China may allow LCCs and new entrants in airline sector reforms, but no deregulation for now

China is planning reform in the world's second-largest airline sector. Where past initiatives focused squarely on volume expansion, the intent this time seems to be around efficient growth. The changes coincide with the Nov-2013 Third Plenary Session of the 18th CPC Central Committee, which itself is expected to bring significant reform now that the country's new leaders have been elected for about a year.

China's aviation regulator the CAAC has already signalled greater support for low cost carriers, existing and new. LCCs have occupied an undefined space where they are neither prohibited outright nor permitted, but the CAAC has now taken note of their efficiency. Less clear reform areas are the country's one airline-one route policy as well as breaking up technology monopolies, a policy towards government travel, airspace reform and ultimately structural changes in bloated state-owned enterprises.

The challenge is to move airlines along without disrupting the status quo, so full deregulation is understandably off the cards. As a result of reforms, state-owned carriers will likely have to deal with more competition, but they could benefit from other reforms in areas such as technology.

As to be expected - witness the Shanghai Free Trade Zone - goals will be apparent, but details will take some time to work through. But there is little doubt there will be positive - and perhaps even momentous - change.