LCCs Go West: Chongqing Airlines Transforms

Airline ownership within China follows several models. The largest and most powerful airlines are Government owned, there are a raft of government and local government joint ventures, a small number of truly private airlines and some companies either owned or partially owned by state owned enterprises. Chongqing Airlines falls into the latter category being a joint venture between the Government owned China Southern (60%) and the Chongqing Municipal Development & Investment Company (40%).

As its name suggests Chongqing Airlines is based at Chongqing Jiangbei International Airport. Chongqing (formerly Chungking) is a major city of over 28 million in Southwest and one of five national central cities in China. The airline began operations on July 8, 2007 connecting Chongqing with Shanghai Pudong. Operations now encompass a significant portion of China from Lhasa to Beijing to Xiamen from its Chongqing hub.

Fleet growth has been relatively steady with the airline only accepting its 11th A320 series aircraft in July 2013 and not adding anymore as of yet. The initial fleet was a single A320 though this was joined by three more before the end of 2007. The current breakdown is 7 A320s and 4 A319s.

Chongqing itself is a very competitive market. In November 2014 no airline grouping had more than 20% of the market with China Southern sat on 12.4%. Chongqing Airlines codeshares with its parent so it is difficult to see its own share of the pie, however CZ is outgunned by Air China, Sichuan Airlines and the HNA Group (Hainan and West Air in this case). Development of the Western regions of China has been a focus for the Government and between 2010 and 2011 Chonqjing Jiangbei grew its passenger numbers by 18.9% and it was the 10th busiest airport in China. Annual passenger volumes at the airport have increased from only 11.1 million in 2008 to 22.1 million in 2012.

China is keen to develop low cost airlines and one of Chongqing Airlines primary competitors, HNA Group's West Air, has transitioned to the low cost model. The lower GDP of the western regions is seen as an important factor in enabling greater sustainability for airline operations fitting with the low cost structure of LCCs. The actions of the CAAC however have not always enabled LCCs to develop even since the concept gained official blessing. China Southern is in the process of converting Chongqing Airlines to the low cost model and in January 2014 the airline began to remove first/business class seats from its A319s. The initial signs are promising as the USD17 million loss reported in 2013 was turned into a USD13.2 million profit in 2014. By May 2015 the airline had reconfigured 7 of its fleet and with the airline increasingly familiar with the LCC model it should be expected that growth is just around the corner.