Disseration on Air Transport Management

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Disseration on Air Transport Management


Submitted in part fulfilment of the requirements for the degree of Master of Science in Air Transport Management Investigate the development of Low-Cost Carrier in China domestic market by Jiayao Chen 6702118 Faculty of Arts and Social Sciences University of Surrey September 2022 Word count: 15000 中文30000字 © Jiayao Chen i. Executive Summary RYAN AIR, EASY JET, SOUTHWEST AIRLINES and AIR AISA are some of the low-cost airlines, given their unique geographical advantages, their constant efforts on reducing cost and their intention of developing the low-cost business model to the extreme, they have managed to survive and become the winners of this game. Their presence is a challenge to traditional management models launched by advanced management models, which has undoubtedly led to the healthy development of the global civil aviation market. However, the Chinese airlines have also pioneered their own low-cost airlines, influenced by the vigorous development of low-cost business strategies by airlines in Western countries. In 2005, Low-cost aviation in China started, with the establishment of Spring Airlines. During that period, low-cost business strategies did not work well in China at first due to the control over the number of carriers on the same route by government. There was also civil airspace control, fare control, pilot recruitment control and the monopoly of traditional airlines on the civil aviation market. China's civil aviation market is now expanding at an alarming rate as the country's national consumption level continues to rise and more young people choose to travel by air. China, a s the second largest air traffic volume in the world, is rapidly relaxing its air traffic control, with the Civil Aviation Administration of China (CAAC) promulgating policies that are conducive to the development of low-cost airlines. The low-cost airlines, represented by Spring Airlines, Jiuyuan Airlines, Aokai Airlines, Juneyao Airlines and Xiangpeng Airlines, have gradually created their own distinctive low-cost business strategies in this environment and, in particular, Spring Airlines has given astonishing and satisfactory financial profitability statements for several years in a row, even under the adverse circumstances of the Covid-19, they still performing brilliantly with strong growth and profitability, aiming in impressing investors and the entire airline market. Therefore, the aim of this study was to investigate the development of low-cost airlines in China up to 2022, after the Covid-19, and to provide a general summary. Apart from what mentioned the above, the other reason for conducting this study is that there was no research has been done in conducting a comprehensive market study of the low cost airline market in Mainland China specifically. Not mention to analyse the extent of its current market development and status to investigate the current status and outlook of the low cost airline market in China after the epidemic in particularly. This study analyses the history and current situation of global low-cost airlines through a literature review and examines the European low-cost airlines with mature experience in low-cost warfare and summarises the differences between the Chinese and European low-cost airline markets. The following part is an in-depth analysis of the current situation of Chinese low-cost airlines, using various research approach and models with a large number of examples of famous Chinese low-cost airlines: Spring Airlines, and several other Chinese low-cost airlines that have adopted low-cost business strategies. Thirdly, the difficulties and advantages of Chinese low-cost airlines are analysed in comparison with China Southern Airlines, and the strengths and weaknesses of Chinese low-cost airlines are analysed, with a summary and outlook on their development strategies. Highlights: Through the results of the analysis, some significant elements that were highlighted to be important: Firstly, the market for low-cost airlines in China is favourable and the demand for low-cost airlines in China remains very strong. Secondly, the findings show that there is a significant gap between Chinese LCCs and European LCCs in terms of size and revenue. The reason for the gap is mainly because of the market conditions difference. The LCC market in China still has many limitations as there is a big gap in terms of purchasing and maintaining aircraft compared to European and American countries. Thirdly, the scale of China's low-cost airlines is still very different from that of European and American low-cost airlines, and it is not feasible for China's low-cost airlines to simply imitate the operation mode of foreign low-cost airlines. Fourthly, as low-cost airlines have not existed in China for a long time, Chinese do not have a high level of recognition of low-cost airlines, however, as the changing of public's perception, so that China's low-cost airline industry can be developed sustainably by establishing a fair market environment, effectively reducing controllable costs, which as further improving the service quality as well as establishing an excellent corporate culture. Fifth, the relaxation of national policies has been decisive for the development of low-cost airlines. Sixthly, we analyse the difficulties encountered by low-cost airlines in China at the level of national policy, at the level of company management, at the level of lack of hardware, and at the level of the company. Seventhly, it also examines the domestic and international competition for Chinese low cost airlines, such as other low cost airlines in Asia and traditional airlines in the domestic market, as well as China's