China aims to fly higher with turboprop aircraft.

China has made substantial progress toward its ambition of gaining a larger share of the world's turboprop aircraft market following the debut of a fuel-efficient new regional aircraft at the end of last month in northwest China.

China's latest turboprop passenger aircraft, the Xinzhou 600, or Modern Ark 600 (MA600), rolled off the assembly line of China Aviation Industry Corp. 1 (AVIC1) in the city of Xi'an on June 29.

Comparable to Canadian firm Bombardier's Q400 and the French ATR aircraft, the 60-seat MA600 is an improved version of the 50-60 seat MA60 that is in service mainly in Africa and Southeast Asia.

Turboprop aircraft are designed for short-haul or mid-range commuter flights lasting two to four hours. They usually carry between four and 70 passengers depending on the plane's size.

China's aviation market has developed fast, but its fleet structure is lopsided, with short-haul and mid-range aircraft accounting for 12 per cent of the total and long-range planes often used for regional flights.

At present, about 75 per cent of China's air routes carry fewer than 160 passengers per day, making it proper to boost short-distance regional air transport among small and medium-sized cities.

"Most of China's regional air routes are about 600 kilometres, or a one-hour flight. They are ideal territory for regional aircraft like MA60 and MA600," said Chen Fusheng, deputy director general of AVIC1's commercial aircraft department.

AVIC1 started to develop MA600 in the second half of 2005, said He Shengqiang, chief engineer and vice-president of Xi'an Aircraft Industry Company Ltd., under AVIC1.

The MA600 is set to begin trial flights in September, said He Shengqiang. It will be delivered next year to its first customer – the China Civil Aviation Flight University in Sichuan Province.

The MA600 production is planned to reach an annual capacity of 10-15 planes by 2010-2012, and an annual capacity of 30 planes after that, said Chen Fusheng.

He Shengqiang predicted that the world market could provide demand for more than 300 and the domestic market between 120-150 MA600 planes in the next 10 years.

"To assure a bigger slice of the turboprop market, the MA600 is designed to meet demand for the next 10 years," said Chen Fusheng.

"Compared with turbo-fan aircraft from Bombardier's CRJ and Brazilian ERJ, MA600 turbo-prop regional aircraft consumes one third to two fifths less fuel," said Lu Hai, chief architect of MA600.

The fuel-efficient quality is attributed to a major improvement in structural design, making MA600 about 300 kilograms lighter than its predecessor MA60.

Fuel consumption amounts to about 30 per cent of the direct operation costs of regional flights. Turboprops, with an obvious fuel-saving capacity, have huge potential in the era of soaring oil prices, Chen said.

An MA60 and MA600 aircraft sells at $14 million to $15 million, competitive to same type of aircraft from Europe and the United States that costs $18 million to $20 million. And the operating costs of MA60 and MA600 are 10 per cent to 20 per cent lower than foreign counterparts, making it possible to lower ticket prices.

In addition to the structure improvement, engineers have optimised the MA600's aviation electronics system, upgraded its interior and added maritime survival functions for island countries, said Meng Xiangkai, President of Xi'an Aircraft Industry Company Ltd.

Microsoft backs Icahn to oust Yahoo board

Microsoft Corp. threw its weight behind investor Carl Icahn's effort to dump Yahoo Inc's board, saying Monday that a successful shareholder rebellion would encourage the software maker to renew its bid to buy Yahoo's Internet search engine or possibly the entire company.

The unexpected endorsement gives Icahn a carrot to dangle before Yahoo shareholders as he wages an acrimonious campaign to replace Yahoo's nine directors at the company's annual meeting Aug 1.

It marks the first time that Microsoft has publicly sided with Icahn since the billionaire investor launched his attempted coup nearly eight weeks ago.

The two sides decided they could work together after Icahn held 'frequent' discussions with Microsoft Chief Executive Steve Ballmer and some of his top lieutenants during the past week, according to a letter that Icahn sent Monday to Yahoo shareholders.

