Turbulent journey for China's fledgling budget airlines
Monday, 9 July 2007
SHANGHAI, July 8 (AFP): Two years after China's first budget airline took to the skies, the low-cost boom seen elsewhere around the world remains a distant prospect despite the Chinese aviation industry's spectacular growth.
Passenger traffic on Chinese airlines is forecast to rise 16 per cent to 185 million journeys in 2007, making it one of the world's fastest growing aviation sectors, but only a tiny fraction of those trips will be on a low-cost airline.
While budget carriers have flourished in Europe and other parts of Asia, in China they face a host of bank-breaking restrictions that puts them at a huge disadvantage to the bigger, government-linked airlines.
High landing fees, bans on lucrative routes and high prices charged by the state-run fuel provider are just some of the barriers for the low-cost hopefuls.
The government has given signals recently that it will ease some of the controls, but the privately-run small carriers said they still had a long way to go before the state monopoly was dismantled.
"We are still waiting for a breakthrough," Wang Jianbin, chief financial officer of Okay Airways, told a conference in Shanghai recently.
Okay began operating in March 2005, creating history as China's first privately-run carrier and the Chinese pioneer of the low-cost model.
But it saw its revenue stream under such pressure that it scrapped its budget concept in favour of a more standard pricing strategy.
Wang said the planned government reforms gave cause for some optimism, but said there was still a long way to go before the conditions were ripe for passengers in China to enjoy ultra-cheap flights.
"Only when liberalisation of the aviation industry is realised will the low-cost model be popularised," he said.
Chen Ke, a financial manager for Spring Airlines, another small private carrier, agreed that running a budget airline was tough but said the government would change its course once it realised that there was money to be made.
Passenger traffic on Chinese airlines is forecast to rise 16 per cent to 185 million journeys in 2007, making it one of the world's fastest growing aviation sectors, but only a tiny fraction of those trips will be on a low-cost airline.
While budget carriers have flourished in Europe and other parts of Asia, in China they face a host of bank-breaking restrictions that puts them at a huge disadvantage to the bigger, government-linked airlines.
High landing fees, bans on lucrative routes and high prices charged by the state-run fuel provider are just some of the barriers for the low-cost hopefuls.
The government has given signals recently that it will ease some of the controls, but the privately-run small carriers said they still had a long way to go before the state monopoly was dismantled.
"We are still waiting for a breakthrough," Wang Jianbin, chief financial officer of Okay Airways, told a conference in Shanghai recently.
Okay began operating in March 2005, creating history as China's first privately-run carrier and the Chinese pioneer of the low-cost model.
But it saw its revenue stream under such pressure that it scrapped its budget concept in favour of a more standard pricing strategy.
Wang said the planned government reforms gave cause for some optimism, but said there was still a long way to go before the conditions were ripe for passengers in China to enjoy ultra-cheap flights.
"Only when liberalisation of the aviation industry is realised will the low-cost model be popularised," he said.
Chen Ke, a financial manager for Spring Airlines, another small private carrier, agreed that running a budget airline was tough but said the government would change its course once it realised that there was money to be made.