high-speed rail. Eighthly, it is also desirable for low-cost competitors - the traditional airlines - to implement a low-cost operating model. Ninth, the production of China's COMAC C919 will provide a huge cost advantage for China's low-cost airlines. Limitations: Due to the time constraints of the study, this paper only uses Spring Airlines as an example of a low-cost airline in China. The number of companies analysed for Chinese low-cost carriers is too small. Subsequent researchers can study other LCCs in China and summarise the problems encountered by each LCC. As there are not many LCCs in China, a SWOT analysis can be conducted to summarise the most significant problems encountered by LCCs in China. Due to the time constraints of the study, a single qualitative approach was chosen for the study, which dictated a number of methodological weaknesses. Firstly, the subjective nature of the study is inevitable. venkatesh et al. (2013) point out that a distinct disadvantage of qualitative research is that it is a research framework based on subjective experience, which means that opinions from others or the researcher himself occupy a large part of the qualitative research. This can compromise the objectivity of the study and cause the researcher to place too much faith in the available evidence and lead to misjudgements. The findings concerning that the future of the Chinese aviation market may lack secondary airports and the corresponding manpower and management personnel. For future research, studies could be carried out on the possibility of developing long-haul low-cost airlines in China, as well as on the development of airport infrastructure in China, such as secondary airports, or the development of the aviation sector. Keywords: low-cost airlines, low-cost business strategy, Spring Airlines, PESTEL, Chinese aviation market. ii.Declaration of originality I hereby declare that this thesis has been composed by myself and has not been presented or accepted in any previous application for a degree. The work, of which this is a record, has been carried out by myself unless otherwise stated and where the work is mine, it reflects personal views and values. All quotations have been distinguished by quotation marks and all sources of information have been acknowledged by means of references including those of the Internet. I agree that the University has the right to submit my work to the plagiarism detection sources for originality checks. Author’s Name: Jiayao Chen Author’s Signature: JY C Date: 12.09.2022 iii.Table of contents iv.List of Tables v.List of Figures vi.List of abbreviations Aircraft total number – the total number of aircrafts a airline company owns. Aircraft age (av.) – the average age of all aircrafts by airline. ASK/M - available seat kilometres, a measure of passenger carrying capacity (de Boer, 2018). Airport number – the number of airports served by an airline. Load factor - a measure of an airline’s passenger carrying capacity. Total revenue - the combination of all incoming sources of money that the company has earned through the selling of air ticket and relevant services. Net profit - total revenue minus total expenses. RPK - revenue passenger kilometres, the number of kilometres travelled by paying passengers (Cui & Li, 2017). Operated aircraft utilization (hours per day) - average daily flight time for all aircrafts. 9C-Spring Airlines SZ – China southern airlines vii. Acknowledgements I would like to take this opportunity to thank everybody who has supported me during this research project. I would like to express special gratitude to my supervisor, Dr. Bennett, for the incredible support, professional advice and guidance I have received during this project. I am also very grateful to all the study participants without whom the research would not have been possible. Finally, I would like to extend my gratitude to my family who made my studies at the University of Surrey possible. Chapter 1: Introduction 1.1 Research Background 1.1.1 Overview After more than 40 years of development, Southwest Airlines has become one of the top three airlines in the United States and has maintained a record of 40 consecutive years of profitability. This was followed by a wave of low-cost airlines in Europe, which became a huge success in the European civil aviation market, with traditional network airlines losing a large number of passengers to the rise of low-cost airlines. The Asian low-cost market has grown rapidly since the turn of the century and has become the most interesting segment of the global aviation market. With China's civil aviation market being the second largest in the world after the United States, it has naturally become a key target for low cost airlines in the Asia Pacific region to expand. As early as the 2012 summer and autumn airline season, AirAsia, Thai AirAsia, Tiger Airways, Jetstar Asia and Cebu Pacific, and several other Asia Pacific low cost airlines, have opened more than 20 routes in mainland China. International low cost airlines in Southeast Asia are rapidly developing and taking the lead in capturing the airline market adjacent to China and Southeast Asia. At the same time, China's civil aviation industry is also being impacted by high-speed rail, which has two most important advantages over aircraft: price and punctuality. In terms of price, in any case, fuel-powered air transport will never be able to beat electric-powered high-speed rail, as has been proven in both Japan and Europe. In terms of punctuality, according to the "National Civil Aviation Flight Operation Efficiency Report 2017" released by the Civil Aviation Administration of China, the punctuality rate of China's civil aviation flights in 2017 was 71.67%, reaching a peak of 88.33% in December
Answered 1 days AfterSep 10, 2022

