China: ‘We urgently need to develop LCCs’ – is this the moment for Asia’s ‘last’ LCC market?
When CAAC vice-administrator Xia Xinghua proclaimed “We urgently need to develop LCCs” at a public forum in Beijing on 5-Nov-2013, it became clear that fundamental changes are on the way for low-cost carriers and the overall aviation market in China.
Within the overriding goal of ensuring stability for the Big Three Chinese flag carriers, it will not be a simple process. One thing is very clear however: the CAAC is serious about introducing significant change in the sector. This includes approving new carriers, reforming airport charges, introducing LCC terminals, changing aircraft acquisition processes and taxes, not requiring approval for new routes, and the ever-topical matter of airspace reform (albeit largely outside its control).
The forthright move is part of a wider commercial agenda of China's new leadership, which meets again on 9-Nov-2013, seeking to find the right formulas to allow greater play of market forces, while maintaining appropriate regulatory backstops. Purists will see this as being half pregnant. For example, in Oct-2013 the CAAC abolished minimum pricing requirements in the domestic market, an important step for LCCs; but price caps remain as a consumer protection measure – despite total price freedom being integral to LCC structures.
But China has repeatedly shown the ingenuity to evolve tailored solutions that fit the very different environment in this enormously complex country. There will be a "China solution" and it will allow more LCC operations – but there will be differences….
It will take some time for clarity to emerge on any new regulations, which the CAAC is drafting with an unspecified timeframe. Even then some regulations will specifically allow for interpretation by regional governments, which hold varying levels of autonomy. And ultimately it will have to be proved new measures can be realised and not just exist on paper. The flights may be short-haul (initially) but the measures are for the long-haul.
China has been referred to as Asia’s “last” market for LCC penetration, with LCC efforts well underway across Asia and major markets like India, Indonesia and Japan.
The potential is for the flourishing of an LCC industry, which in China currently has single-digit penetration.
LCC Capacity Share (%) of International Seats in China: 2001 - 2013*
This compares to far higher rates around Southeast Asia: 57% in Malaysia's domestic market and 61% in Indonesia's domestic market.
Mere establishment of LCCs in China may take some time, with sustainability and compatibility with existing players some time away.
LCC Capacity Share (%) of Seats Within Southeast Asia: 2001 - 2013*
The country's only full-scale LCC is Spring Airlines, which commenced operations in 2005. China West Air has transitioned to being an LCC while Lucky Air is a little bit more than half the size of Spring.
China domestic LCC seat capacity by carrier: 11-Nov-2013 to 17-Nov-2013
Lucky and West Air are entirely domestic carriers while Spring has about 10% of its seat capacity in the international market. Notably, the largest LCC on international routes to/from China is a foreign one – AirAsia. So while there is political rationale for LCCs, there is also very much a strong strategic justification as well. So long as China constrains its home grown industry, foreign LCCs will only become stronger.
China international LCC seat capacity by carrier: 11-Nov-2013 to 17-Nov-2013
Reforms are tied to change at the central government level: frugality and 'go west' included
The impending reforms are driven almost solely by the new government installed at the start of 2013. The government has pushed a broad agenda of partial deregulation, boosting efficiency and letting the market dictate rules. The exact nature of the reforms will trickle out beginning on 09-Nov-2013, the start of the Third Plenum.
These changes are against a backdrop of the government wanting to fuel growth by private investment rather than government debt, and allow consumption to play a larger role The government is also looking to boost economic development in the west of the country as well as open state-owned enterprises (a category that includes Air China, China Eastern and China Southern) to greater competition.
Aviation is one area the central government is looking to introduce change, given the exponential impact of additional services and passengers. Permitting LCCs and new private carriers is good for the market – and ticks a number of political boxes.
Mr Xia, speaking at the CAAC/ICAO LCC development forum in Beijing on 5-Nov-2013, said LCCs are “fighting against waste” and mesh with central government objectives of being “frugal…and saving resources”. The government, concerned about public impressions of high-spending officials, has clamped down. The party is investigating officials for corruption while official dinners have been abbreviated. The impacts have already touched air transport, with premium revenues dipping upwards of 20% due to travel restrictions.
China’s “Go West” strategy, designed to economically develop areas in the west, remains paramount, and the reckoning is more efficient carriers – such as LCCs – can transport more passengers more sustainably.
