China will encourage the development of low-cost carriers, according to the country’s civil aviation authorities.
Speaking on Friday, the Director of the Civil Aviation Administration of China (CAAC), Li Jiaxiang confirmed that it would support the budget aviation market by lowering minimum air fares.
He added that full-service airlines should also consider simplifying their services or changing their operational models to allow them to bring down average air fares.
“The administration will limit flight ticket price increases, and there will be no set minimum price as I think the lower the better,” Li was reported telling a press conference in Beijing.
The move appears to indicate a toughening stance towards China’s state-run airlines, which have relied on government subsidies in recent years to support them through the global economic crisis.
Just last week, China Eastern, China Southern and Air China all predicted that their results for the first half of 2012 would be around 50% worse than the same period last year.
The move will provide a major boost however, to Spring Airlines – country’s only fully-fledged low-cost carrier. Zhang Wu, a spokesperson for Shanghai-based Spring told the Shanghai Daily that the country’s aviation authorities had already taken a series of positive steps in recent months, including permitting the LCC to operate the high-demand Shanghai-Beijing route. The move put further pressure on China’s state-run carriers, which have also been hit by the opening of the Shanghai-Beijing high-speed rail route.
China’s full-service carriers are also eying the low-cost market however. Shanghai-based China Eastern is currently in the process of setting up Hong Kong’s first LCC – Jetstar Hong Kong – in a joint venture arrangement with Qantas. Services are expected to commence in 2013.
It does appear however, that there is significant room for both full-service and low-cost airlines to operate side-by-side in China. IATA has predicted that the country will contribute 27% of new global demand for air travel, adding 214 million new air travellers by 2014 compared to 2009 levels.