Answer To: Disseration on Air Transport Management

Rochak answered on Sep 12 2022
57 Votes
Submitted in partial fulfilment of the requirements for the degree of Master of Science in Air Transport Management
Investigate the development of
Low-Cost Carrier in China’s domestic market
by
Jiayao Chen
6702118
Faculty of Arts and Social Sciences
University of Surrey
September 2022
Word count: 15000 中文30000字
© Jiayao Chen
I. Executive Summary
RYAN AIR, EASY JET, SOUTHWEST AIRLINES and AIR AISA are some of the low-cost airlines, given their unique geographical advantages, their constant efforts on reducing cost and their intention of developing the low-cost business model to the extreme, they have managed to survive and become the winners of this game. Their presence is a challenge to traditional management models launched by advanced management models, which has undoubtedly led to the healthy development of the global civil aviation market. However, Chinese airlines have also pioneered their cost airlines, influenced by the vigorous development of low-cost business strategies by airlines in Western countries. In 2005, Low-cost aviation in China started, with the establishment of Spring Airlines. During that period, low-cost business strategies did not work well in China at first due to the control over the number of carriers on the same route by the government. There was also civil airspace control, fare control, pilot recruitment control and the monopoly of traditional airlines on the civil aviation market.
China's civil aviation market is now expanding at an alarming rate as the country's national consumption level continues to rise and more young people choose to travel by air. China, with the second largest air traffic volume in the world, is rapidly relaxing its air traffic control, with the Civil Aviation Administration of China (CAAC) promulgating policies that are conducive to the development of low-cost airlines. The low-cost airlines, represented by Spring Airlines, Jiuyuan Airlines, Aokai Airlines, Juneyao Airlines and Xiangpeng Airlines, have gradually created their own distinctive low-cost business strategies in this environment and, in particular, Spring Airlines has given astonishing and satisfactory financial profitability statements for several years in a row, even under the adverse circumstances of the Covid-19, they still performing brilliantly with strong growth and profitability, aiming in impressing investors and the entire airline market.
Therefore, this study aimed to investigate the development of low-cost airlines in China up to 2022, after Covid-19, and to provide a general summary. Apart from what mentioned above, the other reason for conducting this study is that there was no research has been done in conducting a comprehensive market study of the low-cost airline market in Mainland China specifically. Not to mention analysing the extent of its current market development and status to investigate the status and outlook of the low-cost airline market in China after the epidemic in particularly.
This study analyses the history and current situation of global low-cost airlines through a literature review and examines the European low-cost airlines with mature experience in low-c
ost warfare and summarises the differences between the Chinese and European low-cost airline markets. The following part is an in-depth analysis of the current situation of Chinese low-cost airlines, using various research approaches and models with many examples of famous Chinese low-cost airlines: Spring Airlines, and several other Chinese low-cost airlines that have adopted low-cost business strategies. Thirdly, the difficulties and advantages of Chinese low-cost airlines are analysed in comparison with China Southern Airlines, and the strengths and weaknesses of Chinese low-cost airlines are analysed, with a summary and outlook on their development strategies.
Highlights:
Through the results of the analysis, some significant elements were highlighted to be important:
Firstly, the market for low-cost airlines in China is favourable and the demand for low-cost airlines in China remains strong.
Secondly, the findings show that there is a significant gap between Chinese LCCs and European LCCs in terms of size and revenue. The reason for the gap is mainly because of the market conditions difference. The LCC market in China still has many limitations as there is a big gap in terms of purchasing and maintaining aircraft compared to European and American countries.
Thirdly, the scale of China's low-cost airlines is still quite different from that of European and American low-cost airlines, and it is not feasible for China's low-cost airlines to simply imitate the operation mode of foreign low-cost airlines.
Fourthly, as low-cost airlines have not existed in China for a long time, the Chinese do not have a high level of recognition of low-cost airlines, however, with the changing public's perception, China's low-cost airline industry can be developed sustainably by establishing a fair market environment, effectively reducing controllable costs, which as further improving the service quality as well as establishing an excellent corporate culture.
Fifth, the relaxation of national policies has been decisive for the development of low-cost airlines.
Sixthly, we analyse the difficulties encountered by low-cost airlines in China at the level of national policy, the level of company management, the level of lack of hardware, and at the level of the company.
Seventhly, it also examines the domestic and international competition for Chinese low-cost airlines, such as other low-cost cost airlines in Asia and traditional airlines in the domestic market, as well as China's high-speed rail.
Eighthly, it is also desirable for low-cost competitors - the traditional airlines - to implement a low-cost operating model.
Ninth, the production of China's COMAC C919 will provide a huge cost advantage for China's low-cost airlines.
Limitations:
Due to the time constraints of the study, this paper only uses Spring Airlines as an example of a low-cost airline in China. The number of companies analysed for Chinese low-cost carriers is too small. Subsequent researchers can study other LCCs in China and summarise the problems encountered by each LCC. As there are not many LCCs in China, a SWOT analysis can be conducted to summarise the most significant problems encountered by LCCs in China. Due to the time constraints of the study, a single qualitative approach was chosen for the study, which dictated several methodological weaknesses. Firstly, the subjective nature of the study is inevitable. Venkatesh et al. (2013) points out that a distinct disadvantage of qualitative research is that it is a research framework based on subjective experience, which means that opinions from others or the researcher himself occupy a large part of the qualitative research. This can compromise the objectivity of the study and cause the researcher to place too much faith in the available evidence and lead to misjudgements.
The findings concern that the future of the Chinese aviation market may lack secondary airports and the corresponding workforce and management personnel.
For future research, studies could be carried out on the possibility of developing long-haul low-cost airlines in China, as well as on the development of airport infrastructures in China, such as secondary airports, or the development of the aviation sector.
Keywords: low-cost airlines, low-cost business strategy, Spring Airlines, PESTEL, Chinese aviation market.




