Chicken Farm Did Well, so Chinese Village Tackles Airline

EVERYWHERE, Tang Yusan, Communist chieftain and capitalist mastermind of the village of Dongmotang, met disbelief and skepticism. Local party conservatives were opposed. Aviation officials in Beijing had doubts. Even worried parents of stewardesses recruited by the new carrier posed that nagging question: "Can farmers run an airline?"

But Mr. Tang, a village science teacher turned wheeler-dealer, prevailed.

Through bravado, bribery, bootlegging, and boosterism, this once dirt-street village has become a bustling hamlet and yesterday launched a self-styled farmer airline to carry passengers and cargo within China.

"We have successfully started and run a chicken farm for export and a railway freight line. So officials were quickly convinced that the village could run a qualified airline," Tang boasts.

Dongmotang is one of those rural rags-to-riches stories that China's economic reformers, headed by supreme leader Deng Xiaoping, love to trumpet. Faced with a mounting rural population, Beijing sees village enterprise as the only solution to rising unemployment in the countryside.

But it was not as easy as the village chief or official propaganda suggests. Indeed, some officials say Dongmotang is taking off into the fast-growing but precarious world of Chinese aviation on a wing and a prayer.

"Even Tang is not confident about the business. They can't predict the future," says an official in the nearby city of Yantai on the Shandong peninsula.

The tale of the farmer airline mirrors the helter-skelter of China's air industry. A key target of economic reform, the state-run Civil Aviation Authority of China (CAAC) was dismantled in hopes of boosting dismal air service and ending the days when CAAC became an acronym for "China's aircraft always crash."

Today, while airlines elsewhere in the world are mired in recession, China's carriers are buoyed by surging economic growth, foreign trade, and tourism, multiplying rapidly to keep pace with 30 percent average annual growth in domestic traffic.

China, which had only 15 Soviet-built commercial airplanes a decade ago, has become one of the world's largest markets for US and European aircraft producers. Last week, Chinese carriers placed an $800 million order with Boeing for 21 small jetliners. With further large orders expected, Western analysts say commercial aircraft could become a key Chinese bargaining chip in sustaining most-favored-nation trade privileges, which come up for renewal by the Clinton administration this June.

But Western observers say Chinese aviation is growing too fast, outstripping the number of trained pilots and other personnel and undercutting safety. Last year, five air accidents in China killed 300 people, one-fifth of all passenger fatalities worldwide in 1992.

Alarmed by the shaky image of Chinese aviation, Beijing tightened safety procedures in February, the first official acknowledgment of the industry's troubles. "The growth in the economy is outpacing the industry's ability to handle this expansion," says a Western analyst.

Into this storm flies Dongmotang, enticed by the glamour of putting the village on the map. Its carrier, called the Yantai Passenger and Cargo Freighter Co. Ltd., is a joint venture with three other Chinese companies, including the regional carrier, China Southwest Airline, which has a 40 percent interest.

It is part of a growing village corporation which, among other enterprises, raises and exports chickens to Japan and built a railway spur to carry its produce to market. In 1992, the village collective earned a 10 percent profit on revenues of $17 million.

The corporation, the brainchild of schoolteacher Tang, has brought an air of prosperity to the village where many of its 2,200 residents live in new houses, work in factories instead of in the fields, and drive cars with telephones down broad boulevards. Residents praise Tang, who gets a monthly salary of about $680, for bettering village life.

But Dongmotang's great leap forward into aviation has been rocky and a bit of a fluke. Nestled among barren hills, across the highway from the Yantai area airport, the village seemed a natural for airline operation.

Or so Tang suggested to a senior Communist elder on an official visit in 1990. When the official agreed and the suggestion was widely publicized, Dongmotang was forced to follow through, officials in Yantai say.

The farmer airline had a false start in September when it flew a Chinese propeller plane to Shanghai. An attempt to lease Russian planes and team up with a company linked to China's Air Force foundered when Tang failed to get Beijing's approval.

Undeterred, Tang won Beijing's clearance by bribing aviation officials and last November struck a a deal with China Southwest Airlines, which was hankering to get a foothold on the fast-growing eastern seaboard. The airline will provide three Boeing 737 jets, pilots, and other technical support for the operation.

But Dongmotang was stuck for cash. Needing to raise 25 percent of the airline's $11 million startup capital, the village struck a deal with smugglers from nearby Korea and spirited 250 Korean cars into China, area officials say.

Emboldened by the village's new status symbol, Tang is talking about starting an international cargo service if the airline is a success. Dongmotang is also building a fuel-storage facility and hotel at the nearby airport, which was recently designated for international service.

"The airline service is a result of China furthering reform," said Tang, who was rushing to catch a plane to Beijing to negotiate a steel plant deal. "It is a symbol of the prosperity of China's rural areas."