Competition Between Full-Service Carrier and Low-Cost Carrier and the Impact of COVID-19 Pandemic: Evidence From China

Xiangru Wu, Kun Wang and Xiaowen Fu

A chapter in Airlines and the COVID-19 Pandemic, 2024, vol. 11, pp 145-174 from Emerald Group Publishing Limited

Abstract: This chapter reviews the competition between full-service carrier (FSC) and low-cost carrier (LCC) in China. More importantly, we discuss the impacts of the COVID-19 pandemic on FSC–LCC competition. Specifically, the airlines' route choices and also the market contact between FSCs and LCCs in China are examined and discussed. Our review results suggest that, despite the rapid growth of the independent LCC Spring Airlines and the establishment of new subsidiary LCCs by FSCs, China's LCC sector still plays relatively minor roles compared with many fully deregulated markets. Subsidiary LCCs serve more as competitive tools for their parent FSCs, primarily deployed on their parent FSCs' routes to jointly compete against rival FSCs. This competition is primarily focused on niche regional markets rather than engaging in full-scale competition. Spring Airlines also strategically avoided direct head-to-head competition with FSCs before the pandemic by mainly connecting with the secondary cities. However, the pandemic has introduced significant changes, notably the network differentiation between FSCs and LCCs in mainland China. With the relaxation of government's regulations on airline route entries into hub airports during pandemic, Chinese LCCs have shifted their focus toward serving more dense routes, especially those connected to the top five cities. This shift has led to an intensified head-to-head competition between LCCs and FSCs following the outbreak of the pandemic. Such a process is likely to continue in the years to come. This chapter's discussions could also provide new insights into LCC development and the impact of the pandemic on FSC–LCC competition interactions to supplement existing literature studying other major airline markets.

Keywords: COVID-19 pandemic; low-cost carrier; full-service carrier; route choice; China (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:aiaezz:s2212-160920240000011007

DOI: 10.1108/S2212-160920240000011007

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