clear rights and responsibilities, clear separation of the functions of the government from those of the enterprises and scientific management, which is good for the long-period and stable development of the enterprises; Through the combination and reorganization, the enterprises have been standardizing the competition, reducing the cost and strengthening the management, which is good for providing high-quality and reasonable-price products and service for passengers and customers.

Besides the three major airlines, we have 22 local government-owned, central authorities and local government joint-fund and Sino-foreign joint-fund airlines in total. And among these 22 airlines, there are 14 companies' stock rights are held or purchased by the three major airlines, and 4 companies' stock rights are held or purchased by Hainan Airlines. The government encourage and support these airlines to be combined or reorganized as new airlines or join the three major airlines or develop independently on the basis of voluntary and on a voluntary basis.

4. Deepen and improve the reform on civil aviation system further

After the six group companies have been founded, according to the State Council requirement, CAAC will keep a firm hand on the organization reform of regional aviation administrations of civil aviation and provincial (region, city) aviation administration of civil aviation constantly, promote the reform on management system of airports, keep a firm hand on the reform of public security organization of civil aviation, and keep a firm hand on the various supplementary reforms.

After the establishment of the six group companies, at the same time of assuring the flight safety and normal operation, CAAC will carry out the reorganization of functions, organizations, personnel, assets, liabilities, transport capacity, airlines and flight numbers and market web, implement the creation and transformation of management theory and enterprise culture, set up and improve the modern enterprise system, which is to be a arduous and heavy task. CAAC will direct and help the six major group companies to keep a firm hand on the reorganization partially or wholly.

In the next year, China civil aviation will finish the major task of the reform on the system basically. In the next two years, the internal reorganization of the six group companies will be basically finished: the whole body of civil aviation industry will transfer the government's functions, improve rules and laws, strengthen the supervision and control of the civil aviation industry, and set up the double-level administrative-management system of small but competent and high-efficiency organizations through 2-3 year arduous work; keep a firm hand on the construction of modern enterprise system, transform the operation system of the enterprises, and form several large aviation transportation enterprises and aviation transportation service guarantee enterprises; form a management development system of the airports' construction financed by the central authorities, local government and all walks of life and managed by the enterprises, and establish several aviation ports with international competitiveness; set up normal ad orderly system of market competition; promote the level of safety guarantee, improve the quality of service, and provide high-quality and reasonable -price products and service for the passengers and customers.

Deepening the reform on civil aviation system is the practice for implementing the spirit of the CCCPC and the 4th plenum of the 15 Central Committee of the CPC, and is also an important measure for civil aviation industry to practise the ideas of Jiang Zemin's "three represents". Besides, it will promote the development of China civil aviation industry to enter a new period, and promote the transformation of China civil aviation to world powerful nation of civil aviation from world leading power of civil aviation. Under the cordial care and direct leading of the Central Party Committee and the State Council, the staff and cadres of each level in civil aviation industry will emancipate our mind further, seek truth from facts, grow up with the time, explore and create new things, promote the continuous, rapid and healthy development of civil aviation industry by all means, and make greater contributions to our reform and open policy and socialist modernization drive all-around in the new century.