Home' Asian Aviation : AAV February 2017 Contents 22 AsianAviation | February 2017
LCCs IN ASIA
LOW-COST CARRIERS IN CHINA make up 10 percent of the
market, double that of five years ago, said Shukor Yusof, founder
of Malaysia-based aviation consultancy Endau Analytics. Analysts
expect more growth over the next five to 10 years, but discount
airlines will remain at under 20 percent of the total China market.
Airlines across the fare spectrum will see more demand as Chi-
nese increasingly enter income brackets with enough money to
fly instead of using ground transport, management consultancy
McKinsey & Co said in a 2014 report. It expected threefold growth
in the number of people who could afford flights by 2024.
“Discount airlines are targeting price-sensitive travellers,” said
Eric Lin, transport analyst with Swiss investment bank UBS in Hong
Kong. “ Those who want the lowest fares go there. The service is
minimal but accepted.”
Budget carriers in China have earned a following for the same
reasons they do elsewhere: half the price of a full-service airline seat.
“My feeling is that they ’re all the same,” said Zhang Shuo, a
38-year-old self-employed businessman in Beijing who took his
first Chinese budget flight last year. He has flown discount carriers
in Australia and Singapore too. “ The flight time is short and there’s
basically no service. If you want to rest, it’s pretty hard. It was like
(the flight attendants) were always hawking things.”
Zhang flew Shanghai-based Spring Airlines from Tianjin in northern
China to the Japanese city of Osaka, a two-hour flight, for a round-
trip fare of about 1,100 yuan (US$159) plus another 200 yuan for 15 kg
of baggage. He said he could have paid less by booking the tickets
earlier. At least 40 to 50 million passengers will take budget flights in
China this year compared to about 400 million total, Yusof estimates.
A proliferation of new airports in China’s smaller cities, particularly
in the vast western region where ground transport takes longer, has
also fostered growth in discount airlines, which in some cases fly
direct routes instead of requiring transfers.
“China’s geography supports the long-term development of a
budget airline industry, as it links up many smaller cities (via) point-
to-point travel,” Yusof said.
Eight airlines based in China are normally considered discount
carriers. Spring Airlines is the oldest at 12 years. It competes with
China United Airlines, 9 Air, Juneyao Airlines, Lucky Air, Ruili Airlines,
Urumqi Air and West Air. They belong to a civil aviation sector with
total operating revenue of 619 billion yuan (US$89 billion) in 2015
and profits of 49 billion yuan (US$7 billion).
Spring Airlines took a 28.9 percent market share among China’s
budget carriers in 2016, down from 40.2 percent the previous year,
according to industry information provider OAG. Lucky Air had the
second-largest share at 18.6 percent, and China United Airlines
came in third at 17.4 percent. West Air had a 16.5 percent market
share. Discount carriers had an 8.4 percent market share overall
last year, OAG says.
Their expansion has helped suppliers as well as passengers.
Boeing Commercial Airplanes, one of China’s chief suppliers, sold
between 20 and 30 aircraft to Chinese budget carriers in 2015 out
of a total 194, said Darren Hulst, managing director of marketing for
China was already a growth market for Boeing, Hulst said, and
“over the course of the last few years these new airlines have helped
grow the market more than it would have grown”.
Boeing regards some Chinese airlines as “hybrid carriers” rather
than pure budget ones, Hulst said. They order aircraft with more
equipment than just extra seats to fit more passengers, he said,
different from “no frills” budget carriers elsewhere. “A hybrid might
have a premium economy class in a couple of rows,” Hulst said.
But budget airline market shares in China lag parts of Southeast
Asia, where the discount percentage can be as high as 50 percent.
Budget airlines grow
in China but dominant
carriers fight back
China’s budget airlines are growing on eager
demand for cheaper, short-haul Asia flights
and vying with the country’s large state-run
carriers, which in turn have lowered fares
or started their own discount subsidiaries.
AAV contributor Ralph Jennings takes a look.
NUMBER OF AIRCRAFT
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