Ember Shares Perspective on LCCs in China

Ember Shares Perspective on LCCs in China

In anticipation of more low cost carriers in China after a December announcement by the Civil Administration of China (CAAC) that it wanted to support their entry in 2014, Embraer China conducted a seminar on LCCs for representatives of the media at its Beijing offices on December 19.

Experts from research organizations, including as Mr. Hu Huaqing, Deputy Director of the Civil Aviation Development Institute at the China Academy of Civil Aviation Science and Technology, and representatives from business and industry joined more than a dozen members from the media.  Among the guest speakers, Mr. Ke Feng, international Partner at Roland Berger, and Ms. Zhang Shaohui, Vice President of OAG China, presented market trends and cited examples of operations of foreign LCCs.

Mr. Philip Wang, Director of Airline Marketing for Embraer China, explained that 18% of E-Jet operators are deployed their aircraft in LCC business applications.  “The Chinese market shows huge potential for low-cost carriers.  Currently, 78% of domestic routes carry fewer than 120 passengers per flight, while 68% of routes offer fewer than two flights each way.  These routes with medium and low passenger volumes are ideal markets for developing low-cost air transportation.  E-Jets generate high daily utilization because of their short turn-around times and longer maintenance intervals.”

Three mainline airlines dominate domestic routes – Air China, China Southern and China Eastern.  The nation’s largest low-fare carrier, Spring Airlines of Shanghai, serves some 40 local cities and 10 international destinations with a fleet of 39 A320s.

Mr. Wang explained the success of LCCs with their E-Jets and the ability of the aircraft to fly to smaller markets that are uneconomical with larger narrow-bodies.  He referenced the tremendous success of Brazil’s Azul Airlines and the impact it has made in opening new markets and providing affordable air travel to first time flyers with its predominantly E-Jet fleet.  “The greatest advantage of low-cost carriers lies in providing quality service with a relatively lower price.  What’s most important is to reduce overall operating cost by using right-sized aircraft.  One hundred-seat E-Jets have lower fuel consumption and lower landing fees than larger aircraft.”​ 

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