II. Declaration of originality
I hereby declare that this thesis has been composed by myself and has not been presented or accepted in any previous application for a degree. The work, of which this is a record, has been conducted by me unless otherwise stated and where the work is mine, it reflects personal views and values. All quotations have been distinguished by quotation marks and all sources of information have been acknowledged using references including those on the Internet. I agree that the University has the right to submit my work to plagiarism detection sources for
originality checks.
Author’s Name: Jiayao Chen    
Author’s Signature: JY C
Date: 12.09.2022
III. Table of contents
    Content
    Page No.
    IV. List of Tables
    10
    V. List of Figures
    10
    VI. List of Abbreviations
    11
    VII. Acknowledgments
    12
    Chapter 1: Introduction
1.1 Research Background
1.2 Rationale
1.3 Research Aim and Objective
1.4 Thesis Structure
    13
13 – 17
17 – 18
18
18 – 19
    Chapter 2: Literature Review
2.1 The beginnings of low-cost airlines in China’s mainland
2.2 Current China mainland’s Low-cost airlines market
2.3 Compare China and Europe's low-cost airline market
2.4 Conclusion
    20
20 – 23
23 – 25
25 – 26
26 – 28
    Chapter 3: Methodology
3.1 Research Philosophy
3.2 Research approach
3.3 Research Strategy
3.4 Data type
3.5 Data Collection
3.6 PESTEL
3.7 Porter Five Forces
3.8 Data Source
3.9 Research limitation
3.10 Ethical considerations
    29
29 – 31
31 – 33
33 – 34
34 – 35
35
35 – 36
36
36 – 37
37
37 - 38
    Chapter 4: Analysis and Findings
4.1 PESTEL Analysis of the Low-Cost Airline Market
4.2 Porter Five Forces Model Analysis
4.3 Discussion of Findings
4.4 Conclusion
    39
39 – 45
46 – 49
50 – 58
58
    Chapter 5: Conclusion
5.1 Introduction Conclusion and Recommendations
5.2 Fulfilment of the research aim and objectives
5.3 Limitations of the Research
5.4 Recommendation
5.5 Future Research
    59
59 – 63
63 – 65
65 – 66
66 – 70
70 – 72
    References
    73
IV. List of Tables
    Table
    Page No.
    Table 1: Fleet Comparison
    24
    Table 2 The main characteristics of positivism and interpretivism
    30
    Table 3. Differences between quantitative and qualitative research strategies
    33
    Table 4, Government Documentation from CAAC
    40 – 42
V. List of Figures
    Figure
    Page No.
    Figure 1: the relationship between Low-cost Carriers (LCCs) and Full-Service Network Carriers (FSNCs)
    22
    Figure 2: Research Onion
    29
    Figure 3: GDP
    43
    Figure 4: Porter Five Forces
    46
VI. List of abbreviations
Aircraft total number – the total number of aircrafts an airline company owns.
Aircraft age (av.) – the average age of all aircraft by the airline.
ASK/M - available seat kilometres, a measure of passenger carrying capacity (de Boer, 2018).
Airport number – the number of airports served by an airline.
Load factor - a measure of an airline’s passenger carrying capacity.
Total revenue - the combination of all incoming sources of money that the company has earned through the selling of air tickets and relevant services.
Net profit - total revenue minus total expenses.
RPK - revenue passenger kilometres, the number of kilometres travelled by paying passengers (Cui & Li, 2017).
Operated aircraft utilization (hours per day) - average daily flight time for all aircraft.
9C-Spring Airlines
SZ – China southern airlines
VII. Acknowledgements
I would like to take this opportunity to thank everybody who has supported me during this research project.
I would like to express special gratitude to my supervisor, Dr Bennett, for the incredible support, professional advice, and guidance I have received during this project.
I am also very grateful to all the study participants without whom the research would not have been possible.
Finally, I would like to extend my gratitude to my family who made my studies at the University of Surrey possible.
Chapter 1: Introduction
1.1 Research Background
After more than 40 years of development, Southwest Airlines has become one of the top three airlines in the United States and has maintained a record of forty consecutive years of profitability. This was followed by a wave of low-cost airlines in Europe, which became a huge success in the European civil aviation market, with traditional network airlines losing many passengers to the rise of low-cost airlines. The Asian low-cost market has grown rapidly since the turn of the century and has become the most interesting segment of the global aviation market. With China's civil aviation market being the second largest in the world after the United States, it has naturally become a key target for low-cost airlines in the Asia Pacific region to expand. As early as the 2012 summer and autumn airline season, AirAsia, Thai AirAsia, Tiger Airways, Jetstar Asia and Cebu Pacific, and several other Asia Pacific low-cost airlines, have opened more than twenty routes in mainland China. International low-cost airlines in Southeast Asia are rapidly developing and taking the lead in capturing the airline market adjacent to China and Southeast Asia.
