Low Cost Carriers in China and its Contribution to Passenger Traffic Flow

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.