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Budget airlines to spread wings abroad

By Wang Ying (China Daily)
Updated: 2009-06-13 10:19

Spring Airlines jets parked at the Hongqiao airport in Shanghai. [CFP]

Budget airliners are spreading their wings overseas by introducing low-fare flights from Shanghai to Hong Kong, Macao, South Korea and Japan, which, according to analysts, may trigger a price war in the aviation market soon.

A number of budget airlines are poised to start international flights this year. In April, the Civil Aviation Administration of China, the nation's aviation regulator, said on its website that it had approved in principle Shanghai-based Spring Airlines' plan to start short-distance international cargo and passenger flights.

Zhang Wu'an, spokesman with Spring Airlines, told China Daily that the airline still has to complete some application procedures to get full approval. "We will work step by step before launching the flights," he said.

Zhang also indicated that the first outbound flight might not be to Hong Kong, as the market is already saturated there. "The flights we plan to launch will be based on previous market research, in order to extract the maximum advantage from the new flights," he said.

Jin Air, Korean Air's budget affiliate, is also planning to start international flights soon to some cities in China and Thailand. An employee surnamed Kim from Korean Air said the airline has got permission to start international flights from July. However, due to the shrinking market demand, a final decision has not yet been made. "As a low-cost carrier, our ticket prices will surely be lower than competition," Kim said.

Yet another Pusan-based low-cost airline is also planning to start flights to China and Japan by the end of this year, increasing competition in the short-distance tourism market.

"We are already feeling the pressure from Air Asia and Tiger Airways, and the challenge will grow bigger. Though the companies have their own modes of operation and pricing, we are still confident of increasing our market share," said Zhang.

Market observers expect the round-trip ticket prices between Shanghai and Hong Kong to fall below 1,000 yuan, once Spring Airlines starts its Hong Kong flights. The low fare trips are also expected to trigger a shopping boom in Hong Kong, often dubbed as the "shopping heaven" by mainland customers due to its duty-free luxury goods, said Zhang.

Related readings:  China's nascent low-cost airlines  Price cuts keep Spring in the black  China's budget carrier drops plan to slash baggage limit  Air Asia kicks off price-down fight in Macao

"Low-cost flights in China are still in a fledgling state, and if they cannot expand their market share, their influence is limited," said Li Lei, an analyst with CITIC China Securities.

Michael Peng, sales manager of Shanghai Business International Travel Service Co, feels that low-cost airlines would not pose a great threat to major carriers' business.

"There are flights every single hour from Shanghai to Hong Kong. Limited by their resources, low-cost carriers such as Spring Airlines can hardly benefit a lot from the mainstream market. Not to mention the business travelers who prefer to pay more for superior services," Peng said.

"The international flights we are about to operate will be aimed to satisfy those who cannot afford average international flight tickets. These clients are highly sensitive to the price. By providing more choices for diversified customers, we hope to co-exist with traditional flights that are targeted at business and high-end travelers. And we call this a win-win situation," Zhang said.