Asia's budget airline boom bypasses China

HONG KONG — When businesswoman Ren Hong flew home after a recent trip to Beijing on state-owned Air China, she was hoping for a decent inflight meal to tide her over until she got back to the spicy cuisine of her native Sichuan province.

The airline's meager offering, which was little more than "just bread," was a galling experience for Ren who wondered why the carrier didn't cut both the pretense of full service and the price of the ticket.

Her gripe highlights how Chinese travelers have been left out of the massive budget airline boom that has swept Asia. From almost none a decade ago, the region now has more than 50 low cost carriers. The fast growth of no-frills airlines such as AirAsia and the slew of recent start-ups including Singapore's Scoot and AirAsia Japan underline surging demand in the region for affordable air travel. The rise of budget carriers in Asia follows similar expansion in Europe and North America in previous decades.

But in China, where the government still keeps tight control of the rapidly growing airline industry, three big state-owned carriers dominate. Aviation authorities' efforts to shield them, as well as keep the industry from growing too rapidly and compromising safety, mean travelers like Ren pay up to twice as much.

"I've found that flight tickets domestically sometimes are more expensive than the international ones due to monopolization and less competition," said Ren, a 37-year-old who runs an export business and also blogs about her travels in her spare time. Even for tickets on Shanghai-based Spring Airlines, considered China's only discount carrier, "their price is just as same as the big airlines" during high season, she said.

While Chinese travelers are benefiting from foreign budget airlines flying to some Chinese cities, analysts and consultants say government policy measures are preventing the domestic aviation market from opening up too quickly. China's domestic market is one of the biggest prizes in Asia's travel industry, with 264 million passengers last year, according to the Civil Aviation Authority of China, which forecasts the number will grow about six-fold by 2030.

"The domestic market in China has more or less remained a fortress," Xiaowen Fu, an aviation expert at Hong Kong Polytechnic University, said at a recent conference in Macau organized by the Sydney-based CAPA-Center for Aviation.

Like other essential industries in China, the policy measures are aimed at protecting the chosen few national champions from too much competition. China's three major state-owned airlines, Beijing-based Air China Ltd., Shanghai-based China Eastern Airlines Corp. and Guangzhou-based China Southern Airlines Ltd., carried 191 million passengers among them in 2011. But in the first half of 2012 their profits collapsed because of higher fuel prices and foreign currency losses. The rest of the market is divided between smaller state carriers — some owned by the big three — and a handful of private operators.

An unsurprising outcome of the cossetted state airline industry is a perpetual sense of grievance among travelers at poor service and lack of choice.

"The food on Chinese airlines is worse and more basic than it is on the international airlines," said 25-year-old Li Peng, who recently quit his job in Beijing to travel overseas for a year.

"And when the flight is delayed, I never get any feedback after my complaints. Many flights are delayed more than two hours" he said. "I do wish there were more budget airlines, especially in China," he said.

China's civil aviation policy hinders the country's budget airline industry in two ways, according to experts. First, it makes it almost impossible for a private company to start a new airline. Second, the policy limits growth by existing airlines, including state-run carriers, through measures including requiring approvals for new airplanes and routes.