Against All Odds: Chinese LCCs are Moving Forward with Different Development Models Despite Numerous Hurdles

This article surveys the low-cost carriers (LCCs) that are beginning to experience success in China. The industry as a whole enjoyed a collective net profit of $311 million in 2006, compared to a roughly $100 million loss in 2005. However, much of that profitability is due to the operations of Air China. Now, the LCCs in China are starting to grow. They are using strategies beyond simple cost saving, such as efficiency improvements and differentiated operating models. Costs are fairly fixed, with monopoly suppliers for items like fuel, and fixed fees for landing charges, aviation supplies and MRO. Different LCCs are described, including East Star Airlines, based in Wuhan, Juneyao Airlines, based in Shanghai, and Spring Airlines, based in Shanghai as well. Challenges for all of them include slot shortages at major airports such as Shanghai and aircraft acquisition, which is centrally managed.