Air Transport World

Against all odds: Chinese LCCs are moving forward with different development models despite numerous hurdles.(COMPETITION)(low-cost carriers)(Financial report)

CHINESE AVIATION ANALYSTS USED to warn that China's air transport industry could not fly on the single engine of Air China. For example, the industry enjoyed a significant financial turnaround in 2006 with a collective net profit of CNY2.38 billion ($311 million) compared with a CNY1.35 billion loss in 2005. But that reversal, as outlined in CAAC's annual report, largely was owing to Air China's success, as the Beijing-based carrier earned CNY3.19 billion.

The good news is that China's crop of low-cost carriers are rising to power the industry, making it more likely they will be the second engine. The success of these airlines is surprising in light of the significant obstacles they face.

East Star Airlines, the Wuhan-based startup, posted a net profit of CNY11 million in its first financial year ended last May. Operating revenue reached CNY281 million and it boarded 465,300 passengers. Currently its fleet numbers five aircraft--three A319s and two A320s--and it is getting around 12 hr. per day utilization with each. It operates to 19 domestic destinations with 115 weekly departures and began serving Hong Kong and Macau last month.

Shanghai-based Juneyao Airlines earned CNY18 million in the January-July period with average load factors of 80%. Like East Star, it operates five Airbus narrowbodies, although the numbers are reversed: It has two A319s and three A320s flying to 21 domestic destinations.

Spring Airlines, also based in Shanghai, achieved impressive growth during the first half of its fiscal year, posting a 27% year-on-year increase in operating revenue to CNY430 million. …

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