After having been in business for just a month, China's first privately-owned carrier Okay Airways has been forced to recognize that local regulations do not allow a truly low-cost carrier.
Passengers are having a hard time to spot the difference between the private airline, launched with much fanfare last month, and its much larger rivals in the state-owned sector, the China Business Weekly said.
The ticket price is essentially the same they would have to pay for flying with the industry's big players, and cabin services -- right down to the inflight meals -- are virtually identical, according to the paper.
"There are many insurmountable obstacles to operating low-cost flights in the current environment," Okay Airways president Liu Jieyin said.
Okay Airways, which received the final go-ahead from the civil aviation authorities early this year, expects to run air cargo and express services, passenger charter services and ground distribution.
At the moment, the airline company has been given approval to fly on six domestic routes, with a leased Boeing 737-900 jet, according to the paper.
While it is headquartered in nearby Beijing with a registered capital of 300 million yuan (US$36 million), it operates out of Binhai International Airport near the port city of Tianjin.
This is in order to reduce costs, as the fledgling airline hopes to take advantage of lower landing fees, the paper said.
But no amount of creative cost cutting may be sufficient to make the company's services cheaper than those of its larger competitors.
"There is a long way to go before a budget carrier takes shape in China," Liu told the paper. "It may emerge within three or five years."
Landing fees, import tariffs and fuel costs are fixed, meaning private companies have no control over about 80 percent of their total operating costs, the paper reported.
While these conditions are the same for everyone, private carriers are nevertheless at a disadvantage, because they face more difficulties obtaining capital from the banks, the paper said.
Three other private carriers are waiting in the wings to begin operations -- United Eagle Airlines in the southwestern city of Chengdu, Spring International Airlines in the eastern city of Shanghai and Huaxia Airlines in China's west.
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