Spring Airline Profile
Spring airline is one of the China’s biggest privately owned low-cost carrier, which is primarily engaged in the transportation of passengers and freight in domestic and international routes. Spring airline originated from Shanghai Spring International Travel Service, which was founded in the 1980s by Wang Zhenghua, after he retired from Civil service position and developed the company into one of the largest private travel agencies in China (Zhenghua 1). Spring airline was founded in 2004 with its first aircraft delivered at Shanghai Hongqiao International airport in the mid-2005. The airline’s headquarter is in Shanghai, China. Spring airline started operations with its first flight being between Shanghai and Yantai, while its daily flights to Guilin also initiated.
Spring airline operates from hubs at Shanghai Pudong International Airport and Shanghai Hongqiao International Airport. Its first international route was between Shanghai and Ibaraki in Japan. The Airline central city is Shijiazhuang Zhengding International Airport. The airline’s customer loyalty reward program is the spring pass. Spring goes to over 50 cities, but most of them are within China. Outside China, Spring Airlines fly to Cambodia, Hong Kong, Japan, Indonesia, Macau, Singapore, South Korea, Taiwan, Thailand, Malaysia, and Vietnam.
Spring airlines fleet consists of 52 Airbus A320 planes, each configured with a single economy class cabin. Spring Airlines parent company is Spring Airlines Limited with approximately 4630 full-time employees, and the key people being Wang Zhenghua – Chairman of the Board, and Yu Wang – the President (Zhenghua 10). The airline sells flight tickets from its website and some designated offices, thus keeping the operating costs low. Moreover, the listing of the airline on the Shanghai stock Exchange fuels its expansion.
Spring Airline promoting costs cuts include a fee-based, in-flight meals and special discount tickets, such as 14 US Dollars and 29 US Dollars. At present, fares are 30% lower on average, comparing to the rivals, and maintain a seat occupancy rate of more than 95% (Zhenghua 3).
Spring airline is also pushing ahead with business strategies to remain in the black, despite lower fares. For instance, promotion of marketing campaigns enables the company to operate at more than 90% capacity. Financial highlights, as at 2015, indicate that Spring Airlines operating income stands at 1,175.45 M US Dollars, with its revenue being at 8,069.60 M US Dollars. Its net income stands at 1,327.85M, with total assets and total equity standing at 16,028.98 M and 6,539.77M US Dollars respectively. Spring Airline Limited main shareholders include GF Fund Management Company Limited (15%), China Securities Finance Corporation Limited (4.6%), and Fullgoal Fund Management Company Limited (3.4%).
Spring airline is one of the China’s low-cost carrier airlines and is privately owned. The airline continues to be successful and profitable, and acts as a role model to other airlines in China, since it applies sound management practices to control its costs and, thus producing good profitability, while under the leadership of Wang Zhenghua – the Chairman of the Board and Yu Wang- President and Director (Yu 1).
Since its establishment, the airline has never enrolled in the ticket sales and departure system of travel sky, the dominant provider of various systems to China air travel industry. Instead, the airline has sold its tickets exclusively from its website and some designated ticket offices. This independent selling system and direct sale model enabled the airline to realize savings of 32 million US Dollars on sales commission fees. By owning its own, and well-developed sales system, the airline saves a lot in billing fees paid to Travel sky.
Spring airline has managed to maintain consistently 95% load factor per flight by putting their fares 30% lower on average than their rivals. The high load factor yielded extra benefits, since the seat numbers are 10% higher than average of the same aircraft type with load factor greater than 85%. The result implies that the passenger fees to be paid to the airport are to be reduced by 25% (Yu 4). This leads to great savings by spring airline, since each passenger saved the airline some good amount, which translates to greater profit.
Management of Spring airline has maintained a single aircraft type fleet that is A320 fleet. This has facilitated much reduction in maintenance, spare-parts warehousing, training and ground handling costs that could have be higher otherwise. Moreover, the airline has been designed to be more efficient with lower cost by employing high-density configuration (single economy class) with 180 seats. A320 aircraft seat capacity is 180, 28 more seats than the average A320 aircraft owned by other airlines.
Going by their marketing slogan “making flights affordable to everyone,” Spring airline has been offering tickets at 1 US Dollar, 14 US Dollars, and 29 US Dollars, a strategy that allows customers to have a higher probability of obtaining discounted tickets. Moreover, the airline promotes cuts by introducing fee-based in-flight meals by neither offering complimentary on board meals, nor complimentary water, but rather passengers are able to purchase meals and beverages on board, thus ensuring that the airline maintained its load factor.
Spring airlines employee-to-aircraft ratio was 102 by 2013. This ratio is more than double to other airlines, an approach that allows the organization save more on salary. However, the ratio is most likely to decrease, as Spring airline increases its fleet. Spring airline focuses on every single detail to reduce cost, including general and administrative costs. The president of the organization shares an office with the CEO of management. This also checks on less expenditure during business trips by not buying first class tickets and staying at hotels below three stars. The aircrew is responsible for cleaning the cabin, reducing costs for hiring a cleaning service agency. In addition to this, employees purchase tickets with more than 50% discount for business trips. All records are electronically documented, thus saving on stationery costs, and air attendants’ uniforms are low cost at 160 US Dollars or less. All these are advantageous strategies of ensuring that the airline reduces its expenses on general and administrative costs.
Fuel cost is the largest component of all operating costs and difficult to reduce. But Spring airline managed to figure out ways of reducing its cost by developing a flight management system that calculated standard fuel consumption of each flight and optimized flight profile, thus reducing fuel consumption. Cleaning of aircraft engines regularly also facilitated increased fuel efficiency and awarded bonus for pilots who contributed to fuel saving. All these efforts are paid off. Use of low-cost parking by using secondary airports and remote aprons, where parking fees were charged half the price of near terminal aprons, saved on parking fees cost.
Spring airline also engaged in targeted marketing activities, while considering travel seasons and age group, especially with low income and, thus increasing revenue. For instance, an operation of a “love flight” from Shanghai to Taipei, whereby Spring airline created a mobile platform, where younger customers purchased tickets via smart phones application, and seven men and women who had registered were carried on board blind date and one week group tour.
Implementation of these initiatives by the management has enabled the airline to be one of the low-cost carrier airlines in China to succeed while making profits. It also have played a significant role model to the other airlines with its performance viewed as standard for all emerging low-cost carriers to follow.
Yu, Wang. “Embarrassment of Low-Cost Carrier.” Spring Airlines Innovative Finance
Zhenghua, Wang. “Explorer of Chinese LCC’s.” China Securities Journal. 2015.