Developing a low-cost airline in a semi-protected regime: Comparing China to Europe and the US

Frédéric Dobruszkes,Jiaoe Wang

doi:10.1016/j.jtrangeo.2019.04.003

Abstract

The US and Europe have long experienced the expansion of low-cost carriers (LCCs) in the aftermath of extensive aviation liberalisation offering free access to the market for US and European airlines, respectively. More recently, following the opening of the progressive aviation market, China has also emerged as a country that welcomed LCCs to some extent, but has not subscribed to full liberalisation. In this context, our paper compares China's largest LCC, Spring Airlines, to the largest European (Ryanair and EasyJet) and US (Southwest and JetBlue) low-cost airlines. Comparisons in this context include volumes supplied, spatial coverage, network geography and financial results. This comparative study found that Spring Airlines is still a small/emerging LCC compared to the European and US giants and in terms of China's potential market. This is notably due to the lack of whole free access to the market and trunk routes that are still protected to some extent in favour of the Big Three in China. However, Spring uses its production means in an efficient way and generates good financial results, especially compared to those of China's Big Three airlines. Finally, Spring appears to be a composite case rather than a duplicate of a reference LCC.

Highlights

China has experienced major policy, economic and demographic changes over the past decades
As a result, setting new airlines and entering existing or new routes has remained subject to approval by the Civil Aviation Authority of China (CAAC)
Comparing Spring Airlines with the European and US models: Methods and data In this paper, we investigate the case of Spring Airlines, the largest low‐cost carriers (LCCs) in China, and compare it with the two largest LCCs in Europe (Ryanair and EasyJet) and the US (Southwest Airlines and JetBlue Airways)

Summary

Introduction

China has experienced major policy, economic and demographic changes over the past decades. These changes have resulted in the growth of the population, infrastructure, industry and urbanisation; major internal migrations; transition to a market economy; and reintegration into the world economy. As a result, setting new airlines and entering existing or new routes has remained subject to approval by the Civil Aviation Authority of China (CAAC). Even though CAAC policy has turned to the free market to some extent, setting up new airlines is still much easier in the US and the EU, where airlines are free to operate nearly any route

Objectives

Methods

Findings

Conclusion