Budget carriers ready for takeoff

By Wang Wen (China Daily) Updated: 2014-06-27 07:06

A Hainan Airlines plane takes off from Sanya, Hainan province. More and more carriers have plans to develop low-cost operations. Shi Yan / For China Daily

Chinese airlines consider low-cost options to counter pressure from rising prices and narrow profit margins, Wang Wen reports

Low-cost carriers are set to fly high in China with more companies eager to cash in on rising passenger numbers and offset dwindling profits, rising costs and low profit margins.

Budget carriers are expected to clock fast growth in China in the next few years, thanks to their extremely low market share, compared with other regions, global aircraft maker Boeing Co said on Wednesday.

LCCs currently account for only 5 percent of the civil aviation market in China, compared with 27.1 percent globally, said Darren Hulst, marketing director for Northeast Asia of Boeing commercial airplanes. The low level means there is plenty of room for growth, he said.

According to Hulst, the rising demand from China will lift overall LCC capacity in the Asia-Pacific region by more than 10 percent each year. That to some extent also explains the flurry of activity in the sector recently, said industry sources.

Xia Xinghua, deputy head of the Civil Aviation Administration of China, said several State-owned and private carriers are considering LCC investments. In March, the administration released guidelines to support development of LCCs.

Although there are no unified criteria for LCCs, globally they share similar features such as cheaper tickets, lower operational costs and higher income from non-flight business.

China Eastern Airlines Ltd, the first State-owned carrier to take the budget airline route, established Jetstar Hong Kong, a low-cost joint venture with Qantas Airways of Australia in 2012. It is still awaiting final approval from the authorities.