China United Airlines announced on Wednesday that it has transformed to a low-cost carrier and that fares will be 20 percent to 40 percent lower than previous fares. This is China’s first state-owned budget airline.
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Controlling partner China Eastern Airlines said the move is a response to the trend of civil aviation reform and will fill market gaps in the Beijing-Tianjin-Hebei economic belt.
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Currently, the company mainly depends on two airports, Beijing Nanyuan Airport and Guangdong Foshan Shadi Airport. There are also routes to Inner Mongolia and China’s northeastern region.
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By the end of this year, China United Airlines will have 31 B737s in operation, and the figure is predicted to reach 80 in 2019.
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Since the start of the year, low-cost carriers have been attracting much attention. After China’s first budget airline, Spring Airlines, had successfully established itself in the market, the private company Jiuyuan Airlines, a Guangzhou-based low-cost subsidiary of Shanghai Juneyao Airlines, also announced its launch.
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In the aviation industry, costs are usually divided into controllable and uncontrollable. Aircraft, materials, fuel and other non-controllable costs account for the major share. Therefore, the success of a budget airline depends on both its operations and its uncontrollable costs.