Prospects for air policy liberalization in China as a Result of China-ASEAN Open Skies: Changing role of Chinese mega carriers in global scene and anticipated Low Cost Carrier competition

Abstract

The objective of this study is to predict the direction of change in China's airline policy in the next decade. This is done by (a) reviewing performance of Chinese mega airlines and predicting their changing global role which will have strong influence on Chinese air policy; (b) changing role of airline industry in the modern economy; and (c) impacts of South East Asian LCCs' penetration into a large number of Chinese major cities enabled by the recent China-ASEAN Open Skies Agreement, and its anticipated impacts on China's LCC policy. Our analysis led us to conclude that if China's air policy makers encourage 80 + major cities to initiate made-in-China LCCs, it would solve the looming short-term policy disaster (losing the majority of China-ASEAN markets to SE Asian LCCs); help solve an important medium-term policy goal of inducing Chinese mega carriers to get more efficient vs. competing foreign carriers; and the long-term need for preparing China's mega carriers to claim the global leadership roles such as setting standards on the global civil air transport sector. Such policy will also better serve both consumers and the Chinese economy as a whole as the more efficient and convenient air services would help tourism, international trade sectors that airlines need to support, in order to maximize its total contribution to the Chinese economy.