The Oriental Morning Post recently reported that Spring Airlines, the first low-fare carrier in China, announced plans to establish 40 cheaper airlines within five years. The new airlines will be based in Zhengzhou, the capital of central China's Henan Province.
An editorial in the China Youth Daily says the adoption of the low-fare airline system will help passengers save 30 percent on tickets and enjoy more convenient services.(Www.hxen.net)
The paper says three factors limit the development of low-fare airlines: government policies, and controllable and uncontrollable costs.
In order to reduce the controllable costs, which account for 30 percent of total operating expenses, Spring Airlines has strengthened management controls over the cost of human resources, food and luggage delivery. This measure eventually returned high profits.
The paper, however, points out that compared policies and controllable costs, the uncontrollable costs are much more complicated, making low-fare airlines hard to keep afloat.
Due to government monopolies, the costs of oil and building materials are one-third higher than average international prices.
Therefore, the uncontrollable costs that account for 70 percent of total operating expenses are the deciding factor in the development of low-fare airlines. |
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