Spring Airlines CEO Zhang Xiuzhi, speaking at CAPA's World Aviation Summit in Hong Kong, stated (28-Nov-2012) Spring Airlines’ profit before tax has been above the industry average for the last four consecutive years including a profit before tax of USD3.9 million compared to the industry average of USD2.3 million in 2011. Spring’s passenger numbers have been growing at an average rate of 44.4% p/a from 180,000 in 2005 to an estimated 10.3 million so far in 2012. The carrier’s fleet has been growing at an average rate of 46.5% p/a from two aircraft in 2005 to 33 aircraft at present. The carrier also reports average load factor of 94% at present, compared to China’s national average of 81% and aircraft utilisation of 11.4 hours, compared to the national average of 9.3 hours. Spring Airlines cost per ASK in 2011 was USD5.12 cents, compared to peers average of USD7.19 cents. The carrier is increasingly looking to new technology to drive down costs even further. From a sales perspective, the carrier stated B2C channels will always be the priority. In the last few months, Spring have launched new Thai and Korean version sites. Meanwhile, the carrier said due to the development of China’s high-speed rail the carrier no longer considers 800-100km sectors but is now considering long-haul routes. This will see Spring’s average sector length to be similar to Chinese full service carriers in the future. [more - CAPA Analysis]
Spring Airlines reporting PBT exceeding industry average, pax growth and LFs also exceed average
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The company folklore of the Chinese low cost carrier Spring Airlines has become entrenched in aviation history, with photos of Spring staff on duty trips sharing hotel rooms while eating instant noodles.
For the Chinese market this thriftiness, and regular candid interviews with billionaire founder Wang Zhenghua, became synonymous with the growing number of budget flights on Spring Airlines. The public became educated about China's only notable LCC, which was markedly different from the cookie cutter format of full service domestic airlines.
But the spectrum of airlines in China is widening and Spring, now under the leadership of Stephen Wang, needs to reassert its position in the Chinese market.
Mr Wang addressed CAPA's Americas Aviation Summit in Orlando in Apr-2017. There are new LCCs and airlines transitioning to LCCs with different service levels, making Spring wonder if it should be an "ULCC". The reality of a government orchestrated market means Spring needs to consider widebody operations for domestic trunk routes, and possible long haul flying. Spring also needs to diversify its presence: its home hub of Shanghai is high yielding but this has invited envy, and an aviation hub overhaul could mean that LCCs are moved to a new and remote third airport in Shanghai.
Juneyao Airlines: will launch long haul, join Star Alliance, but must balance Air China's interests
China's Juneyao Airlines has always operated in the shadow of Spring Airlines. They launched from Shanghai within a year of each other and have had similar growth trajectories. Yet Spring sought the limelight and garnered attention for its low cost model. Juneyao, in contrast, often seemed to want to keep a low profile.
There are now rapid changes for Juneyao, and not just in comparison to its quiet history. In 1H2017 Juneyao is due to be the first "Connecting Partner" for Star Alliance, which will regain a footprint in China's commercial centre. Juneyao will likely transition to being a full Star member.
This will help the airline to grow its footprint as it takes delivery of its first of five 787s in 2018. Traffic rights internally and externally will be a challenge, but Juneyao must keep even closer watch on its quasi strategic patron, Air China. It is in the interests of Beijing based Air China to have a friend in Shanghai, but Air China's ultimate objective with Juneyao could be consolidation.