At the same time, China's civil aviation industry is also being impacted by high-speed rail, which has two most important advantages over aircraft: price and punctuality. In terms of price, in any case, fuel-powered air transport will never be able to beat electric-powered high-speed rail, as has been proven in both Japan and Europe. In terms of punctuality, according to the "National Civil Aviation Flight Operation Efficiency Report 2017" released by the Civil Aviation Administration of China, the punctuality rate of China's civil aviation flights in 2017 was 71.67%, reaching a peak of 88.33% in December, while the punctuality rates of China's high-speed rail departures and arrivals over the years have been 98% and 95% respectively. On 1 July 2011, China's third longest high-speed railway line, the Beijing-Shanghai high-speed railway, was opened and began trial operations. Just half a month of trial operations put the prime domestic section of the Beijing-Shanghai line under enormous pressure. According to the development progress of high-speed rail in China, cities within a radius of 800 km around the Pearl River Delta, the Chang Jiang Delta, and the Beijing-Tianjin region of the Bohai Sea will be the most affected. Many airlines' branches and headquarters will be affected. As a result, traditional airlines' business strategies will be disrupted by the dense frequency of high-speed rail, and the impact will be long-lasting and irreversible. In terms of prices, it is difficult to ignore the fact that airline fares are volatile and can be affected by the season and date of travel, whereas HSR fares are fixed and not subject to price fluctuations due to several variables. Although we often say that over 1,299 km is covered by civil aviation, however, China’s per capita income and social security system are far from allowing most ordinary Chinese consumers to use aeroplanes common means of daily travel. In China, it is accepted that travelling by train is a more economical option than travelling by air.
Taking into account the above, the carving up and threatening of the Chinese civil aviation market by international low-cost airlines in Southeast Asia, and the impact on the Chinese civil aviation market brought about by the rapid development of China's high-speed rail, focusing on the development of Chinese low-cost airlines, as opposed to the already existing business network airlines, is a most beneficial supplement that will bring about a healthy, rapid and sustainable development environment for the Chinese civil aviation industry. As early as 25 February 2010, the Civil Aviation Administration of China (CAAC) officially issued the "Strategic Concept for Building a Strong Civil Aviation Country", in which the first paragraph of the fifth part mentions that "efforts will be made to develop regional and low-cost airlines to meet the needs of different consumer groups. The recent release of the "Guidance on Promoting the Development of Low-Cost Airlines" by the Civil Aviation Administration of China (CAAC) is strong evidence of the CAAC's commitment to support and focus on the development of low-cost airlines in China. China today has the largest consumer market in the world, so there is great potential for low-cost airlines to develop in the country; and with the growing income of the general population leading to increased spending power, there is a huge demand for passengers in the Chinese mainland aviation market. As a result, low-cost airlines, which are characterized by low prices and dense flight schedules, have a huge opportunity in the country; low-cost airlines also have an important role to play in stimulating the aviation market and bringing competition and innovative changes to the aviation market in Mainland China. If the Civil Aviation Administration of China (CAAC) and the national government can benefit airlines in terms of policy and control of flight times, then there will be a lot of room for the Chinese low-cost airline market to flourish.
At present, after a period of development, China's low-cost airlines have taken shape. Airlines such as Spring Airlines, Shenzhen Airlines, Aokai Airlines and Juneyao Airlines have entered the development track of low-cost airlines one after another. Despite the already remarkable size of the Chinese aviation market, China's low-cost carriers have entered the market late compared to industrialized countries. They have been slower to develop than the global aviation industry. The domestic market share of Chinese low-cost carriers is 9.7%, while the market share of European low-cost carriers has reached 30%.

