Spring Air Has Enough Planes on Order to Meet Demand

  • China’s top budget carrier plans to have 100 planes by 2018
  • Chairman Wang sees no M&A deals immediately; focus on growth

As many airlines across Asia join a rush to expand their fleets by ordering hundreds of jets, China’s top budget carrier is putting a pause to its new plane orders and said it will instead focus on operations.

After signing an agreement in December with Airbus Group SE for 60 A320 aircraft, Spring Airlines Co. said it has enough planes to grow its capacity by a targeted 15 percent to 20 percent annually. The operator isn’t likely to buy more in the “foreseeable years to come,” Chairman Wang Zhenghua said in an interview in Shanghai on Friday.

“How many more do you expect us to buy?” said Wang, who is also the founder of the airline. “Some of the new planes we prepaid for will be gradually put into service.” The company has 60 in its fleet at present, including 33 leased jets.

Wang’s strategy of capping new plane orders is in contrast to the approach taken by companies such as AirAsia Bhd., the continent’s biggest discount carrier, which last month announced a deal to buy 100 A321neos from Airbus, taking its total orders of the A320-series planes to 575. The emergence of low-cost operators is making air travel more affordable in Asia, and has fueled a double-digit growth in passenger traffic in countries such as China and India, according to the International Air Transport Association.

Sino-Japan Routes

Shanghai-based Spring Airlines in December said it would buy 45 A320neo planes and 15 A321neo jets in a deal valued at $6.3 billion at list prices, not including discounts customary for large orders. The aircraft would be used on some of the 36 new international routes Spring Air had introduced last year.

The company has 106 planes on order so far and its fleet will reach about 100 by 2018, Wang said.

Shares of the company have declined 20 percent this year to 48.50 yuan, compared with a 17 percent drop in the Shanghai Stock Exchange Composite Index, according to data compiled by Bloomberg.

Spring Air’s Wang said there’s too much competition for air-travel services between Japan and China, adding that he expects some reshuffle in the routes.  

Bucket of Gold

“We made the first bucket of gold in this market and more have piled in after seeing that,” Wang said, referring to the China-Japan services. “Those who aren’t well-prepared will be phased out gradually and more rational and suitable players will stay.”

Spring Air’s low-fare subsidiary in Japan, which was started in August 2014, offers services to four routes between the two countries and within Japan. It flies from Tokyo’s Narita airport using Boeing Co. 737 planes.

Spring Air is planning to add new destinations for its Japan unit, including to South Korea and Southeast Asia, Wang said, without elaborating.

Wang said he’s “cautious” on merger and acquisition deals and doesn’t see any involving Spring Airlines or its Japan unit “in the near future.”

“Market share is useless to me,” he said. “What matters most is to develop our capability step by step. I only care if we can maintain a growth of 15%-20% annually in our scale. Focusing on scale growth will give you more steady development.”

— With assistance by Amanda Wang, Crystal Tse, and Kyunghee Park

(Company corrects number of planes on order in 6th paragraph and number of routes run by Spring Japan in 10th paragraph.)
    Before it's here, it's on the Bloomberg Terminal.