Chinese airlines have warned that some carriers may not be able to support their long-haul expansions, should the fuel price head north and as government subsidies for such routes subside.
With Chinese carriers bullishly expanding their long-haul networks in recent years, the question of how sustainable this is was thrown up at during a debate at the Strategy Summit held during World Routes.
Air China’s assistant president Zhu Songyan says the low fuel price has allowed more Chinese carriers to start international long-haul services. The key however, he says, is whether these airlines are able to develop those routes while keeping an efficient control of costs.
Subsidies from provincial governments aimed at encouraging carriers to launch long-haul services from non-core cities, also tend to decrease after three years of a route’s launch, says Hong Kong Airlines’ chief commercial officer Li Dianchun. This, together with a rise in fuel price, may force some carriers to adjust their networks.
Hainan Airlines vice president Hou Wei meanwhile points out that there are “too many” players in China, with 57 operators, compared to four hub airlines in the USA. It does not help that China’s aviation policy is not completely open.
“For small airlines, their survivability is a question… they need to be really innovative in terms of cost and product design,” he adds.
Spring Airlines’ president Stephen Wang is of the view that more airlines will enter the Chinese market in coming years, and that the country would undergo a period of consolidation just like the USA in the 1980s and in Europe a decade later. He however remains confident of Chinese low-cost players’ potential, considering LCCs account for less than 10% of all flights in China.