Regional subsidies need to be reduced
Currently regional routes are heavily subsidised: the CAAC in Aug-2013 said by the end of the year 21 airlines would receive subsidies for international services amounting to CNY433 million (USD67.7 million). While the subsidies are unlikely to go away, they could be reduced, even as services expand. Alternatively, subsidies to LCCs may be a better use of funds.
A low-cost platform also delivers a new growth channel. To paraphrase a statement by a representative of Xi’an Airport at the forum, there are no slots available on profitable routes and no profits on routes with slots available.
Changing the cost structure of airlines could make unprofitable routes profitable.
Total subsidy CNY433 million (USD67.7 million): as of Aug-2013
- China Eastern Airlines: CNY110.7 million (USD17.2 million);
- China Southern Airlines: CNY98.5 million (USD15.4 million);
- Tianjin Airlines: CNY58.8 million (USD92 million);
- Air China: CNY42.7 million (USD6.7 million);
- Sichuan Airlines: CNY40.0 million (USD6.3 million);
- Tibet Airlines: CNY22.3 million (USD3.5 million);
- Lucky Air: CNY12.2 million (USD1.9 million);
- China United Airlines: CNY7.6 million (USD1.2 million);
- China Express Airlines: CNY7.2 million (USD1.1 million);
- Okay Airways: CNY7.1 million (USD1.1 million).
LCCs are not the objective, they are the ‘means to an end’ – this will shape policy, at home and abroad
Major markets like the US and UK complain their governments do not appreciate the economic impact of airlines and the exponential contribution their passengers make.
This is the opposite of China’s position, as CAAC vice administrator Zhou Laizhen clearly stated: “LCC is not a goal. It’s a means to an end. It’s not just a business model.” Mr Zhou was equally clear on the implication for LCCs of that view: “The government should guide it, facilitate it.”
This follows China’s wider attitude towards aviation, as demonstrated by Guangdong Airport Management VP Chen Xiaoning, who is reported by WCarn to have said: “An airport is a public facility and it means more than profit and loss…It's pointless to focus purely on their profitability.”
China may very well overtake Gulf nations in stressing the economic importance of aviation. Already the long-haul growth of China Southern has stirred foreign rivals, albeit quietly. Further tying aviation to China’s expansion could bring profound change in relations with other nations. While the focus is on domestic services, international flights are not entirely forgotten.
(If there is unease today about the alleged government support for Gulf airlines, China will clearly be unfazed by any such niceties. Aviation is an essential underpinning of economic development and as such requires special treatment. For the time being, while Chinese airlines are still bit players in international markets, the issue is not particularly troublesome.)
But back at home, this view of LCCs will become contentious, just as it is already with state-owned full-service airlines. What is best for the country may not be the best for an airline which does have to focus on profitability and reports to the central government.
The focus of private carriers and LCCs is their role in the domestic market, but the CAAC sees them as further building relationships with other countries as they eventually fly internationally. The majority of Chinese carriers are entirely domestic, and only five have long-haul flights.
Chinese carriers have lacked the cost base and marketing strength necessary for sustainable international operations. New private carriers and LCCs – likely to be more innovative and lean than state-owned peers – could reverse this, once they are carefully screened to fly beyond China’s borders.
See related report: Chinese airlines focus on domestic growth while international expansion remains the poor cousin
CAAC studying foreign LCCs, but home-grown Spring Airlines is the inspiration
If there was a turning point in LCCs, it was a report earlier in 2013 from the CAAC looking into privately owned Spring Airlines’ competitiveness. The commissioning of such a report a few years ago, when Spring was well outside the establishment, would have been unfathomable.
Not only that, the report was glowing in its conclusions: Spring’s net margin was 41% compared to an industry average of 12%, Spring had a load factor of 94% compared to an industry average of 76%, a selling expense of RMB0.08 per ASK compared to an industry average of RMB0.41, maintenance expense of RMB0.13 compared to an industry average of RMB0.25, management cost per ASK of RMB0.11 compared to an industry average of RMB0.25, utilisation rate of 11.4 hours compared to China’s average A320 utilisation rate of 9.2 hours, and 95 employees per aircraft compared to the industry average of 122.
In short, China’s all-powerful regulator was proclaiming fledgling Spring as a model for efficiency on nearly every metric. Even competitor airlines have acknowledged – jealously – Spring’s efficiency and the impact of it on the CAAC's thinking.