According to statistics, Southwest's prices are 50% lower than traditional airlines in the short-haul segment of the U.S. market, directly forcing traditional airlines to reduce their airfares by 25% to 30% as well. It would be a great turnaround in the history of China's civil aviation if China's low-cost airlines could do the same in this aspect of airline pricing as Southwest Airlines in the United States and achieve the same effect as the operation of Southwest Airlines in the United States. In terms of China's social development, it will help to reduce social costs and meet the need to create a frugal society; it will help to develop and promote tourism and other related industries, stimulate consumption, and promote great economic and social development; and it will help to reduce the economic cost of air travel for economically sensitive customer groups to the benefit of the public.
The aim of developing low-cost airlines in China is first and foremost to make air travel accessible to the masses. In 2018, China's civil aviation industry completed a total of 120,653 million tonne-kilometres of transport and 107,132 million passenger trips, up 11.4% and 12.6% respectively year-on-year. The total transport turnover ranked second in the world for fourteen consecutive years. The passenger throughput of the capital airport exceeded one hundred million passengers, while the passenger throughput of Chengdu, Chongqing, Harbin, Guiyang, and Sanya airports all achieved historic breakthroughs, and the number of ten million airports reached thirty-seven, an increase of 5 year-on-year. The number of air traffic control flights exceeded ten million. The share of civil aviation passenger turnover in the comprehensive transportation system reached 31%, an increase of 1.9 percentage points year on year. in 2017, China's annual per capita air travel was about 0.42 times, but the number of frequent air travellers may only account for about 2% of China's total population, compared to 2.9 in the United States, where air travel is only a transportation option for travel. The "popularisation of aviation" that we can now feel is only at a preliminary stage and is still not as widespread as in the West. From the point of view of China's aviation industry, this is a good thing for both airline companies and passengers and indicates that the growth in demand will remain stable and upward for a long time to come.
1.2 Rationale
However, to the authors' knowledge, no previous academic studies have been conducted to analyse and study the market specifically for low-cost airlines in China. This study complements the limited existing research. Based on the development trend of low-cost airlines, a comprehensive analysis and research will be conducted on the elements of low-cost airlines' operation model, low-cost strategies, the development overview of low-cost airlines in various regions of the world, the current situation of low-cost airlines in China, as well as the development dilemma faced by China's low-cost airlines and the deep-seated reasons that hinder his development. Through the study of the above issues, this paper hopes to summarise the advanced and mature experiences of international low-cost airlines and Chinese low-cost airlines and to analyze and study how Chinese low-cost airlines should cope and develop in the fierce domestic market competition in conjunction with low-cost airlines with Chinese characteristics. It is hoped that the study of this thesis will provide a reference for Chinese low-cost airlines and investors to make decisions and serve as a positive guide for the development of China's low-cost airline market. This thesis will help to obtain the latest information about the low-cost airline market in Mainland China and provide recommendations and important insights for the management of airlines in Mainland China. Providing recommendations and important insights to airline management to assist in developing the right strategies and allocating scarce resources, which include human and financial resources (Wu and Cheng, 2013; Jiang and Zhang, 2016).
1.3 Research Aim and Objectives
Aim and objectives
This study aims to investigate and assess the development of
Low-Cost Carrier in China’s domestic market.
Therefore, the following objectives are proposed for this research:
· Objective 1: To analyse all activities happening of Low-cost carriers in China domestic.
· Objective 2: To determine the competitive environment in China’s domestic aviation market, particular focus on Low-cost carriers.
· Objective 3: To identify the barriers to the development of Low-cost carriers.
1.4 Thesis structure
This research project consists of five chapters and is structured as follows:
Chapter 1 – This Chapter will give an overview of the report, and define the research aim, and objective, it is the introductive part of the thesis, which outlines the aim and objectives of the research and provides a research background of what will be analysed alongside the rationale for conducting the study.
Chapter 2 – This chapter will collect the existing literature and data and will define a research structure. It critically reviews and analyses existing literature regarding all the low-cost carrier’s activities happening in China mainland.
