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….