Spring Airlines annual passenger numbers: 2008-2012
The CAAC is also actively learning from foreign LCCs and governments in order to shape its own LCC policy. The CAAC regularly asks questions and more recently has sent teams abroad to study LCCs. While some details go astray, their interpretation of LCCs like Ryanair and Southwest is largely accurate.
Airlines are seizing reform momentum to push for their own changes
Some of the government’s objectives could theoretically be accomplished by an efficient state-owned carrier. But an efficient state-owned carrier is often an oxymoron, and China’s big three state-owned carriers – Air China, China Eastern and China Southern – remain woefully inefficient, as the CAAC’s report on Spring helped demonstrate.
This inefficiency is not entirely their fault. Being state-owned enterprises, they cannot reduce often-bloated workforces and their planning is coordinated by the central government in five-year plans. The ongoing problem is that the government has driven passenger growth while efficiency has taken a backseat, so airline growth rates have been higher than each airline would have preferred on a commercial basis.
More recently, China’s slowing GDP has reduced demand, but the state-owned airlines have largely been unable to change their fleet plans since they were constructed at the turn of the decade as part of the 12th fifth-year plan covering 2011-2015. Elsewhere airlines regularly adjust fleet plans based on the economic environment. Some airlines such as Qantas routinely tout their ability to quickly change fleet plans.
The reforms will necessarily bring added competition, at varying levels, to the existing airlines. Juneyao Airlines intends to start an LCC in Guangzhou, the home of China Southern. But an LCC in Beijing, the home of Air China, will likely have to wait until later this decade when the new airport is completed. Also LCCs will surely have limited impact on trunk routes, where most of the money is made. The top 15 routes in China comprise about 20% of ASKs and a handsome share of profits.
Top 15 Domestic Chinese Routes Ranked on Seat Capacity: 4-Nov-2013 to 10-Nov-2013
So while the reforms will challenge (again, at varying levels) state-owned carriers, the existing carriers can use this reform atmosphere to argue for their own changes, namely greater autonomy, especially around fleet planning.
Mr Xia told the symposium that “the CAAC will try not to interfere” in fleet planning as has been the practice in the past. This should be read cautiously. There is almost a mini industry and regulatory division for national fleet planning, and it is rare for bureaucrats to regulate themselves out of a job. But the intent is vividly apparent.
The state-owned carriers may need to permit new carriers, including LCCs, into their backyard, but for the foreseeable future they will continue to have extensive influence on the extent of their reach. They will not hesitate to use their traditional lobbying power, with Air China most prominent in that respect.
LCCs will emerge from existing carriers, new private entrants and subsidiaries of full-service airlines
Among the clear lessons that the CAAC will have gleaned from its extensive research is the special nature of the Asia Pacific LCC industry.
Emerging much later than most other regions of the world, Asia Pacific LCCs have been born into a very different environment. It is one where international operations play a major part; where LCC subsidiaries of full service airlines are the rule rather than the exception; where cross border joint ventures have driven international liberalisation and allowed greater operating efficiencies for pan-Asian branded LCCs; and where long-haul LCCs are a fact of life rather than a theoretical impossibility.
Each of these features will have to be accounted for in formulating a durable LCC policy for China.
Nonetheless, for the time being, the CAAC's focus seems certain to be on domestic operations, stimulating domestic travel and seeking to achieve policy goals such as building bridges on thin routes to the western part of the country. Thus joint ventures with a foreign partner – such as AirAsia, Jetstar, Lion Air or Tigerair – are probably not immediately on the horizon.
(1) Existing smaller airlines metamorphosing
The most likely sources of the new LCCs will be from existing smaller carriers that predict better results on an LCC platform, and/or want to take advantage of any government subsidies and incentives for LCCs. (What these subsidies and incentives might be is not clear, nor the tricky matter of needing to define what is and is not an LCC – and thus eligible.)
Already China West Air, part of the expansive HNA Group and based in Chongqing, has adopted the LCC model. The reckoning is that being based in Chongqing in China’s west where salaries are less and travel propensity is lower, the low-cost model is better suited. This will likely be replicated at some of the numerous small airlines that comprise China’s fragmented domestic market.
See related reports:
- HNA's China West Air to become a low-cost carrier – the catalyst for a LCC boom in China?