The first research objective is fulfilled in this chapter.
Chapter 3 – This chapter will discuss in detail the research method of this thesis and why it was chosen, it provides an insight into the research philosophy and methodology implemented in this study.
Chosen secondary data sources have been discussed.
Chapter 4 – This chapter covers the market and data analyses based on the PESTEL, Porter 5 Force models, and the discussion of the findings. Spring Airlines is selected as a sample for this analysis. An extensive discussion about the identified competition environment and potential opportunities and risks have been conducted.
The second objective will be achieved in this chapter.
Chapter 5 – This chapter is based on the analysis of the results in the previous section, uncovers the barriers to developing Low-cost carriers in China’s domestic market, gives recommendations for China's low-cost carriers and reviews the entire research process. It contains the conclusions that are drawn from the findings and the literature review. Furthermore, the limitations of the study and future research suggestions are provided. The third objective will be conducted in this chapter.
Chapter 2: Literature Review
This section will study all the activities of China's low-cost airlines and their current situation. The emergence of the low-cost airline company is the result of fierce competition in the aviation industry. Doganis (2009) conducted a low-cost carrier.
Excessive competition in the airline business, and rising passengers, according to the study quantity, was identified as a factor in the formation of low-cost airlines. The existing studies speculated that this improved quotient business model may be more suitable for the Chinese market. Although China's low-cost airlines have continued to expand over the past decade, but in 2014, China's low-cost airlines accounted for only 10 per cent of passenger traffic in China's domestic market 6.4% (CAAC, 2015). Although this figure has risen to 9.7% in 2020, some people believe that, in the context of the Covid-19 pandemic, the increase in the share of LCCs does not represent the real evolution of LCCs in China (CAPA, 2020). China's low-cost airlines still have a long way to go. This chapter will review and examine academic literature, theory, and concepts of all the low-cost carrier’s activities happening in mainland China.
2.1 The beginnings of low-cost airlines in China’s mainland
Low-cost airlines started late compared to Western countries. This is large since China has highly restrictive policies and regulations on civil aviation, some existing literature has been used to illustrate the evolution of deregulation in the industry. (Zhang and Round, 2008; Shaw et al., 2009; Zhang et al., 2014; Wang et al., 2016). Although China's aviation deregulation began as early as 1978, this process is limited in the early stages. The road to air deregulation in China can be divided into four stages (Wang et al., 2016): pre-reform strict regulation (before 1978), transitional phase (1979-1987), state ownership, led integration and privatization (1988-2004) and new entrants, market-driven integration, and deregulated competition (2005-2012). Before 2004, the deregulation of air traffic was only partly because the government wanted to protect its growing domestic market and foster the Big Three to compete internationally. Therefore, private, and foreign airlines entering the market are strictly regulated.
Spring Airlines is the first Chinese airline to be officially advertised as a low-cost airline. Since its establishment in 2005, Spring Airlines has developed rapidly. In January 2015, Spring Airlines was successfully listed on the Shanghai Stock Exchange, becoming the first privately-owned listed company in China. Spring Airlines has also independently developed a passenger self-service departure system, automatic assisted boarding system, revenue management system, independently developed the FOC system for flight management, and the FOC system for aircraft maintenance management. The MISS system, constantly innovating, makes aviation informatization construction effective.
Spring Airlines was once the only active low-cost airline in China (Zhang and Lu, 2013; jiang et al.,2017), before merging with some other airlines. These include West Air (founded by Hainan Airlines in 2006) established, converted to a low-cost carrier in 2013), China United Airlines (owned by China Eastern Airlines, converted to a low-cost carrier in 2014; the first state-owned low-cost airline), Nine Airlines (founded by Juneyao Airlines and operated in 2015) and Chengdu airline, which claimed to have transformed its business model into a low-cost airline in 2015. Established the earliest harmony with China. All other low-cost airlines have few passengers compared to the largest low-cost airline (https://doi.org/10.1016/j.jtrangeo.2019.04.003)
Budd and Ison (2020) in their book Air Transport Management demonstrate the relationship between LCC and other airline business models.
Figure 1, the relationship between Low-cost Carriers (LCCs) and Full-Service Network Carriers (FSNCs)

