Flying high with Hainan

Editor's note: Alexandr Svetlicinii is an associate professor of law at the University of Macau, where he also serves as program coordinator for the Master of Law in International Business Law in (English) program. The article reflects the author's opinions and not necessarily the views of CGTN.

On June 1, 2020, the Chinese authorities issued a master plan for the construction of the Hainan free trade port. It contains a number of measures aimed at further opening-up this tropical island province to international trade and investment, taking into account Hainan's strategic positioning in the South China Sea at the crossroads of international maritime routes.

Besides building a modern free trade port, the master plan provides for the development of the services industry, tourism, high tech and several other sectors, which are expected to attract a high number of visitors and foreign talents to Hainan. The need to facilitate the free movement of persons prompted the introduction of the visa-free policy for tourists from certain countries and the plans to facilitate the residency policy and simplify immigration clearance formalities.

The master plan addresses this expected increase in the number of travelers to the island with the initiative to develop Hainan into a "free and convenient transportation reform hub." In the absence of the land connection with the Chinese mainland, this increase in the number of visitors will have to be handled by the aviation industry.

The plan envisages the promotion of the "third, fourth and fifth freedoms of the air" based on the bilateral agreements concluded by China with third countries. This implies the opening of scheduled air routes between airports in China and the partner country, as well as using each other's airports for stopovers to and from a third country. These flights will be opened on the basis of reciprocity enshrined in the bilateral civil aviation agreements concluded by China with a large number of countries.

The plan also provides for the introduction of the pilot program allowing "seventh freedom" flights from Hainan airports. This means that a foreign airline can be granted permission to operate scheduled flights between Hainan and a third country. The subsequent guidelines of the Civil Aviation Administration of China specified that "seventh freedom" flights will be limited to seven flights per week for scheduled passenger or cargo routes between an airport in Hainan and an airport in a third country.

The above measures should be considered in the context of the current developments in international civil aviation. Notably, the recent exponential growth of the Chinese aviation market has been primarily in the domestic segment. According to the Official Airline Guide, the number of airline seats has risen from 320 million in 2008 to 802 million in 2017, and it is expected that China will replace the U.S. as the world's largest aviation market by 2022.

When compared to the U.S. (23 percent) and the EU (84 percent), China's international aviation segment (10 percent) retains ample potential for further growth. The increase of the international air routes network in China has been prompted by the unveiling of the Belt and Road Initiative in 2013, which saw substantial investments in the logistics infrastructure, including the construction of the new and expansion of the existing airports that can handle international flights. The opening of the new international air routes from Hainan will further contribute to this process.

Currently, Hainan Province operates two international airports: Haikou Meilan Airport (HAK), 17th in China by passenger traffic in 2019, and Sanya Phoenix Airport (SYX), 23rd by traffic. The Qionghai Boao Airport (BAR) currently receives only domestic flights. The introduction of "seventh freedom flights" will further enhance the Hainan's international connectivity and introduce more competition in the island's civil aviation market.

The deregulation of China's aviation industry in the 2000s and increased competitiveness on the global market saw the consolidation of the state-owned airlines and the entrance of new market players – private airlines. The most notable example is Hainan Airlines, which opened its first international route connecting tropical holiday destination Sanya with South Korea's capital Seoul. Recently, Hainan Airlines added Moscow and Sydney to the network of its international routes operated from Haikou.

The opening up of Hainan's aviation market will also allow airlines to test their hub-and-spoke models by connecting Hainan's airports to regional transportation hubs, such as Guangzhou, Hong Kong, Singapore, as well as the point-to-point model, which would entail direct flights to Hainan from the airports around the world, which is already the model for seasonal flight to Sanya Airport.

On June 13, 2020, during the signing ceremony for the first key projects of the Hainan free trade port, it was announced that China Eastern Airlines and its partners, including Hainan Province Transport Investment Holding Co Ltd, Sanya Development Holdings Ltd, Juneyao Airlines and Trip.com Group, will set up a new international airline Sanya International Airlines.

It is expected that with the resumption of international air travel following the COVID-19 outbreak, the foreign carriers will follow suit.