Industry analysts said Icahn now has more credibility with Yahoo shareholders because he has been arguing that a purge of Yahoo's board is the only way to salvage a deal with Microsoft.

"This breathes new life into Icahn's proposal," said Stanford Group analyst Clayton Moran. "It really pushes the power to Icahn and his board (nominees)."

The prospect that a changing of the guard at Yahoo might pave the way to a friendly deal with Microsoft lifted Yahoo shares $2.56, or 12 per cent, to finish Monday at $23.91.

Echoing previous remarks in its battle with Icahn, Yahoo questioned Microsoft's interest in buying the entire company.

"If Microsoft and Ballmer really want to purchase Yahoo, we again invite them to make a proposal immediately," Yahoo said.

But Icahn said Microsoft doesn't want to risk making a bid under Yahoo's current regime, because the software maker fears Yahoo's management would make more poor decisions during an antitrust review that would take at least nine months.

"If the current board and management team of Yahoo mismanage the company (and their recent track record is far from reassuring), Microsoft would be putting its money at risk and a great deal could be lost," Icahn wrote in his letter to shareholders.

Microsoft's willingness to work with Icahn undermines one of Yahoo's chief arguments for re-electing its board.

Yahoo has maintained that it would be foolhardy to back Icahn's slate of alternate nominees because Icahn had no concrete ideas besides selling the company to Microsoft -- something that Yahoo has been depicting as a pipe dream since Microsoft withdrew a $47.5 billion offer in early May.

Microsoft reinforced that perception by refusing to revive its bid last month even after Yahoo's board signaled its willingness to accept the earlier offer.

With Microsoft in Icahn's corner, 'the dynamic has changed', Sanford C Bernstein & Co analyst Jeffrey Lindsay said. "There is now a rationale for voting for Icahn's board because there now seems to be a real possibility for a deal again."

Monday's turn of events amplifies the pressure on Yahoo co-founder and CEO Jerry Yang, whose handling of the earlier negotiations with Microsoft infuriated many shareholders.

Yahoo's stock price had plunged by more than 30 per cent to fall below $20 during Yang's first six months as CEO. Then, in January, Microsoft raised hopes for a quick windfall with its unsolicited takeover bid, only to be repeatedly rebuffed.

If he seizes control of the board, Icahn has promised to fire the 39-year-old Yang as CEO and replace him with a more seasoned leader.

Yang has been meeting with Yahoo's major stockholders during the past week, hoping to persuade them to give him a chance to prove the Sunnyvale-based company is worth more than the $33 per share that Microsoft previously offered.

Ballmer withdrew that bid after Yang sought $37 per share -- a height the stock hasn't reached in 2-1/2 years.

In its Monday statement, Microsoft didn't mention how much it thinks Yahoo is worth now.

Industry analysts estimated Microsoft would likely pay anywhere from $28 to $33 per share if it takes another stab at swallowing Yahoo whole.

"Microsoft is still asking Yahoo shareholders to make a big decision with incomplete information," said Standard & Poor's Internet analyst Scott Kessler. "I could still see a scenario where the Yahoo board is replaced and Microsoft comes in with a bid that is lower than people want. Then what do you do?"

Microsoft more recently has been trying to pry away Yahoo's search engine for $1 billion, plus an additional $8 billion investment for a 16 per cent stake in Yahoo's remaining operations.

Yahoo instead opted for an online advertising partnership with rival Google Inc. that is supposed to boost its annual revenue by $800 million. That alliance faces an antitrust review by the US Justice Department because Google and Yahoo combined control more than 80 per cent of the US search advertising market.

In its Monday statement, Yahoo asserted Microsoft is trying to use Icahn to engineer a purchase of Yahoo's search engine in a deal that would hurt the company in the long run, by hindering its ability to compete in the Internet's rapidly growing ad market.