2005 marks the first year that privately-owned airlines can take to China's skies. With the new open regulations has come at least five budget Chinese airlines aimed at business travelers commuting among China's secondary cities. But recent Chinese court decisions and changes in how the budget airlines price themselves in the market worries me.
China's Okay Airlines was the first airline to launch this year under the budget banner. Based in Tianjin, it had subleased its first two Boeing 737-900s from Korean Air. However Okay never got off the ground and instead this week announced it will be selling a large part of its business to Korean Air. It is still unclear why Okay made this move. Will it mean even greater expansion with the new infusion of capital?
Spring Airlines launched its maiden flight about a month ago, but already it has encountered a number of problems. Spring plans to concentrate on niche travel routes for tourists and business travelers–current cities include Shanghai, Yantai, Nanchang, Guilin, and Mianyang. The airline plans to not serve in-flight meals and instead only serve bottled water to travelers.
But just a few days after Spring's July launch, several domestic airline companies sued Spring Airlines for not abiding by relevant regulations that require all airfare ticket discounts not be higher than 55%. Under the pressure from these airlines, Spring Airlines had to cancel its RMB199 and RMB299 air tickets for lines to Yantai, Nanchang and Mianyang from Shanghai.
It seems that the entrenched airline market is not happy to see so many budget competitors among their ranks.
But there are even bigger problems for passengers. In the first instance where a Shanghai court has ordered a domestic airline to reimburse passengers for a flight delay, China Eastern in June was ordered to refund 10% of the airfare for 20 passengers. Each passenger received an average of RMB135. In July 2004, those 20 passengers bought air tickets for a China Eastern flight from Shanghai Hongqiao Airport to Hohhot in Inner Mongolia. The flight was scheduled to depart at 2:35pm, but it was delayed until 8:07pm due to a thunderstorm. China Eastern had appealed an earlier decision by the court, because the airline believes that the delayed was caused by bad weather. China Eastern also said that it provided food and drinks for the passengers during the delay. However the court said it believes that the airline company is obligated to take the passengers to their destinations within the scheduled time frame. Therefore, China Eastern's appeal was turned down.
This is a scary decision. Chinese airlines are considered among the safest in the world. I am on a plane at least four times a month in China and we are routinely delayed if the weather seems even likely to have a few clouds. It can be frustrating to deal with those delays, but I would rather err on the side of safety. I hope the airline industry does not worry so much about being sued in these extreme cases–it will be more liable for air crashes than for some delays, even due to potentially treacherous thunderstorms.
Budget airline travel has finally, thankfully, arrived in China. But the industry is still going through some growing pains that will hopefully lead to better options for consumers. A soft-seat train ticket from Shanghai to Beijing currently costs about 500RMB, while it it can also be possible to purchase air tickets for the same route at the same price. As the budget airlines expand into secondary and tertiary cities in Shanghai, an entirely new group of travelers will have their first trips in the air.
Hopefully even in this very competitive market, airlines will still keep the planes grounded in the event of inclement weather.
By Danny Levinson
Publisher, ChinaHospitalityNews.com
Danny has worked in China for over 8 years and travels frequently, mostly to Hong Kong, Beijing, and Shanghai. His views are his own and do not represent those of this publication, its investors, owners, or other staff. To comment on this article please email Danny at [email protected]–though he can't always promise a response, he will read all messages.