- China approves more start-up airlines but they risk being starved of scale in a fragmented market
Seat share of China's domestic market: 07-Oct-2013 to 13-Oct-2013
(2) New private entrants
There will also be new private entrants. There are some 11 carriers in the start-up/approval phase.
Business model details are limited, but some by the time of their launch will likely follow the LCC platform, either out of opportunity or encouragement. Logically, under a new regime, any business model that shows the appropriate signs of frugality will receive more generous treatment.
One of those 11 start-ups is an LCC subsidiary from Shanghai-based full-service carrier Juneyao Airlines. Juneyao may be the first to have anLCC subsidiary, but it will probably not be the last.
(3) New LCC subsidiaries of the Big Three
It is a fair prospect that Air China, China Eastern and China Southern will shortly establish LCC subsidiaries. (Such a dual-brand approach in China raises a series of questions and will be examined in a follow-up report.)
Air China has studied the LCC model in the past: China Eastern is currently gaining direct LCC exposure via its joint venture with Qantas and Shun Tak Holdings in proposed carrier Jetstar Hong Kong; and China Southern is unlikely to want to be the sole standout.
Goals include growing western China routes, but confining the experiment will not be easy
Previous comments from the CAAC have focused on new carriers and carriers in the western region adopting the LCC model while existing major carriers adopt LCC tactics. But the carriers are at a relative loss of how to reduce their cost base considering fuel, airport charges, labour and aircraft acquisition are largely outside of their control.
The comments also indicate there could be support for establishing LCCs in one geographic area. The effect of this would be to introduce the concept (and the example for others to follow) while limiting their impact, and/or provide a test case to observe how the model functions under specific conditions.
But confining the impact will not be simple – especially given the difficulties in defining specific models, once pricing and entry rules are relaxed. China cannot simply have a separate garden where the LCCs play in. Even carriers based in regional locations will be drawn to trunk routes, and will especially want to enter if a full-service carrier’s subsidiary enters.
One encouraging sign is that before this idea can be taken further it is being overtaken as Juneyao looks to establish an LCC – not in a regional location but at Guangzhou, the country’s second largest airport. Zhejiang Loong is planning a base in well-developed Hangzhou. But it will be important to recognise these not as exceptions but the trend.
Cross-ownership and partnership amongst Chinese carriers: Oct-2013
The policy changes, from checked luggage to terminals to aircraft acquisition
(1) Approval for new carriers, especially private ones
Although the CAAC late in the last decade technically suspended new airline applications after a number of launches – and failures – created some disorder, it continued to approve new airlines launched in partnership with an existing carrier, such as Air China’s role with Tibet Airlines and Qingdao Airlines.
But in May-2013 the CAAC signalled a new direction by approving Ruili Airlines, an entirely private carrier without any equity ties to an existing airline. Additional approvals are expected in the short term. Ruili’s business model is unknown, but Mr Xia outlined as a priority the approval of private investment in LCCs and reducing red tape to allow major airlines to establish LCC subsidiaries. Private investment coincides with shifting economic growth from a state-led model.
See related reports:
- China may allow LCCs and new entrants in airline sector reforms, but no deregulation for now
- Chinese airlines focus on domestic growth while international expansion remains the poor cousin
(2) CAAC will ‘try’ to limit its fleet planning influence, encourage large aircraft orders
For new airlines, approval is one matter and survival another. For the latter, the carrier will need scale, and to achieve that will require government approval for aircraft imports. While the CAAC says it will ‘try’ not to interfere with fleet planning, as noted above, that is not the limit of pending reforms.
Mr Xia told the symposium it was difficult for Chinese airlines to order in bulk, something that is possible with central purchasing, and the CAAC hoped this would change. This is a signal that the major manufacturers will be watching with interest; supporting a more flexible purchasing role that helps support the CAAC's new objectives would certainly be regarded favourably.
Mr Xia hopes import taxes will also be reformed as the accumulated tax rate for some components can be as high as 24%. Mr Xia spoke of the need to find an “appropriate” tax.
(3) Low-cost terminals are being studied by airports and incorporated into central planning
With double digit annual growth projected for the foreseeable future, infrastructure spending is inevitably a major part of any airline policy goals. The introduction of LCCs will reshape the design and scope of airport development, so an integral part of planning for this new category must involve aspects such as the need for low-cost terminals (LCCT) at existing and new facilities.
