China launches first state-owned budget airline

China United Airlines announced on Wednesday that it has transformed to a low-cost carrier and that fares will be 20 percent to 40 percent lower than previous fares. This is China's first state-owned budget airline.

Controlling partner China Eastern Airlines said the move is a response to the trend of civil aviation reform and will fill market gaps in the Beijing-Tianjin-Hebei economic belt.

Currently, the company mainly depends on two airports, Beijing Nanyuan Airport and Guangdong Foshan Shadi Airport. There are also routes to Inner Mongolia and China's northeastern region.

By the end of this year, China United Airlines will have 31 B737s in operation, and the figure is predicted to reach 80 in 2019.

Since the start of the year, low-cost carriers have been attracting much attention. After China's first budget airline, Spring Airlines, had successfully established itself in the market, the private company Jiuyuan Airlines, a Guangzhou-based low-cost subsidiary of Shanghai Juneyao Airlines, also announced its launch.

In the aviation industry, costs are usually divided into controllable and uncontrollable. Aircraft, materials, fuel and other non-controllable costs account for the major share. Therefore, the success of a budget airline depends on both its operations and its uncontrollable costs.