[March 19, 2006]

Okay Airways to Lease Boeing 737 Jets

(SinoCast Transportation Watch Via Thomson Dialog NewsEdge)TIANJIN, March 20, SinoCast -- Liu Jieyin, president of Okay Airways Co., Ltd., China's leading low-cost private carrier, disclosed that the company will fulfill the agreement of introducing Boeing 737-300 cargo aircrafts this month. Okay Airways, based in Tianjin, a port city neighboring Beijing, is now negotiating to lease Boeing 737-300 cargo aircrafts. The concrete number and timetable of the aircrafts are not available yet. The jets will be delivered within 2006. A newly introduced Boeing 737-800 passenger aircraft arrived at the Tianjin Binhai International Airport on March 13, 2006, and has been formally put into operation. The Boeing 737-800 passenger aircraft with full economy class can accommodate 175 passengers. Boeing 737-800 is the second jet of Okay Airways. Han Jing, spokesperson of Okay Airways, said in an interview that Boeing 737-800 is more economical and comfortable compared with Boeing 737-900. The company's first aircraft is a little bigger and the operating costs are too high although the seat occupancy reaches more than 80%. Okay Airways is set to bring in the 3rd Boeing 737 aircraft by the end of this month and put it into operation in April 2006. The spokesperson frankly acknowledged that the company would continuously suffer losses although it was set to increase its fleet to three aircrafts by the end of this month and could break even after keeping five jets in operation. Okay Airways will also open the Tianjin-Shenyang Route, the Tianjin-Chengdu Route and the Tianjin-Zhangjiajie Route. The president also disclosed that Okay Airways is now in talks with US FedEx Express, one of global four largest express giants, on cooperation and emphasized that the partnership will be restricted to the business level and not be involved in equity transfer. Okay Airways still wants to hook up with Korean Air on equity transfer and both sides are in negotiation presently, added Mr. Liu. Industry analysts pointed out that Okay Airways and FedEx Express were complementary. Okay Airways hasn't been issued license to open international routes until now although it has owned many regional routes. FedEx Express cannot make inroads into Chinese air cargo transportation market although it has Sino-US navigation right. Currently, the other two private airline carriers in China, United Eagle Airlines Co., Ltd. and Spring Airlines Co., Ltd., respectively have three aircrafts. United Eagle, based in the Chengdu Shuangliu International Airport, will have its fourth passenger aircraft and plans to open the Chengdu-Lanzhou Route. Spring Airlines, headquartered in Shanghai, also plans to increase two or three aircrafts within 2006. The three private airlines are all suffering losses now. Industry experts pointed out that private airlines should invite strategic investors to expand business. However, the carriers seem to have met difficulties in looking for foreign partners. In the second half of 2005, Okay Airways said that the company had reached an agreement with South Korea's biggest airline Korean Air and the latter would buy a stake in it. A source even said that Korean Air, the world's largest freight carrier, would take a 49% stake in Okay Airways and the Tianjin-based airline carrier was set to transfer its core business to air freight, becoming the first private carrier engaged in air cargo transportation. (USD 1 = CNY 8.0379)

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