A recent Knowledge@Wharton provides a great international perspective - including from the US, Europe and China - on the dynamics of low-cost airline industry.
Some extracts from the article's section on the action in China:
Over the last six months, China's airline industry, which for a decade hadn't registered any new members, showed sudden signs of growth. Three private airlines -- Okay Airlines, Spring Airlines and United Eagle Airlines -- made their debut. Even more notably, Shanghai's Spring Airlines became the first carrier in China to offer low-cost airfares. On July 18, the opening day of the carrier, a flight from Shanghai to Yantai cost 199 yuan (about $24). The move by Spring Airlines -- which is owned by Shanghai Spring Travel Agency, the largest privately-owned travel agency in China -- stirred discussions in the media about low-cost airfares. In April, Thailand's Asia Airline opened its China flights and charged 99 yuan ($12) for a ticket from Xiamen to Bangkok. The move marked the first step by foreign air carriers to launch low-cost services.
...In addition, according to press reports during the World Economic Forum in Beijing in September 2004, CEOs from some of the world's well-known low-cost carriers -- including Asia Airline, Britain's Easy Group and Australia's Qantas -- all said they believed that it's time for them to enter the Chinese market, noting that in developed countries, an air ticket on average represents 0.5% of a passenger's annual income, while in China the ratio is as high as 10% to 15%. This suggests a huge demand from Chinese consumers for low-cost air services.
...The year 2004 saw a record for China's aviation industry in terms of transportation volume, which jumped 35.3% over 2003. A total of 121 million people -- or one in every 10 Chinese -- traveled by air, up 38.1% from a year earlier. Like the rest of China's economy, the air transportation industry has become one of the fastest-growing industries and has attracted attention from carriers throughout the world.
Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.