ABSTRACT
The transport sector is one of the largest sectors in the Chinese economy, and aviation is the fastest-growing of all the mainland's transportation modes. The annual growth rate of civil aviation averaged over 18% during the period from 1980 - 98 while the annual growth rate of all modes of transportation averaged only 8.9%. China's aviation industry was founded in the early 1950s. Air travel was necessary for government administration, trade and tourism. However, before 1979, the airline business was not so much an industry but a paramilitary organization. At the end of 1992, the State Council authorized the formation of 55 corporate mega-groups that would form the core of a new phase of China's economic development. These groups were given a high degree of autonomy, including rights to manage their own finances. Air travel is a service industry, and as a consequence competition between firms may be in terms of both price and non-price attributes.
