Monday - Sep 25, 2017

China Eastern Airlines launches low-cost subsidiary

China Eastern Airlines launches low-cost subsidiary

As economic growth in China goes on and with it business travel, the main three Chinese airlines have been expanding rapidly and, in the process, adding more larger aircraft to their fleets.

A potentially important new development for the Asian airline industry has come from Shanghai-based China Eastern Airlines who have announced their intention to become the first in the country to launch a budget airline, which industry experts predict will go a long way in pushing even further forward the development of the airline industry sector in northeast Asia.

China Eastern’s budget carrier, China United Airlines, will be based in Beijing, reportedly at the huge international airport under construction in the city’s southern outskirts.

In order to get the new airline off the ground, China Eastern is expected to acquire an additional 50 or more aircraft, ostensibly tripling their existing fleet to 80 planes by year 2019.

Currently, China United operate a fleet of 26 Boeing 737s, scheduled to be increased to 31 by the end of 2014.

It has been known for some time that China Eastern were more interested in getting into the budget market than their local counterparts, even attempting to a joint venture budget carrier in Hong Kong with Jetstar, the budget sector subsidy of Australia’s Qantas Airways, in partnership with Shun Tak Holdings, a conglomerate controlled by Macau gaming magnate Stanley Ho.

As yet the application to establish Jetstar Hong Kong, as the new airline would be known, is yet to gain approval. However, if given the green light, Jetstar Hong Kong would become the first budget carrier to be based in the Region.

Despite the decision to establish the first budget airlines in China, the management at China Eastern are reportedly still very interested in establishing Jetstar Hong Kong and are confident that they will soon be receiving approvals to operate.

Asian airline industry analysts have long since cautioned that it is liable to take many years for a budget airline industry to develop in the massive country, although there are some smaller budget airlines such as Qingdao Airlines and Zhejiang Loong Airlines which offer domestic flights one.

For the meantime, China Eastern’s two biggest rivals, Air China and China Southern, are showing no great interest in launching subsidiary budget carriers despite the fact that China’s aviation administration have been observed to encourage their development.

One of the principal stumbling blocks of the development of international budget airlines is the cross-shareholding agreement between Air China and Cathay Pacific.

Cathay Pacific has publicly stated their objections to the idea of having budget carriers operating in their home territory, which could be a major factor in restricting their growth in East Asia.

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