Chongqing-based China Express Airlines reported a 2018 first-quarter net profit of CNY82.3 million ($13 million), up 6.3% compared to net income of CNY77.4 million in the year-ago quarter.

Operating revenue jumped 35.4% year-over-year (YOY) to CNY991.3 million against a 43.5% YOY increase in operating expenses to CNY798.3 million.

The regional carrier credited its business scope expansion and continuous domestic market demand growth as main reasons for the results.

However, industry analysts pointed out government subsidies also played a role as Chinese domestic carriers are collectively experiencing financial difficulties on regional route operations because of higher operating expenses, lower load factors and more taxes.

China Express, which received CNY105 million in government subsidies from January to March, did not release traffic figures for the quarter.

Launched in 2006, China Express became the first Chinese regional carrier to launch an initial public offering in March to buy six Bombardier CRJ900 aircraft and three engines, as well as build a flight training center.

China Express also signed codeshare and special-pro-rate (SPA) agreements with China’s major carriers to provide regional services on major trunk routes. In addition, the carrier is committed to establish more secondary regional hubs in less-developed West China to attract more regional traffic since most Chinese trunk airports have slot shortages, according to China Express VP Luo Tong.

As a result, in April China Express set up an overnight base at Xinjiang’s Korla Airport as its secondary regional hub, from which it is expected to launch 11 new services to different cities within the Xinjiang region. The carrier also plans to adopt similar practices in the Guizhou province and the Inner Mongolia region.

In the 1Q, the carrier introduced two Bombardier CRJ900s, which expanded its fleet to 37 aircraft operating on more than 80 domestic destinations. By 2020, China Express plans to introduce more narrowbodies and expand its fleet to 66 aircraft, comprising 50 CRJ500s and 16 Airbus A320s.

Looking forward, China Express estimates its net profit will fall between CNY130.8 million and CNY196.3 million in the first half of 2018.