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South China model of low-cost airline: Jiuyuan Airlines starts maiden flight next week
ReleaseDate: 2014-10-27

 November 26, 2014   21st Century Business Herald

45-year old Ji Guangping tried to open new battleground in Guangzhou with low-cost airline model.

On the afternoon of November 25, Jiuyuan Airlines announced at Guangzhou Baiyun Airport that, on December 2 its first flight route Guanghzou-Zhanjiang will formally start maiden flight, which ushers in the first low-cost airline based on South China area.

Following the report last year that JuneYao Airlines has plan to develop low-cost airline, this Guangzhou-based new airline company received high level of concern: First, it was confirmed that Ji Guangping would resign as Vice President of JuneYao Airlines to focus on new company’s business, subsequently it placed the order for 50 737 serial aircrafts from Boeing. The industry circle closely monitored its movements, how will this new action-driven airline company operate? And what impact will it bring to the market?

At the press conference on November 25, Ji Guangping, President of Jiuyuan Airlines Co., Ltd, gave detailed explanations on Jiuyuan Airlines’ base selection, flight route planning, market positioning and enterprise operation aspects. According to his introduction, Jiuyuan Airlines will center on Guangzhou, its flight routes will basically cover 5-hour flight circle departing from Guangzhou, in the future it will open flight routes to East Asia, Southeast Asia, Northeast Asia, South Asia and even Australia. To accomplish these targets, Jiuyuan Airlines next year will grow to 8 aircraft, by 2020 the 50 aircraft order signed with Boeing will be fully delivered.

21st Century Business Herald noticed that, flights.ctrip.com, www.qunar.com and Nanhu Travel, a local big travel agency in Guangzhou, were invited to attend the press conference on November 25, these three enterprises will very likely join the marketing for Jiuyuan Airlines.

Jiuyuan Airlines’ official website, APP client end and WeChat platform have all been completed, and will go online in the near future.

First low-cost airline in South China

Jointly invested by Shanghai JuneYao Airlines Co., Ltd, Elion Resources Group Co., Ltd, Macrolink Holding Co., Ltd and natural person Ji Guangping, Jiuyuan Airlines has a registered capital of RMB 600 million yuan, in which JuneYao Airlines contributed 414 million yuan in cash and kind, accounting for 69% of registered capital, making it a controlling shareholder. It is worth noting that, Ji Guangping himself contributed 36 million yuan in cash, accounting for 6% of registered capital.

After obtaining CAAC setup approval at the beginning of this year, Jiuyuan Airlines quickly entered Renhe Town near Baiyun Airport, and began to prepare for flight opening. To build up Jiuyuan Airlines, Ji Guangping brought personnel from JuneYao Airlines, chief persons of the technology, management, operation, and repair departments all came from JuneYao Airlines.

Why choose Guangzhou? This is the first question that Jiuyuan Airlines needs to answer before starting operation. Ji Guangping said, Guangzhou has a large population of industrial and commercial trade workers from both home and abroad, it is also has the most concentrated customer groups represented by laborers who are highly sensitive to prices, furthermore Guangdong also boasts very prominent economic standing across the nation.

“I summarize its features as plenty of population, plenty of money, and plenty of opportunities, these three “plenties” signal brisk air travel demand in the Guangdong area, and indicate the vast space in Guangdong’s civil aviation market.” Ji Guangping said.

After CAAC re-started approval of passenger aviation airline last year, new airline companies mushroomed in Yunnan, Shandong, Fujian, Guangxi and even Urumqi. “As the southern gate of China’s civil aviation territory, in the recent two years Guangzhou Baiyun Airport witnessed no setup of emerging base airline company, which is undoubtedly regrettable.” Ji Guangping said.

What’s more important, low-cost airline is a blank in South China. Currently, low-cost airlines only include Spring Airlines, West Air under Hainan Airlines and China United Airlines under China Eastern Airlines, and China Express Airlines, whose bases are deployed in Shanghai, Chongqing and Beijing respectively. The setup of Jiuyuan Airlines will fill a void of low-cost airline in Guangdong and even the entire South China region.

