AirAsia China: establishing the model for JVs in China's complex aviation market

The AirAsia Group plans to establish AirAsia China, a cross border JV, with non airline Chinese partners. The startup will be based in one of China's secondary cities: Zhengzhou, which is not a major point of demand and already has above average LCC representation. But Zhengzhou is eagerly building an aviation hub, and this is critical for AirAsia China to receive government backing for this first in foreign airline JVs of this nature.

Launching in a major Chinese city was not going to happen - from a slot and protectionism view - but Zhengzhou is a start. AirAsia Group CEO Tony Fernandes called AirAsia China "the last piece of the puzzle for AirAsia", but AirAsia's full China aspiration and entering major markets may take more than five, possibly 10, years to materialise.

AirAsia has the distinction of becoming the first pan Asian LCC group to have a China unit. But the announcement of AirAsia China provides a greater reflection on the state of Chinese aviation - layered regulators, hub ambitions, home grown aircraft - and thus is a global case study for how to succeed in Chinese aviation.

As some airlines struggle with mere slots and codeshares, AirAsia will set up a local airline with a foreign (but geographically accurate) brand. AirAsia China will be one of more than a dozen global JV airlines, but the nuances of China mean that AirAsia's announcement is one of the most profound - from a partnership perspective.