The CAAC, with Spring Airlines and economy planning unit National Development and Reform Commission, are examining how and where to introduce LCC terminal/facilities in China, which currently lacks a single LCCT. Besides the LCCT examples on other continents, there are examples closer to home.
Kuala Lumpur has an LCCT while Singapore is constructing a new one (having closed its earlier Budget Terminal), Bangkok has converted former airport Don Mueang into a low-cost facility, Taipei has spoken of converting a former catering facility into an LCCT, and in Japan there is a low-cost terminal at Okinawa Naha and facilities at Osaka Kansai with LCCTs plans elsewhere, including Tokyo Narita.
For LCCTs the CAAC is considering both renovations of old buildings and greenfield sites. Shanghai, which hopes to have an LCC penetration rate of 19% by 2020 (up from 2013’s figure of about 8%), will renovate terminal one at Hongqiao airport for Spring Airlines, the first major move to have airport development in collaboration with LCCs.
Beijing and Guangzhou could also see LCC facilities, but Beijing is unlikely to see one until its new airport opens later this decade (a low-cost facility may not be at the new airport but rather the current one, Beijing Capital).
Beyond this, the CAAC is open to bringing LCCTs into its master planning for renovating airports, building new airports and feasibility studies.
(4) Much of the practical implementation of low-cost operations will be localised
The discussion on LCCTs was a good example of how Chinese policy is confronting reality. While there are top level plans, the details and execution are left to regional bodies – be it CAAC bureaus, governments, or airports. So while the CAAC is making encouraging but noncommittal remarks towards LCCTs, individual airports are pressing ahead, such as Shanghai Hongqiao renovating terminal one to suit Spring.
With low-cost terminals or facilities comes the question of pricing. At a basic level, LCCs expect that by using simpler and thus cheaper facilities, they should receive discounted fees. As a more complex argument, LCCs see that by having flights with higher density and load factors, they are bringing more passengers per aircraft than full-service competitors.
Not only is the airport as a result receiving greater volume, the low-cost nature of the business means passengers typically spend more at airport concessions, either because they have no lounge to retreat to, want food and drinks before their flight that does not provide any, or have the view that they saved money on flights so can spend more at airport shops (all features experienced at LCC facilities in Asia Pacific).
A Shanghai Airport representative said his management was of the opinion lower-cost facilities should mean lower charges for airlines. But some airlines do not necessarily conform to a particular model and, given that charges are controlled by the government which will not want airports to see lower revenue, the picture will be uneven. The high profits of major airports is a source of frustration for Chinese airlines, as is the case with airlines elsewhere in the world. However, the CAAC says that while it has set an unspecified maximum threshold airports can charge, there is no minimum and airports have the power to discount landing fees.
(5) Some new routes will no longer require approval
The CAAC is beginning to lift route restrictions by shifting from a model where airlines require advanced approval towards merely notifying the regulator where they will fly. However, this will initially be implemented only on routes within Inner Mongolia.
This approach of liberalisation in a confined geographic area is consistent with historical trends, such as the first special economic zones. More recently China permitted 72-hour visa-free stays (with some caveats), initially in Beijing and then Shanghai, Guangzhou and other cities.
While there is now momentum in the route authority process, it will still be some time before there is de-regulation in the international market where Chinese carriers typically cannot fly a route if another Chinese carrier is already present on the same city pair. This rule for example limited China Southern’s A380 deployment as other carriers – notably Air China – were already present on routes where the A380 was best suited. Hainan Airlines has also been held back by lack of opportunities on blue-chip routes.
(6) Air traffic reform reaches limits of 'technical' change; 'institutional' change is needed
The CAAC does not pretend the lack of airspace – 80% is controlled by the military – is a problem. The CAAC highlighted improvements, such as reducing the takeoff interval at Beijing from two to one minute and the planned opening of a new Beijing-Kunming air corridor by the end of the year. But the CAAC acknowledged more needed to be done – although this is largely outside its jurisdiction.
China United Airlines president Yao Weihui minced no words, telling the symposium: “Airspace reform is so urgent. We have to reform our systems. Without this reform it is not possible to serve the public.” He pointed to his carrier’s all-737 fleet achieving a utilisation rate of about nine hours, which is negatively impacted by air traffic delays, and remarked: “It is an institutional problem, not a technical problem.”
