How can Chinese low-cost carriers become successful and profitable

Abstract

This thesis is a discussion of improvements Chinese Low-cost Carriers (LCCs) could make in order to become profitable and successful as their counterparts in Europe and the United States. China is Asia's latest LCC market and has accelerated its pace in developing LCCs since Chinese authorities published the "Guidance on Promoting the Development of Low-Cost Airlines" at the end of 2013. There are currently seven LCCs in China, including Spring Airlines, an established LCC since 2004 along with another six newly established LCCs in response to the published Guidance. The newly established six have followed many practices adopted by Spring Airlines, which is seen as a role model for the Chinese LCC market. Spring Airlines applies sound management practices to control its costs, producing good profitability. As the Guidance is implemented by Chinese authorities in next few years, many costs that were previously uncontrolled, such as aircraft ownership, crew and airport fees, could be further cut. While expecting positive news from civil authorities, Spring Airlines and other Chinese LCCs could begin work on improvements. From the perspective of cost control, Spring Airlines could reduce its labor costs by decreasing employee-to-aircraft ratio. In terms of increasing revenue, Spring Airlines could increase charges on excess baggage and seat selection. It could also expand into various other ancillary services, such as in-flight wifi, to increase revenues.