Source: Budd & Ison, 2020
As shown in the diagram, Low-cost Carriers (LCCs) and Full-Service Network Carriers (FSNCs), charter carriers are interleaved and merged. Indeed, in the actual operation of the airline in the camp, as the LCC continues to develop, increased airlines change their strategies and begun to accept and adopt low-cost parts or all of the airline's operating model, which has also led to intense competition in the low-cost airline market. Jost and Sascha analysed thirty-six data items from twenty-six airlines between 2004 and 2012. The results showed that the airline's business models are shifting; between 2004 and 2012, the gap between LCCs and FSNCs narrowed. May multiple LCCs are starting to raise fares, cancel single class, and use major airports. This is in line with Dobruszkes' (2013) study, the findings are consistent with those of Xavier et al. (2015), who found that low-cost airlines began to offer bundled tie-in air tickets and improve service quality. Although some authors and airline practitioners have justified the development of suspicion. The situation is even worse in China, where low-cost airlines lack full freedom of market access and trunk routes. In the early days of its emergence, China's civil aviation market was still limited to a certain extent in favour of China's three major airlines. However, Spring Airlines used this to effectively produce good financial results, especially compared with the three major airlines in China. Chunqiu seems to be a combined case of FSNC vs LCC, not 100% LCC. (https://doi.org/10.1016/j.jtrangeo.2019.04.003)
By the end of 2017, Spring Airlines had seventy-six aircraft operating on 159 routes connecting ninety-four cities in China and abroad. Five with other Chinese airlines. Compared with other companies, Spring and Autumn is the third largest international supplier - in 2017, 35% of its seat kilometres (ASK) went abroad (to Japan, Thailand and South Korea). By comparison, the average for Chinese airlines at the time was 30%, the degree and of internationalization has never reached 42% (China Eastern Airlines), or even 49% (Air China). 6 However, considering the passengers, Spring Airlines are more international, at 21.6% in 2017, compared to 12-13% for the Big Three (CAAC, 2018).
2.2 Current China mainland’s Low-cost airlines market
Chinese low-cost airlines emerged late and are still in their infancy, with Spring Airlines, 9 Air, Chengdu Airlines, Beibu Gulf Airlines, Colorful Guizhou Airlines, Happiness Airlines, China United Airlines, Urumqi Airlines, and Western Airlines being the main ones at present.
Unlike several other Chinese airlines with fleets that have a mix of aircraft types, Spring Airlines uses only a standardized fleet consisting of Airbus 320s (as shown in Table 1) and offers significantly discounted fares well below those offered by full-service network airlines.
Table 1: Fleet Comparison
     
    A320-200
    A320neo
    A321neo
    A319
    B737-700
    B737-800
    ARJ21
    E190
    ERJ190
    MA60
    Total
    Spring Airlines
    79
    27
    9
     
     
     
     
     
     
     
    115
    Colorful Guizhou Airlines
     
    4
     
     
     
     
     
    9
     
     
    13
    9 Air
     
     
     
     
     
    22
     
     
     
     
    22
    Chengdu Airlines
    34
     
     
    4
     
     
    26
     
     
     
    64
    Beibu Gulf Airlines
    6
    4
     
     
     
     
     
     
    17
     
    27
    Joy Air
     
     
     
     
     
    5
     
     
     
    25
    55
    China United Airlines
     
     
     
     
     
    8
    45
     
     
     
    53
    Urumqi Air
     
     
     
     
    16
     
     
    1
     
     
    17
    China West Air
    25
    6
     
    4
     
     
     
     
     
     
    35
Source: cirium
Spring Airlines also has the highest passenger seat rate in China, reaching 91.7% in 2016, 90.6% in 2017, 89.01 in 2018, 90.81% in 2019, and 79.67% in 2020 (Spring Airline Annual report, 2020), while China's average seat rate for 2019 is 83.2%,...
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