This view about inefficiency was affirmed by CAAC ATC office for industry regulation deputy director Jiang Tao, who said, “we can only solve these at the technical level.” The connotation of course is that the CAAC is limited by the military.
The first steps are in the right direction, but there is still a marathon to run
The changes implemented and planned, or at least spoken of, have occurred at a rapid pace. At the start of 2013, few would have predicted the conversation at the end of 2013. This is reminding airlines that when China (finally) sets its sights on a task, matters move very quickly.
Cross border joint ventures may be introduced, like it or not, through sheer market pressure
A vital feature of Asia Pacific's LCC movement, cross border JVs have become almost essential for the new generation of branded airlines.
But in a primarily domestic strategy, the CAAC's attention is closer to home. Thus, for international carriers, approval of a foreign JV may not be up for discussion now. This could change sooner rather than later, and first mover advantage is usually significant, if the regulatory environment supports it. (Early entry means securing not just network access, but financing and leasing arrangements, as well as potentially launching an IPO before investors become weary, as has occurred in other markets with multiple airline IPOs.) But China will want its airlines to be partners, rather than silent local shareholders.
This could be problematic for AirAsia, which after its failed attempt at AirAsia Japan with All Nippon Airways, is reluctant to partner again with an airline. Jetstar and Tiger – and the newer Lion Air and VietJet – may be more open. Certainly Jetstar hopes China Eastern will call on it as partner for a mainland operation. For now, Asia’s major LCCs seem to be watching the developments and awaiting clarity rather than circling on partner. Meanwhile though, those same JVs are becoming increasingly powerful as they "join up the dots" of their various operations.
Subsidiaries of the Big Three could redefine the market
HNA continues to show agility by deciding to transition West Air to an LCC before the LCC topic emerged publicly. Juneyao – another private carrier – is also moving quickly, and plans are underfoot elsewhere. But LCC subsidiaries from Air China, China Eastern and China Southern will likely take longer, and will change the framework of LCCs in China. There are already significantly more questions than answers, and bringing in LCC subsidiaries from the mighty and entrenched carriers effectively re-defines the market.
The CAAC is asking, learning and shaping. Running a Chinese airline may be one of, if not the, most complex position in the industry. The CAAC does not have it easy either.
The CAAC’s policies, and those from other government bodies, will impact economic development in the coming decade. Some – but not too much – wavering (or evolutionary "flexibility") should be permitted. Basic details of the new strategy are still being worked out, and will be for some time. As with most matters in China, development is occurring on a compressed scale.
Avoiding dysfunctionality is a major driver
What China wants to avoid at all cost is any scenario that faintly approaches the dysfunctional aviation sector in the world’s second most-populous nation: India. So allowing time to get it right, or experiment and make amendments, is worthwhile.
Regulation becomes comfortable, especially as it is already such a dominant feature of the Chinese system. The CAAC is looking to step up penalties on delayed and cancelled flights, and wants to ensure airlines are upfront about what is and is not included in the ticket price. The former has worrying echoes of US or EU delay regulations, while the latter may be innocuous or an opportunity for over-extended regulation. LCCs will argue – and with good cause – that the greater the level of regulation of details, the more LCCs are forced to behave like full service airlines. Consumer protection regulation is essential, but hopefully the Chinese model will learn from the mistakes made in Europe and the US, with their over-enthusiastic wish to regulate every detail.
Perhaps the biggest question for LCCs and new private carriers is how much independence they will be given from Air China, China Eastern and China Southern, which have mighty lobbying positions and can change the academically well-crafted policies.
A free market, but partially regulated...
This is the larger question China is facing with its reform programme: how much regulatory control to give up.
Some call for a “leap of faith”, and this would be most welcome but is also least likely.
Perhaps the starting point for a new regulatory regime is to recognise the historical damage that has been inflicted on the airline sector by seeking to protect airlines "in the national interest". Ironically, much of that damage has fallen on the very same airlines that are supposed to be the beneficiaries of that support.
Air China, China Eastern and China Southern will not have their umbilical cords cut overnight, but they should prepare for a more rapid move towards greater efficiency. They should now seek support from Beijing to create a platform for the greater efficiencies they need – rather than being protected from other industry participants. With that will come the independence they too are seeking.