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* China Eastern converts full-service subsidiary into budget
* Budget carrier to use 80 Boeing aircraft, sees fleet
expanding to 100 by 2019
* China Easter chairman sees explosive growth in budget air
travel in China
BEIJING, July 2 China Eastern Airlines Corp Ltd
launched on Wednesday its budget airline, becoming
the first state-run carrier to tap the low-cost travel segment
long dominated by privately run Spring Airlines.
China Eastern said it would use the 80 Boeing 737 planes it
had ordered from Boeing Co last month in a $7.4 billion
deal for the budget airline China United, which was created by
converting a full-service subsidiary.
China United aims to have up to 100 planes in its fleet by
2019 from 26 now, China Eastern Chairman Liu Shaoyong told
reporters in Beijing.
"We'll see explosive growth of LCCs, especially in China,"
Liu said. "In Asia alone, LCC (low-cost carriers) have already
accounted for over one third of the market."
Low-cost carriers, led by Shanghai-based Spring Airlines,
account for up to 7 percent of air travel market in China,
compared to Europe, where they control 50 percent of the
A slew of incentives issued by the Civil Aviation
Administration of China earlier this year, including cutting
airport charges and simplifying approvals, has encouraged more
budget airlines to take to the skies.
Industry analysts say China Eastern's foray into the budget
segment may encourage other state-run carriers such as Air China
and China Southern Airlines Co Ltd to
China Eastern Airlines intends to bring in a strategic or
financial investor to shore up the budget carrier, Liu said,
without giving further details.
China United will continue to fly to 54 domestic cities but
with tickets priced at a 20-40 percent discount to the fares it
sold as a full-service carrier, its President Zhang Lanhai
added. It could also expand into neighbouring countries.
The launch of China United could raise questions about the
fate of Jetstar Hong Kong, a budget carrier jointly owned by
China Eastern, Macau gambling mogul Stanley Ho and Australia's
Qantas Airways Ltd.
Intended to be the only low-cost carrier flying from Hong
Kong, Jetstar Hong Kong has faced delays in securing its airline
Liu declined to comment on Jetstar Hong Kong.
China's airline market, which is dominated by state-owned
carriers China Eastern, China Southern Airlines and Air China,
is believed by analysts to be on the cusp of a low-cost travel
Northeast Asia, especially, is seen to be a laggard in the
low-cost air travel market, with only a handful of small
carriers flying in Japan and South Korea.
($1 = 6.2115 Chinese Yuan Renminbi)
(Reporting by Fang Yan and Koh Gui Qing; Editing by Miral