International Routes Will Be Exempt From Business Tax.

China Air China (601111.SH) 6 announced that although the official notification was not received, according to the joint circular issued by the Ministry of Finance and the State Administration of Taxation on the exemption of business tax on international pport services, the company's international airline revenue in 2010 will be exempt from business tax.

Once the policy is formally implemented, it will become a major positive news for airlines.

The notice stated that "since January 1, 2010, the international tax service provided to the units or individuals in People's Republic of China has been exempted from business tax".

Air China said that in accordance with the spirit of the notice, based on the actual international and regional airline revenue (excluding fuel surcharge income) that occurred in 2009, according to the comprehensive tax rate of about 3.21% (including business tax, urban maintenance and construction tax and education surcharge), this policy will reduce the company's business tax and additional expenditure by about 549 million yuan in 2009.

The "four vertical and four horizontal" high-speed railway network, which will be completed in 2012, has caused significant impact on some short haul routes.

The top three state-owned airlines have said before that the next step will be to increase investment in international routes.

However, the advantages of foreign airlines in terms of brand and service make China Airlines have no obvious competitiveness in running international routes.

The implementation of this policy will greatly help airlines expand international routes and restructure their strategic direction.

At present, the international airline accounts for a larger proportion of the airlines. The proportion of Air China's international routes is about 40%, and the East China Airlines account for less than 30% of the international routes. The proportion of China Southern Airlines international routes is about 15%.