On May 14 this year, Jiuyuan Airlines signed the biggest single aircraft order among China’s private airlines with Boeing. According to the purchase agreement, Jiuyuan Airlines purchased a total of 50 Boeing 737-800 model and next generation 737MAX aircrafts. The total cost based on catalogue price topped USD 6 billion, it is estimated in 2020 its fleet size will reach 60.

Nonetheless, since this order will start delivery in 2016, in August this year Jiuyuan Airlines leased two Boeing 737-800 aircrafts from Transportation Partners, a leasing subsidiary of Indonesia Lion Air, hoping to start operation with the help of leasing order before the above big order finishes deliver. Ji Guangping further told the journalist that, by 2016 Jiuyuan Airlines will reach the fleet size of 8 aircrafts through aircraft leasing.

Discount ticket and stringent cost control

It is worth mentioning that, Jiuyuan Airlines did not use the A320 aircraft model adopted by its parent company JuneYao Airlines, instead it switched to Boeing 737 single aircraft model fleet, and changed it to total economy class model. Ji Guangping explained, this is because Boeing 737-800 has more seats after removing first class cabin, and it is therefore considered it can better fit the operation model of low-cost airline.

21st Century Business Herald noticed that, the painted Boeing 737-800 aircraft of Jiuyuan Airlines has a total of 189 seats, 9 more than that of A320. Nevertheless, the Boeing side which attended the press release conference stressed the point to journalists that the current seat interval is 30 inches, which is still wider than the average 28 inches in the low-cost airline market.

The two 737-800 aircrafts now available for Jiuyuan Airlines were delivered in August and September, in which the first one is now under test trial. Ji Guangping did not disclose the preference of Jiuyuan Airlines on flight route opening to 21st Century Business Herald, he only said “currently it is talking with airports in a number of regions about flight route cooperation”. Nevertheless, 21st Century Business Herald learned that, apart from Zhanjiang for the maiden flight, in the next step Jiuyuan Airlines will open flight access spots such as Haikou, and Shanghai Pudong, in the future it may reach Wenzhou and other places.

It can be confirmed that, Jiuyuan Airlines, which is named after “Jiuyuan” (meaning nine yuan in Chinese), will stick to selling 9 yuan special price tickets from the date of its opening. However, like other low-cost airlines, such special price tickets have limited availability for each flight.

Like other domestic and overseas low-cost airlines such as Spring Airlines and AirAsia, Jiuyuan Airlines also transforms decorative services like in-cabin catering, luggage weight, and seat selection into optionable service items, passengers need to pay extra fee to obtain these value-added services.

But Ji Guangping said, Jiuyuan Airlines’ more important transformation lies in improving enterprise operation efficiency. “The man machine ratio of some large airline companies, namely the ratio between the number of aircrafts in operation and enterprise staff number, may be as high as 1: 290, but the man machine ratio of in Jiuyuan Airlines will be very low, as low as 1: 90, in the long term it will be kept even lower.”

But Ji Guangping emphasized that, Jiuyuan Airlines will not cut its investment in hiring personnel in safety and technology aspects.

“Because we are running low-cost airline, such flat-styled management model is more suitable for execution of operation decision.” Said one insider of JuneYao Group, JuneYao Airlines’ biggest shareholder.

In addition, Jiuyuan Airlines will increase airplane’s daily average utilization hours, raising it from the widespread 9 hours/day in the industry today to 12-13 hours/day. “The flying workload of three Jiuyuan aircrafts each day is equivalent to that of four aircrafts per day in other airlines.”

Despite its positioning of low-cost airline, Jiuyuan Airlines’ future relation with JuneYao Airlines also triggers imagination. Ji Guangping told the 21st Century Business Herald that, in the future if there is cooperation between Jiuyuan Airlines and JuneYao Airlines, it will focus on technology and talent aspects. This means that within a certain period of time in the near future, no cooperation between flights of the two airlines will be introduced.