China's aviation authority pledges to boost low-cost carriers

Fri Feb 28, 2014 3:26am EST

Related Topics

* Threshold to be lowered to establish new budget carries

* Airport charges set to be cut at lower-tier airports

* Local governments encouraged to build new airports

BEIJING, Feb 28 (Reuters) - China's aviation authority on Friday pledged to promote the country's fledging budget airline industry with supportive policies, a move industry observers say could lead to a boom of low-cost air travel in the world's most populous country.

The Civil Aviation Administration of China (CAAC) said in a statement published on its the website that it would lower the threshold to establish new budget carries, simplify approval procedures and cut airport charges in lower-tier airports.

CAAC also said it will encourage local governments to build new airports or convert existing facilities to target low-cost carriers, while continuing efforts to lower import tariffs for aircraft.

China's airline industry has long been dominated by state carriers, led by Air China Ltd , China Eastern Airlines Corp Ltd and China Southern Airlines Co Ltd , which receive the lion's share of the country's most lucrative routes and the best take-off and landing slots at airports.

That is starting to change. Last year, privately-owned Juneyao Airlines setup a budget airlines with several other partners, while HNA Group converted subsidiary West Air into a budget carrier. China Eastern also is converting its Beijing-based subsidiary China United Airlines into a low-cost airline.

"More new entrants will come to the market once CAAC issues favorable policies," said Gao Liangyu, an analyst with Huatai Securities Co. "China is the most populous country in the world and there is plenty of room for budget airlines,"

China's longest established budget carrier is Shanghai-based Spring Airlines, which started operations nearly a decade ago. Company chairman Wang Zhenghua told Reuters earlier this month the airline is set to make an order for up to 30 Airbus (AIR.PA) A320 aircraft worth $3 billion at list prices as the carrier increases its routes.

In November, CAAC indicated its support for low-cost air travel when it relaxed its airfare restrictions for the first time in nearly a decade by allowing airlines to set prices as low as they see necessary on 31 domestic routes.

(Reporting by Fang Yan and Matthew Miller in BEIJING; Editing by Matt Driskill)

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