China’s local government debt woes ground ambitions of regional airlines as overdue subsidies mount up
- Regional carrier Joy Air has filed three lawsuits since the start of the year against three local governments, with two concerning overdue subsidies
- Local governments named in Joy Air’s lawsuits among the most indebted in China
While China’s aviation market is one of the fastest growing in the world, a series of lawsuits against local governments and local-government backed entities this year over millions of yuan worth of overdue subsidies have dampened the ambitions of its regional airlines.
“The importance of regional aviation cannot be neglected as it connects communities across various city pairs, but with rapid growth of high-speed railway across China, this does pose a threat to regional airlines,” said Mayur Patel, head of Asia at OAG Aviation.
“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.
