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Chinese Low-cost Airlines Eye Growth Amid Stiff Competition | Aviation International News

Budget carriers compete with each other through pricing strategy. For instance, Spring Airlines, serving 130 routes with 80 airplanes, offers a promo fare equivalent to $15.50 for its Shanghai-Bangkok route. All of the LCCs target the growing middle class, estimated at 200 million people. Also, they face tough competition from the full-service airlines, as their “reconciliation” strategy captures the market share of budget carriers by imitating low-cost operating models, optimizing fleets, streamlining revenue management, and modifying services. In the field of medium and short-haul routes, legacy airlines and low-cost carriers have grown more similar.

There are several other challenges. A planned local high-speed rail network can hinder airline growth. As the high-speed rail travels at 350 km/h (218 mph), it is expected that air transportation between the second and third tier cities within 1,200 km will be squeezed out.

Underserving aviation resources in the government’s promotional programs and allocation process has caused the operating cost of low-cost airlines to be higher. Low-cost operating models count on industry management organizations providing more recognition and differentiation of service standards. On the positive side, Chinese millennials’ acceptance of low-cost aviation services is expanding the market gradually, as they replace the older generation. But the existing planned pricing management system for local air transport services conflicts with the demand for marketing innovation.

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Chinese Low-cost Airlines Eye Growth Amid Stiff Competition | Air Transport News: Aviation International News.