China and North Asia on brink of Low Cost Airline Boom

China will become a major market for low cost airline development within two years, as regulation of the aviation sector eases and demand for air travel explodes, the Centre for Asia Pacific Aviation predicted today.

Peter Harbison, Managing Director of The Centre, a leading aviation consultancy group in the region, expects a combination of internal and external pressures to drive the introduction to China of the low-cost phenomenon that is currently sweeping Southeast Asia.

“All the indicators point to China becoming the next big thing for the growth of low cost airline services - and the rapid rate of developments suggests it will happen by 2005 or 2006,” Mr Harbison says.

Its bullish outlook for China coincides with the Centre announcing two important initiatives concerning low cost airlines (LCAs) – 

- the release of a comprehensive new report entitled “Low Cost Airlines in the Asia Pacific Region - A Force for Change”; and,

- its forthcoming LCA symposium in Macau on 26-27 April 2004, which will examine Low Cost Airlines prospects in China & North Asia Low Cost. This follows a highly successful event in Singapore in February, which attracted 250 delegates.

Mr Harbison says the economic and industry environments in China are fast reaching a stage where low cost airline development is both inevitable and desirable, and the government has shown a willingness to consider its role in the future of international and domestic aviation.

This will add to an already huge potential for LCA services in North Asia as a whole, says Mr. Harbison, with its many large population centres within close proximity, increasing economic interdependence, high traffic growth and rising income levels. The markets are already ripe for development in South Korea, Japan and Taiwan, and it will take just a small shift in government attitudes and policy to unleash substantial new growth across these countries. If nothing else, the prospects for China to steal a march in the LCA sector will encourage them to move in this direction.

The Centre’s symposium will look at the factors that have made Low Cost Airlines so successful over the past several years, in Asia now, as well as in Europe and North America, and how these will evolve in the future. It will consider the options they raise for the national carriers and full service airlines. And it will examine the prospects for a number of airports that might emerge as low cost airline centres, as well as their impact on the major hubs.

For example, the likely entry of low-cost international services to destinations such as Macau will apply pressure for change within China and throughout the region, at a time when consolidation of the three airline groupings in the country is almost complete,” Mr Harbison says.

There are a number of airports that could provide exploit a range of new markets within China, across North Asia and between North and South East Asia, exploiting the Low Cost Airline model. Over the coming year, the airports in South China, including Hong Kong, Vietnam, the Philippines and southern Japan may find themselves all vying for the new wave of low cost carriers.

Business travellers and leisure travellers in the region stand to benefit - and the travel companies may have to find ways to participate in the revolution which will account for much of the growth in the region.

For China, Mr. Harbison suggested that the emergence of LCAs could see Air China, China Southern and China Eastern adopt low-cost operations or regional subsidiaries - a move which would address the current mismatch between aircraft type and capacity and thin demand associated with secondary airports. Another possible outcome is the development of a “second tier” of the airline industry in China involving non-aligned secondary airlines concentrating on low-cost services.

“But”, he said, “the more immediate prospect is that the arrival of a low-cost airline culture in North Asia could see a revolution in travel patterns throughout North Asia - to the benefit of the travel sector as a whole and national economies. It is timely to consider just what form this might take, how current industry members, including government, should react, and who the main players in this next phase of aviation development will be.”

See also: Low Cost Airlines