Abstract
The gradual liberalization of China's air transport sector led to the launch of some new private airlines and low-cost carriers (LCCs) in the mid-2000s. However, the large population and geographic market do not necessarily mean that a favorable environment is ensured for the growth of these new airlines. The domestic market is still dominated by the three state-owned carriers that have access to government aid whenever they are in trouble. Despite the less favorable environment, China's only low-cost carrier, Spring Airlines, has managed to grow and has achieved limited success. The presence of Spring Airlines on a domestic route has contributed to an increase in passenger volume by 23%, holding other factors constant. This study also finds that when the jet fuel price increases by one dollar per gallon, the number of passengers carried will drop by 6%. The tourism and economic benefits brought about by LCCs should be the driving forces for change in air transport policies in China.
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