China Eastern Airlines (MU, Shanghai Hongqiao) is planning to reposition its China United Airlines (KN, Beijing Nanyuan) subsidiary as a regional low-cost carrier in an effort to stem the rising tide of foreign LCCs targetting the Chinese market.

China United currently operates no-frills flights to 77 cities across China with its international network limited to just two cities - Shizuoka and Fukuoka in Japan. It operates eight B737-700s and forty-one B737-800s.

“We see the future of low-cost travel (LCT) as very promising,” China Eastern's Executive Vice President, Sheng Xi, told Malaysia's Star newspaper last week. "In 2014, we entered this segment, and now under the Belt and Road Initiative (BRI) policy, we want to expand our budget air travel to South-East Asia, South Korea and Japan."

In order to meet that coverage target, Xi said the plan is to grow China United's fleet to 80 aircraft within the next three to five years.

AirAsia has grabbed a large LCT (low-cost travel) market share in China. We cannot be a threat to AirAsia, but we will be a new player providing an alternative to existing players. When we enter South-East Asia, we will compete with current players on services and cost. But fundamentally, safety will come first,” the executive added.

Aside from the China United plan, China Eastern would also be looking to strategic cooperation, joint ventures, and equity investment with other carriers.