Avi­a­tion: Room ex­ists for fur­ther ex­pan­sion but growth must be ro­bust, long term

China Daily (Canada) - - FRONT PAGE -

in­no­va­tive ways to cut costs.

The world’s first low-cost air­line was South­west Air­lines Co in the United States, which has been fly­ing since 1971. Spring Air­lines took off in 2006.

The num­ber of Chi­nese low-cost air­lines in­creased from two to six in 2014, al­though most of them were for­merly full-ser­vice car­ri­ers.

They ac­counted for 8 per­cent of do­mes­tic routes in 2014, com­pared with 0.7 per­cent in 2006, ac­cord­ing to the CAPA Cen­ter for Avi­a­tion, a global avi­a­tion mar­ket anal­y­sis firm.

The only new low-cost air­line in 2014 was 9Air Co Ltd, which ran its first com­mer­cial flight on Jan 16. The cheap­est seats cost only 9 yuan and they sold out in­stantly.

Three full-ser­vice air­lines — China Eastern Air­lines Co Ltd’s Bei­jing­sub­sidiary known as China United Air­lines Co Ltd, China Ex­press Air­lines Co Ltd based in Guizhou prov­ince and Chengdu Air­lines Co Ltd in Sichuan prov­ince — adopted the bud­get model in 2014.

Some air­lines, in­clud­ing Cap­i­tal Air Co Ltd, a Bei­jing-based sub­sidiary of HNA Group, and Chongqing Air­lines Co Ltd, a sub­sidiary of China South­ern Air­lines Co Ltd, have adopted the low-cost model in part by re­mov­ing first- or busi­ness-class cab­ins and cut­ting ticket prices, but they don’t call them­selves bud­get car­ri­ers.

Some other full-ser­vice car­ri­ers are now look­ing more closely at the low-cost model.

“Okay Air­ways

is

in­ter­ested

in the low-cost model in the re­gional avi­a­tion mar­ket, es­pe­cially in west­ern China,” Li­uWein­ing, chief ex­ec­u­tive of­fi­cer of Okay Air­ways Co Ltd, told China Daily.

HNA Group, which is the fourth­largest air­line group in China, is tak­ing more rad­i­cal steps.

The group al­ready has two es­tab­lished low-cost sub­sidiaries — West Air andHongKong Ex­press Air­ways Ltd. Its two new joint ven­tures with lo­cal gov­ern­ments — Urumqi Air­lines Co Ltd and Fuzhou Air­lines Co Ltd — also adopt some low-cost strate­gies.

“In fu­ture, all sub­sidiaries of HNA Avi­a­tion Group will work as low-cost car­ri­ers and the group plans to only keep Hainan Air­lines as a flag­ship car­rier pro­vid­ing full ser­vice,” saidWang Ying­ming, ex­ec­u­tive vice-pres­i­dent ofHNA Group.

HNA Group and all the other air­lines in­ter­ested in the low-cost model have been given pos­i­tive sig­nals from the gov­ern­ment.

The Civil Avi­a­tion Ad­min­is­tra­tion of China re­leased a doc­u­ment to pro­mote the low-cost car­ri­ers’ de­vel­op­ment in Fe­bru­ary 2014.

The mea­sures it an­nounced cover six main ar­eas: fleet growth, route and air­port slots ap­pli­ca­tions, ap­proval of star­tups, ser­vice cat­e­gories and low-cost air­port con­struc­tion.

China’s avi­a­tion mar­ket al­ready has the con­di­tions to de­velop low­cost car­ri­ers, saidZhouLaizhen, deputy di­rec­tor of the CAAC. Some progress has been achieved, al­though it will take some time for the reg­u­la­tions to be fully ef­fec­tive.

Spring Air­lines spent a lot of ef­fort and time cut­ting un­nec­es­sary ser­vices, adding fee-based items and pro­vid­ing lower fares. But the process of be­com­ing a bud­get car­rier has be­come much sim­pler, due to chang­ing reg­u­la­tions.

It only took one year for 9Air to get op­er­at­ing ap­proval and run its first flight. 9Air signed a 50-plane deal with Boe­ing Co for B737s in May 2014. That was the largest or­der so far for a Chi­nese pri­vately owned air­line.

Chi­nese car­ri­ers have to think about trans­for­ma­tion of their model, since the world avi­a­tion sec­tor has suf­fered from slow growth in re­cent years, weighed down by ris­ing staff and fuel costs as well as re­ces­sion in many coun­tries.

De­spiteth­echal­lenges, Chi­ne­sep­a­s­sen­gers have gen­er­ally ac­cepted the low-cost model, saidWang Zhi­jie, se­nior vice-pres­i­dent of Spring Air­lines.

But such car­ri­ers still need to ed­u­cate trav­el­ers about the dif­fer­ences be­tween­low-co­stand­full-ser­vice air­lines, es­pe­cial­ly­when­it­comes to fees for in­di­vid­ual ser­vices. And some pas­sen­gers com­plain about poor ser­vice on bud­get air­lines, al­though they en­joy the low fares.

It is dif­fi­cult for Chi­nese low-cost air­lines to cut some costs, in­clud­ing air­port fees and fuel costs.

Be­cause of these chal­lenges, ex­perts said that Chi­nese low-cost car­ri­ers still have a long way to go.

“The mar­ket room for Chi­nese low-cost car­ri­ers ex­ists, but they will de­velop ro­bustly rather than boom­ing in a short time,” said Li Xiao­jin, pro­fes­sor at the Tian­jin-based Civil Avi­a­tionUniver­sity of China. Con­tact the writer at wang­wen@chi­nadaily.com.cn

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