“However, as with any regional domestic carrier’s viability, it requires government subsidies to remain economical and the impact it has on local communities.”

And while subsidies in aviation are not uncommon, in China, local governments are much more active, including airline ownership.

Regional carrier Joy Air has filed three lawsuits since the start of the year against three local governments – two concerning overdue subsidies – according to filings with the People’s Court of Weicheng district in the city of Xianyang, Shaanxi province, on March 15.

03:44

China’s home-grown passenger jet C919 celebrates first anniversary of maiden flight

China’s home-grown passenger jet C919 celebrates first anniversary of maiden flight

Joy Air claimed Tianshui Maijishan Airport had not met its contractual obligations to pay 3.14 million yuan (US$433,000) in subsidies for flying a route between Xian and Tianshui, a city in China’s northwestern Gansu province, between 2016 and 2018.

The two parties had signed an agreement in March 2016 that Joy Air would initiate the route, with the airport assuming the obligation to pay for the operating expenses.

Another case filed by Joy Air claimed Qiannan Libo Airport only partially paid subsidies to operate a route between Changsha, the capital of the central Hunan province, and Libo, a county in the southern Guizhou province, in 2018.

In September 2020, the Libo County Culture, Radio, Television and Tourism Bureau promised in a letter that it would repay the outstanding 800,000 yuan in a series of instalments, but Joy Air claimed it never received any payments.

On April 10, Joy Air filed another lawsuit against both the Airport authority and Development and Reform Commission of Alxa League and the Inner Mongolia autonomous region, although the exact details were not disclosed.

Joy Air had flown a route from Xian to Alxa Left Banner Bayanhot Airport and Ejin Banner Taolai in Inner Mongolia, although the last flight by JR1513 was flown in October 2021, according to Chinese flight data provider VariFlight.

Joy Air and the Development and Reform Commission of Alxa League did not respond to faxed questions over the details of the lawsuit.

Official data does not indicate the amount of subsidies local governments have provided to regional airlines, but analysts said small state carriers like Joy Air are highly dependent on government allowances, with the local governments named in Joy Air’s lawsuits among the most indebted in China.

According to the Ejin Banner government in September 2023, citing Zhang Guangyu, deputy director of the Railway and Aviation Centre of the Inner Mongolia Autonomous Region Development and Reform Commission, the local government had spent 225 million yuan (US$31 million) on subsidies to cover the operation of regional flights throughout the summer and autumn in 2023.

Another regional airline, the Chongqing-based China Express, which offers connections between secondary hubs at airports in Guiyang, Dalian, Hohhot, Xian and Xinjiang, continued to post losses in 2023, although they had narrowed from 2022 and 2021.

Rashi Lal, senior industry analyst at the Economist Intelligence Unit, said subsidies have been extended to support the opening of routes domestically and globally following the end of the coronavirus pandemic in 2022.

And as of the end of 2023, subsidies had contributed to 515 new domestic routes, Lal estimated.

“Subsidies have led to a considerable increase in driving flight demand and setting up new air routes and for better services to airports in remote areas,” Lal said.

But critics have said local governments’ hefty presence has been detrimental to the aviation industry.

At the “two sessions” annual parliamentary meeting in March, Ma Chongxian, chairman of state-owned Air China, told delegates that local governments control more than 30 airlines in China.

As such, it has often led to overlapping of resources and “disorderly” competition, which affected the overall development of the aviation market, Ma said.

Ma advocated for guidelines to regulate and clarify the scope of local government subsidies, according to an article from the Chinese People’s Political Consultative Conference magazine in March, citing comments he made at the National People’s Congress in Beijing.

And for the ARJ21 to succeed, Comac needed to work closer with airport operators to use the regional jet to connect with larger hubs, Zhang said.

“Domestic airports favour international routes, trunk routes and mainline passenger planes and have fewer resources for regional routes and regional aircraft,” said Zhang in a commentary published by Comac in March.

He added that even if the ARJ21 was suitable to fly within Inner Mongolia, more than half of the airports are not equipped to support the regional aircraft.

China is building an average of 10 airports a year for commercial use, with the goal of lifting the total to 400 by 2035, with many designated for regional aircraft, according to Zhang.

Addison Schonland, co-founder of AirInsight, believes while China’s regional air travel would become more mature, it does not necessarily mean Comac’s investment in the ARJ21 would pay off.

“The ARJ21 is not going to be a great success because it’s too heavy and is eclipsed by better models like the Embraer E175. The ARJ21 sells because China wants it to,” said Schonland.

“For Comac, this especially is a problem because of the Western equipment needed for assembly.

“Being so much smaller than the Western competitors, they have to wait in line. Avionics and engine suppliers focus on their biggest customers first.”